By Saabira Chaudhuri
State Street Corp. (STT) on Tuesday released new data projecting
that it would have higher capital levels under a hypothetical
economic downturn, than it projected earlier this year.
Under the results of its mid-year stress test, the trust bank
said its minimum threshold for the measure of financial
health--known as a Tier 1 common ratio--would fall to 12.3%, up
from its March projection of 11.9%.
The latest projection is for the nine quarters up to June 30,
2015, while the bank's March figure was for the end of 2014.
Also on Tuesday, State Street projected it would log a $2.3
billion profit on $2.8 billion in pre-provision net revenue in case
of a severely adverse scenario. This compares with the $100 million
profit on revenue of $1.3 billion it projected in March.
In March, the Fed had said it expected State Street's Tier 1
common ratio under a stressed scenario would be 12.8%.
Like Citigroup Inc. (C), Goldman Sachs Group (GS), KeyCorp (KEY)
and others, State Street released the updated figure as part of a
requirement of the Dodd-Frank Act, which calls on large
bank-holding companies to conduct their own so-called stress tests
to help gauge their financial strength.
Eighteen banks released results under an initial round of
Dodd-Frank stress tests in March and were required to conduct a
mid-year version of the tests, the results of which they are
required to release between Sept. 15 and Sept. 30.
The tests are separate from the Federal Reserve's Comprehensive
Capital Analysis and Review, or CCAR, stress tests, the results of
which were also released in March.
The CCAR exams help determine whether large banks will be able
to increase capital payouts to investors in the form of share
repurchases and dividends.
State Street, one of the country's largest trust banks, has
taken a hard line on expenses despite improving business trends.
The company's cost-control measures have included withdrawing from
its fixed-income-trading initiative and staff cuts, actions it has
said will better align expenses with its 2013 business outlook.
In July, State Street reported that its second-quarter earnings
rose 19% as the trust bank collected more servicing and management
fees.
Shares of State Street were up by 20 cents in recent trading to
$69.03. The stock has risen 47% so far this year.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com