01—Abstract
Summary
Summary of the 8-K filed October 15, 2024. Cited figures are marked; the original filing is the authoritative source.
State Street reported third-quarter 2024 results on October 15, 2024 that were strong on headline metrics.
Diluted EPS was $2.26a, up 81% year over year, though the comparison is flattered by a $294 million investment portfolio repositioning loss in 3Q23. Excluding notable items, EPS rose 17% (from $1.93). Total revenue of $3.26 billion grew 21% reported and 9% excluding notable items.
Fee revenue rose 11%b (7% ex-notable items), led by FX trading, management fees and securities finance. Net interest income increased 16% year over year but fell 2% sequentially as deposit mix shifted and market rates eased. Total expenses rose 6% and fee operating leverage was positive, with management reiterating its goal of positive full-year fee and total operating leverage.
ROE was 12.0% and pre-tax margin 28.4%. New AUC/A wins of $466 billionc and record Investment Management net inflows of $100 billion were highlights, while the CET1 ratio improved to 11.6%. The filing also disclosed that Vice Chairman and CFO Eric Aboaf informed the company on October 10, 2024 of his intention to step down to take a role outside banking.
He will remain through the filing of the 2024 Form 10-K, expected around February 2025, and State Street has started a formal internal and external search for a successor. Investors should weigh the earnings momentum against this leadership transition at a finance-critical moment.
Capital return was about 100% of net income available to common shareholders, with $450 milliond in buybacks and $224 million in dividends. Net interest margin compressed to 1.07% and the State Street Corporation LCR of roughly 107% remains a monitoring point.
02—Key points
Key Highlights
- Diluted EPS of $2.26, up 81% YoY (up 17% excluding notable items), with total revenue of $3.26 billion up 21% (up 9% excluding notable items).
- Fee revenue rose 11% YoY (7% ex-notable items), driven by FX trading services (+19%), management fees (+10%) and securities finance (+13%).
- Net interest income increased 16% YoY but declined 2% QoQ, and NIM compressed to 1.07% from 1.13% in 2Q24.
- Total expenses rose 6% YoY to $2.31 billion; management reiterated its goal of positive full-year fee and total operating leverage.
- Record $100 billion of Investment Management net inflows, including a record $54 billion in Cash, and $466 billion of new servicing AUC/A wins.
- CET1 ratio (Standardized) improved to 11.6%, and the company returned $674 million to shareholders (about 100% of net income available to common).
- CFO Eric Aboaf will step down, remaining through the 2024 Form 10-K (expected around February 2025); a formal succession search is underway.
03—Questions
Frequently Asked Questions
Why is the reported EPS growth of 81% misleading?
The 3Q23 base included a $294 million loss on an investment portfolio repositioning, which reduced 3Q23 EPS by $0.68. Excluding notable items, diluted EPS grew 17%, from $1.93 to $2.26. The 3Q24 results also include about $0.20 of notable items (a $66 million equity investment gain, a $15 million FX litigation recovery, offset by an $81 million repositioning loss), so underlying growth is the more useful measure.
Who is leaving, and how does it affect the company's near-term reporting?
Vice Chairman and CFO Eric Aboaf informed State Street on October 10, 2024 that he will step down to join a firm outside banking. He will remain through the filing of the 2024 Form 10-K, expected around February 2025. The company has begun a formal internal and external search, so investors should expect a CFO transition during the next several quarters, but no immediate disruption to the reporting cycle is indicated.
Is the NII growth sustainable given the sequential decline?
NII rose 16% YoY on higher investment securities yields and loan growth, but fell 2% QoQ due to deposit mix shift toward interest-bearing balances and lower market rates. NIM fell to 1.07% from 1.13%. Investors should watch whether higher portfolio yields can offset continued deposit repricing and mix shift as rates move.
How is State Street returning capital, and how strong is its capital position?
In 3Q24 the company returned $674 million to common shareholders, comprising $450 million of buybacks and $224 million of dividends declared ($0.76 per share), roughly 100% of net income available to common. The Standardized CET1 ratio rose to 11.6%, and the Tier 1 leverage ratio was 5.5%. The company said buybacks are subject to capital, regulatory and market conditions and have no fixed price targets.
04—Continue