1Q17 GAAP-Basis Revenue up 7% Compared to
1Q16, Reflecting 12% Increase in Fee Revenue
On an operating-basis, 1Q17 EPS was $1.21,
up 23% compared to 1Q16, ROE of 10.4%, up 200 basis points, and
revenue up 8%, fee revenue up 12% and substantial operating
leverage
Both GAAP and operating-basis results include a
gain of $0.08 per share associated with sales of BFDS and IFDS; and
a loss of $0.08 per share reflecting a modest repositioning of the
investment portfolio for the current interest rate environment
In announcing today’s financial results, Joseph L. Hooley, State
Street’s Chairman and Chief Executive Officer, said, "These results
reflect strong fee revenue growth, continued expense control and
further progress across our strategic priorities, which in turn
drove significant positive fee operating leverage, compared to
1Q16. We are seeing solid new business traction and continue to
differentiate our capabilities by investing in our technology and
systems. Assets under custody and administration increased 11% from
1Q16, reflecting stronger markets, improved client flows and the
contribution of our new business wins over the past year, which
benefited from our investments in solutions for clients’ most
complex needs. SSGA also achieved strong revenue gains driven in
part by the momentum in our ETF strategies, which are benefiting
from investments in distribution and new products, such as SSGA’s
SHE ETF launched last year to help drive gender diversity across
corporate boards and management. We’re delighted by the response to
Fearless Girl, representing the power of fulfilling this
objective.”
This Smart News Release features multimedia.
View the full release here:
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Hooley concluded, “Our capital ratios are strong and we remain
committed to our ROE objectives. We submitted our 2017 capital plan
to the Federal Reserve and are well positioned to return capital
through share repurchases and dividends."
1Q17 Highlights:
- Business momentum: Asset
servicing AUCA growth of 11% as compared to 1Q16 (4% growth
compared to 4Q16). Asset management AUM growth of 12% as compared
to 1Q16 (4% growth compared to 4Q16).
- New business: New asset
servicing mandates during 1Q17 totaled approximately $110 billion.
Servicing assets remaining to be installed in future periods
totaled approximately $375 billion. In our asset management
business, net ETF inflows of $12 billion during 1Q17 continued to
provide business momentum.
- The acquired GEAM operations
excluding merger and integration costs, have delivered accretive
GAAP-basis earnings through the three quarters ended March 31,
2017, one quarter ahead of schedule.
- Capital: Our estimated Basel III
common equity tier 1 ratio as of March 31, 2017 was 11.2% and our
estimated supplementary leverage ratio was 6.1%.
- Return of capital to
shareholders: 1Q17 we acquired common stock of approximately
$523 million, including common shares received as part of the sale
of BFDS/IFDS. In addition, we declared a quarterly common stock
dividend of $0.38 per share in 1Q17.
1Q17 GAAP-basis and operating-basis results included the
following notable items:
- A pre-tax gain of $30 million, or
after-tax gain of $31 million(1) (+$0.08 per share), related to the
sale of BFDS/IFDS.
- A pre-tax loss of $40 million, or
after-tax loss of $32 million (-$0.08 per share), largely
reflecting a modest repositioning of $2.7 billion of primarily
agency MBS and U.S. treasuries in the investment portfolio for the
current interest rate environment.
(1) An additional after-tax $12 million gain is expected to be
recognized throughout the remainder of 2017 as a result of a lower
effective tax rate.
1Q17 GAAP-Basis Results:
(Table presents summary results, dollars in millions, except
per share amounts, or where otherwise noted)
1Q17 4Q16
Increase(Decrease)
1Q16
Increase(Decrease)
Total fee revenue
$ 2,198 $ 2,014 9.1 % $ 1,970 11.6
% Net interest income
510 514 (0.8 ) 512 (0.4 ) Total
revenue
2,668 2,530 5.5 2,484 7.4 Provision for loan losses
(2 ) 2 nm 4 nm Total expenses
2,086 2,183 (4.4
) 2,050 1.8 Net income available to common shareholders
446
557 (19.9 ) 319 39.8
Earnings per common
share(1): Diluted
1.15 1.43 (19.6 ) 0.79
45.6
Financial ratios:
Quarterly average total assets
219,209 232,999 (5.9 )
223,623 (2.0 ) Fee operating leverage(2) 1,358 bps 981 bps
Operating leverage(3) 989 565 Return on average common equity
9.9 % 12.1 % (220 ) 6.8 % 310
nm Not meaningful(1) The 1Q17, 4Q16 and 1Q16 results included
net after-tax charges of $12 million, $8 million and $62 million,
respectively, or $0.03, $0.02 and $0.15 per share, respectively,
primarily related to State Street Beacon.(2) The financial ratio
represents the rate of growth of total fee revenue less the rate of
growth of expenses.(3) The financial ratio represents the rate of
growth of total revenue less the rate of growth of total
expenses.
Operating-Basis (Non-GAAP) Financial Measures:
In addition to presenting State Street's financial results in
conformity with U.S. generally accepted accounting principles, or
GAAP, management also presents results on a non-GAAP, or
operating-basis, as it believes this presentation supports
additional meaningful analysis and comparisons of trends with
respect to State Street's business operations from period to
period, as well as information, such as capital ratios calculated
under regulatory standards scheduled to be effective in the future
or other standards, that management also uses in evaluating State
Street’s business and activities. Non-GAAP financial measures
should be considered in addition to, and not as a substitute for or
superior to, financial measures determined in conformity with GAAP.
Summary results presented on a GAAP-basis, descriptions of our
non-GAAP, or operating-basis, financial measures, and
reconciliations of operating-basis information to GAAP-basis
information are provided in the addendum included with this News
Release.
1Q17 Operating-Basis (Non-GAAP)
Results:
(Table presents summary results, dollars in millions, except
per share amounts, or where otherwise noted)
1Q17 4Q16
Increase(Decrease)
1Q16
Increase(Decrease)
Total fee revenue(1)
$ 2,268 $ 2,200 3.1 % $ 2,033
11.6 % Net interest income(2)
553 547 1.1 539 2.6 Total
revenue(1)(2)
2,781 2,749 1.2 2,574 8.0 Provision for loan
losses
(2 ) 2 nm 4 nm Total expenses
2,057
2,143 (4.0 ) 1,943 5.9 Net income available to common shareholders
468 577 (18.9 ) 396 18.2
Earnings per common share:
Diluted Earnings per Share
1.21 1.48 (18.2 ) 0.98 23.5
Financial ratios: Fee operating leverage(3) 710 bps 569 bps
Operating leverage(4) 517 217 Return on average common equity
10.4 % 12.5 % (210 ) 8.4 % 200
nm Not meaningful(1) The 1Q17 operating-basis results include a
pre-tax gain of approximately $30 million on the sale of State
Street's interest in BFDS/IFDS, reflecting a change in our
operating-basis presentation effective the first quarter of 2017 to
include gains/losses on sales of businesses.(2) Beginning in the
first quarter of 2017, management will no longer present discount
accretion associated with former conduit securities as an
operating-basis adjustment. Therefore, first quarter 2017 GAAP and
operating-basis results included $5 million of discount accretion.
In the first and fourth quarters of 2016, operating-basis net
interest income excluded $15 million and $10 million of discount
accretion, respectively, and such results have not been revised.(3)
The financial ratio represents the rate of growth of total
operating-basis fee revenue less the rate of growth of
operating-basis expenses.(4) The financial ratio represents the
rate of growth of total operating-basis revenue less the rate of
growth of total operating-basis expenses.
The following table reconciles select 1Q17 operating-basis
financial information to financial information prepared and
reported in conformity with GAAP for the same period. The addendum
included with this News Release includes additional
reconciliations.
1Q17 Selected Operating-Basis
(Non-GAAP) Reconciliations:
(In millions, except per share amounts)
IncomeBeforeIncome TaxExpense
Net IncomeAvailable
toCommonShareholders
EarningsPerCommonShare
GAAP-basis
$ 584 $ 446 $
1.15 Tax-equivalent non-operating adjustments Tax-advantaged
investments (processing fees and other revenue)
70
Tax-exempt investment securities (net interest income)
43
Total
113 Other non-operating adjustments Acquisition
& restructuring costs (expenses)(1)
29 19
.05 Effect on income tax of non-operating adjustments
— 3 .01 Total
29
22 .06 Operating-basis
$ 726
$ 468 $ 1.21
(1) Includes a pre-tax charge of $17 million ($12 million after
tax or $0.03 per share) primarily related to State Street
Beacon.
Selected Financial Information and Metrics
The tables below provide a summary of selected financial
information and key ratios for the indicated periods. Amounts are
presented in millions of dollars, except for per-share amounts or
where otherwise noted.
The following table presents assets under custody and
administration, assets under management, market indices and average
foreign exchange rates for the periods indicated.
Assets Under Custody and Administration and Assets Under
Management (Dollars in billions, except market indices and
foreign exchange rates)
1Q17
4Q16
Increase(Decrease)
1Q16
Increase(Decrease)
Assets under custody and administration(1)(2)
$
29,833 $ 28,771 3.7 % $ 26,943 10.7 % Assets under
management(2)(3)
2,561 2,468 3.8 2,296 11.5 Market
Indices(4): S&P 500® daily average
2,326 2,185 6.5 1,951
19.2 MSCI EAFE® daily average
1,749 1,660 5.4 1,594 9.7
MSCI® Emerging Markets daily average
927 877 5.7 757 22.5
Barclays Capital Global Aggregate Bond Index® period-end
459
451 1.8 468 (1.9 ) Average Foreign Exchange Rate (Euro vs. USD)
1.065 1.078 (1.2 ) 1.103 (3.4 ) Average Foreign Exchange
Rate (GBP vs. USD)
1.239 1.242 (0.2 ) 1.433 (13.5 )
(1) Includes assets under custody of $22,505 billion, $21,725
billion and $20,788 billion, as of 1Q17, 4Q16 and 1Q16,
respectively.(2) As of period-end.(3) Includes assets under
management as part of the GEAM business acquired on July 1,
2016.(4) The index names listed in the table are service marks of
their respective owners.
Assets Under Management
The following table presents 1Q17 activity in assets under
management, by product category.
(Dollars in billions)
Equity
Fixed-Income
Cash(2)
Multi-Asset-ClassSolutions
AlternativeInvestments(3)
Total Balance as of December 31, 2016 $ 1,474 $ 378 $ 333 $
126 $ 157 $ 2,468 Long-term institutional inflows(1)
71
22 — 12 8 113 Long-term
institutional outflows(1)
(85 ) (25 )
— (11 ) (18 ) (139
) Long-term institutional flows, net
(14 )
(3 ) — 1 (10 ) (26
) ETF flows, net
10 1 — —
1 12 Cash fund flows, net
— —
3 — — 3
Total flows, net
(4 ) (2 )
3 1 (9 ) (11 ) Market
appreciation
81 2 (2 ) 3
4 88 Foreign exchange impact
8 3
1 2 2 16
Total market/foreign exchange impact
89
5 (1 ) 5 6
104 Balance as of March 31, 2017
$
1,559 $ 381 $ 335
$ 132 $ 154
$ 2,561
(1) Amounts represent long-term portfolios, excluding ETFs.(2)
Includes both floating and constant-net-asset-value portfolios held
in commingled structures or separate accounts.(3) Includes real
estate investment trusts, currency and commodities, including SPDR®
Gold ETF and SPDR® Long Dollar Gold Trust ETF. State Street is not
the investment manager for the SPDR® Gold ETF and the SPDR® Long
Dollar Gold Trust ETF, but acts as the marketing agent.
Revenue
The following tables provide the components of our GAAP-basis
and operating-basis revenue for the periods noted:
GAAP-Basis Revenue
(Dollars in millions)
1Q17 4Q16
Increase(Decrease)
1Q16
Increase(Decrease)
Servicing fees
$ 1,296 $ 1,289 0.5 % $ 1,242 4.3 %
Management fees
382 361 5.8 270 41.5 Trading services
revenue: Foreign exchange trading
164 182 (9.9 ) 156 5.1
Brokerage and other fees
111 111 — 116 (4.3 ) Total
trading services revenue
275 293 (6.1 ) 272 1.1 Securities
finance revenue
133 136 (2.2 ) 134 (0.7 ) Processing fees
and other revenue
112 (65 ) nm 52 115.4
Total fee revenue
2,198 2,014 9.1 1,970 11.6 Net interest
income
510 514 (0.8 ) 512 (0.4 ) Gains (losses) related to
investment securities, net
(40 ) 2 nm 2
nm
Total Revenue $ 2,668 $ 2,530
5.5 % $ 2,484 7.4 %
nm Not meaningful
Operating-Basis (Non-GAAP)
Revenue
(Dollars in millions)
1Q17 4Q16
Increase(Decrease)
1Q16
Increase(Decrease)
Servicing fees
$ 1,296 $ 1,289 0.5 % $ 1,242 4.3 %
Management fees
382 361 5.8 270 41.5 Trading services
revenue: Foreign exchange trading
164 182 (9.9 ) 156 5.1
Brokerage and other fees
111 111 — 116 (4.3 ) Total
trading services revenue
275 293 (6.1 ) 272 1.1 Securities
finance revenue
133 136 (2.2 ) 134 (0.7 )
Processing fees and other revenue(1)
182 121 50.4 115 58.3
Total fee revenue(1)
2,268 2,200 3.1 2,033 11.6
Net interest income(2)
553 547 1.1 539 2.6 Gains (losses) related to investment
securities, net
(40 ) 2 nm 2 nm
Total Revenue(1)(2)
$ 2,781 $ 2,749 1.2 % $ 2,574
8.0 %
nm Not meaningful(1) The 1Q17 operating-basis results include a
pre-tax gain of approximately $30 million on the sale of State
Street's interest in BFDS/IFDS, reflecting a change in our
operating-basis presentation effective the first quarter of 2017 to
include gains/losses on sales of businesses.(2) Beginning in the
first quarter of 2017, management will no longer present discount
accretion associated with former conduit securities as an
operating-basis adjustment. Therefore, first quarter 2017 GAAP and
operating-basis results included $5 million of discount accretion.
In the first and fourth quarters of 2016, operating-basis net
interest income excluded $15 million and $10 million of discount
accretion, respectively, and such results have not been
revised.
The following highlights primary drivers of changes in our 1Q17
revenue for the noted periods, indicating (where relevant)
differences between our GAAP-basis and operating-basis results.
Servicing fees increased from 1Q16, primarily due to
higher global equity markets and net new business, partially offset
by the stronger U.S. dollar and hedge fund outflows. Growth was
strong in both the U.S. and Europe. Compared to 4Q16, servicing
fees increased primarily due to higher global equity markets and
new business.
Management fees increased from 1Q16 primarily due to an
estimated $71 million from the acquired GEAM business, higher
global equity markets and higher revenue-yielding ETF flows.
Compared to 4Q16, management fees increased primarily due to higher
global equity markets, net new business, and higher
revenue-yielding ETF flows.
Foreign exchange trading revenue increased from 1Q16
reflecting higher volumes, partially offset by lower volatility.
Compared to 4Q16, foreign exchange trading revenue decreased,
reflecting lower volatility, partially offset by higher
volumes.
Brokerage and other fees decreased from 1Q16, primarily
due to lower electronic foreign exchange trading revenue as well as
the absence of revenue associated with the WM Reuters business.
Compared to 4Q16, brokerage and other fees were flat.
Securities finance revenue was flat from 1Q16. Compared
to 4Q16, securities finance revenue decreased slightly, reflecting
lower short-interest in equity markets in 1Q17.
Processing fees and other revenue on a GAAP-basis
increased from 1Q16, primarily due to a $30 million pre-tax gain
associated with the sale of BFDS/IFDS and favorable foreign
exchange swap costs. Compared to 4Q16, processing fees and other
revenue increased primarily due to higher tax-advantaged investment
activity in 4Q16, the gain associated with the sale of BFDS/IFDS,
and favorable foreign exchange swap costs.
Processing fees and other revenue on an
operating-basis increased compared to 1Q16 and 4Q16, primarily
due to the gain associated with the sale of BFDS/IFDS and favorable
foreign exchange swap costs. See footnote (1) to the
operating-basis (non-GAAP) revenue table above.
Net interest income on a GAAP-basis was relatively flat
compared to 1Q16 and 4Q16. GAAP-basis net interest income does not
include a taxable equivalent adjustment.
Net interest income on an operating-basis increased from
1Q16, primarily due to higher market interest rates in the U.S. and
disciplined liability pricing, partially offset by lower interest
earning assets and lower non-U.S. investment portfolio yields.
Compared to 4Q16, net interest income increased primarily due to
higher U.S. market interest rates and the impact of including
discount accretion in operating-basis results in 1Q17, partially
offset by a smaller, more efficient balance sheet(1). Net interest
margin, calculated based on operating-basis net interest income,
increased to 117 basis points in 1Q17 from 112 basis points in 1Q16
and 108 basis points in 4Q16.
(1) See footnote (2) to the operating-basis (non-GAAP) revenue
table above
Expenses
The following tables provide the components of our GAAP-basis
and operating-basis expenses for the periods noted:
GAAP-Basis Expenses
(Dollars in millions)
1Q17 4Q16
Increase(Decrease)
1Q16
Increase(Decrease)
Compensation and employee benefits
$ 1,166 $ 1,244
(6.3 )% $ 1,107 5.3 % Information systems and communications
287 278 3.2 272 5.5 Transaction processing services
197 199 (1.0 ) 200 (1.5 ) Occupancy
110 109 0.9 113
(2.7 ) Acquisition and restructuring costs(1)
29 43 (32.6 )
104 (72.1 ) Other
297 310 (4.2 ) 254
16.9
Total Expenses $ 2,086 $
2,183 (4.4 )% $ 2,050 1.8 %
(1) The acquisition costs associated with the GEAM business
acquired on July 1, 2016 were $12 million and $25 million in 1Q17
and 4Q16, respectively. The restructuring costs associated with
State Street Beacon were $16 million, $21 million, and $97 million
in 1Q17, 4Q16, and 1Q16, respectively.
Operating-Basis (Non-GAAP)
Expenses
(Dollars in millions)
1Q17 4Q16
Increase(Decrease)
1Q16
Increase(Decrease)
Compensation and employee benefits
$ 1,166 $ 1,246
(6.4 )% $ 1,104 5.6 % Information systems and communications
287 278 3.2 272 5.5 Transaction processing services
197 199 (1.0 ) 200 (1.5 ) Occupancy
110 109 0.9 113
(2.7 ) Other
297 311 (4.5 ) 254 16.9
Total Expenses $ 2,057 $ 2,143
(4.0 )% $ 1,943 5.9 %
The following highlights primary drivers of changes in our 1Q17
expenses for the noted periods, indicating (where relevant)
differences between our GAAP-basis and operating-basis results.
Compensation and employee benefits expenses increased
from 1Q16, primarily due to higher expenses associated with the
seasonal deferred incentive compensation expense for
retirement-eligible employees and payroll taxes, higher costs
related to the acquired GEAM business, the effects of annual merit
increases, and higher costs to support new business, partially
offset by State Street Beacon savings. Compensation and employee
benefits expenses decreased from 4Q16, primarily due to higher 4Q16
expenses associated with the accelerated expense related to the
amendment of certain deferred cash awards of $249 million and
additional 1Q17 State Street Beacon savings, partially offset by an
incremental $154 million in 1Q17 associated with the seasonal
deferred incentive compensation expense for retirement-eligible
employees and payroll taxes as well as costs to support new
business.
Information systems and communications expenses increased
from 1Q16 and 4Q16. The increase from both periods primarily
reflects investments supporting new business.
Transaction processing services expenses were down
slightly compared to 1Q16 and 4Q16.
Occupancy expenses decreased compared to 1Q16, primarily
due to rationalizing our real estate footprint in high cost
locations. Compared to 4Q16, occupancy expenses were relatively
flat.
Other expenses increased from 1Q16, primarily reflecting
increased costs associated with the acquired GEAM sub-advisory
relationships, and higher regulatory fees and insurance expenses.
Other expenses decreased from 4Q16, primarily due to lower
professional service fees and securities processing costs,
partially offset by higher regulatory fees and insurance
expenses.
1Q17 GAAP-basis effective tax rate was 14.0% compared to
14.4% in 1Q16 and (72.3)% in 4Q16. 1Q17 included a $10 million tax
benefit for share-based compensation, as well as benefits from the
disposition of BFDS and a reduction in State tax expense. 4Q16
reflected a reduction in accrued tax expense on foreign earnings,
incremental foreign tax credits and a foreign affiliate tax
loss.
1Q17 operating-basis effective tax rate was 27.8%
compared to 29.1% in 1Q16 and (1.5)% in 4Q16. The 1Q17 effective
tax rate reflects the $10 million tax benefit for share-based
compensation, BFDS and State tax benefits as well as fewer
alternative energy investments. The 4Q16 effective tax rate
includes the reduction in accrued tax expense, incremental foreign
tax credits, and affiliate tax loss.
Capital
The following table presents our regulatory capital ratios as of
March 31, 2017 and December 31, 2016. The lower of our
capital ratios calculated under the Basel III advanced approaches
and under the Basel III standardized approach are applied in the
assessment of our capital adequacy for regulatory purposes. Also
presented is the calculation of State Street's and State Street
Bank's supplementary leverage ratio (SLR) under final U.S. banking
regulator rules adopted in 2014. Unless otherwise noted, all
capital ratios presented in the table and elsewhere in this News
Release refer to State Street Corporation and not State Street Bank
and Trust Company.
March
31, 2017(1)
Basel IIIAdvancedApproaches(2)
Basel IIIStandardizedApproach
Basel III
FullyPhased-InAdvancedApproaches(Estimated) Pro-Forma(2)(3)
Basel III
FullyPhased-InStandardizedApproach(Estimated) Pro-Forma(3)
Common equity tier 1 ratio
11.2 % 11.5
% 10.9 % 11.1 % Tier 1 capital
ratio
14.4 14.7 14.0 14.4 Total capital
ratio
15.4 15.9 15.1 15.5 Tier 1
leverage ratio
6.8 6.8 6.7 6.7
December 31, 2016 Common equity tier 1 ratio 11.7 % 11.6 %
10.9 % 10.9 % Tier 1 capital ratio 14.8 14.7 14.1 14.1 Total
capital ratio 16.0 16.0 15.3 15.3 Tier 1 leverage ratio 6.5 6.5 6.2
6.2 State Street State
Street Bank
As of March 31, 2017(Dollars in
millions)(1)
Transitional SLR
Fully Phased-InSLR(4)
Transitional SLR
Fully Phased-InSLR(4)
Tier 1 Capital $ 14,475 $ 14,176
$ 15,492 $ 15,206 Total assets for SLR
238,146 237,877 235,141 234,880
Supplementary Leverage Ratio 6.1 % 6.0
% 6.6 % 6.5 % As of
December 31, 2016(Dollars in millions)
Tier 1 Capital $
14,717 $ 14,051 $ 15,805 $ 15,169 Total assets for SLR 251,033
250,559 247,409 246,955
Supplementary Leverage Ratio 5.9 %
5.6 % 6.4 % 6.1 %
(1) March 31, 2017 capital ratios are preliminary
estimates.
(2) The advanced approaches-based ratios (actual and estimated)
included in this presentation reflect calculations and
determinations with respect to our capital and related matters,
based on State Street and external data, quantitative formulae,
statistical models, historical correlations and assumptions,
collectively referred to as “advanced systems.” Refer to the
addendum included with this News Release for a description of the
advanced approaches and a discussion of related risks.
(3) Estimated pro-forma fully phased-in ratios as of
March 31, 2017 and December 31, 2016 (fully phased in as
of January 1, 2019, as per Basel III phase-in requirements for
capital) reflect capital and total risk-weighted assets calculated
under the Basel III final rule. Refer to the addendum included with
this News Release for reconciliations of these estimated pro-forma
fully phased-in ratios to our capital ratios calculated under the
currently applicable regulatory requirements.
(4) Estimated pro-forma fully phased-in SLRs as of
March 31, 2017 and December 31, 2016 (fully phased-in as
of January 1, 2018, as per the phase-in requirements of the SLR
final rule) are preliminary estimates as calculated under the SLR
final rule. Refer to the addendum included with this News Release
for reconciliations of these estimated pro-forma fully phased-in
SLRs to our SLRs under currently applicable regulatory
requirements.
Investor Conference Call and Quarterly
Website Disclosures
State Street will webcast an investor conference call today,
Wednesday, April 26, 2017, at 9:30 a.m. EST, available at
http://investors.statestreet.com/. The
conference call will also be available via telephone, at +1
877-423-4013 inside the U.S. or at +1 706-679-5594 outside of the
U.S. The Conference ID is # 91884508.
Recorded replays of the conference call will be available on the
website, and by telephone at +1 855-859-2056 inside the U.S. or at
+1 404-537-3406 outside the U.S. beginning approximately two hours
after the call's completion. The Conference ID is # 91884508.
The telephone replay will be available for approximately two
weeks following the conference call. This News Release,
presentation materials referred to on the conference call, and
additional financial information are available on State Street's
website, at http://investors.statestreet.com/ under “Investor
Relations--Investor News & Events" and under the title “Events
and Presentations.”
State Street intends to publish updates to its public disclosure
regarding regulatory capital, as required by the Basel III final
rule, on a quarterly basis on its website at http://investors.statestreet.com/, under "Filings
& Reports." Those updates will be published each quarter,
during the period beginning after State Street's public
announcement of its quarterly results of operations and ending on
or prior to the due date under applicable bank regulatory
requirements (i.e., ordinarily, ending no later than 60 days
following year-end or 45 days following each other quarter-end, as
applicable). For 1Q17, State Street expects to publish its updates
during the period beginning today and ending on or about
May 4, 2017.
State Street Corporation (NYSE: STT) is the world's leading
provider of financial services to institutional investors including
investment servicing, investment management and investment research
and trading. With $29.8 trillion in assets under custody and
administration and $2.6 trillion* in assets under management as of
March 31, 2017, State Street operates globally in more than
100 geographic markets and employs 34,817 worldwide. For more
information, visit State Street's website at
www.statestreet.com.
* Assets under management include the assets of the SPDR® Gold
ETF and the SPDR® Long Dollar Gold Trust ETF (approximately $33
billion as of March 31, 2017), for which State Street Global
Markets, LLC, an affiliate of SSgA, serves as the distribution
agent.
Additional Information
In this News Release:
- All earnings per share amounts (EPS)
represent fully diluted earnings per common share.
- Return on average common shareholders'
equity (ROE) is determined by dividing annualized net income
available to common equity by average common shareholders' equity
for the period. Operating-basis return on average common equity
utilizes annualized operating-basis net income available to common
equity in the calculation.
- New business in assets to be serviced
is reflected in our assets under custody and administration after
we begin servicing the assets, and new business in assets to be
managed is reflected in our assets under management after we begin
managing the assets. As such, only a portion of any new asset
servicing and asset management mandates is reflected in our assets
under custody and administration and assets under management, as of
March 31, 2017. Distribution fees from the SPDR® Gold
Exchange-Traded Fund, or ETF, are recorded in brokerage and other
fee revenue and not in management fee revenue.
Forward-Looking
Statements
This News Release contains forward-looking statements within the
meaning of United States securities laws, including statements
about our goals and expectations regarding our business, financial
and capital condition, results of operations, strategies, the
financial and market outlook, dividend and stock purchase programs,
governmental and regulatory initiatives and developments, and the
business environment. Forward-looking statements are often, but not
always, identified by such forward-looking terminology as
“outlook,” “expect,” "priority," “objective,” “intend,” “plan,”
“forecast,” “believe,” “anticipate,” “estimate,” “seek,” “may,”
“will,” “trend,” “target,” “strategy” and “goal,” or similar
statements or variations of such terms. These statements are not
guarantees of future performance, are inherently uncertain, are
based on current assumptions that are difficult to predict and
involve a number of risks and uncertainties. Therefore, actual
outcomes and results may differ materially from what is expressed
in those statements, and those statements should not be relied upon
as representing our expectations or beliefs as of any date
subsequent to April 26, 2017.
Important factors that may affect future results and outcomes
include, but are not limited to:
- the financial strength and continuing
viability of the counterparties with which we or our clients do
business and to which we have investment, credit or financial
exposure, including, for example, the direct and indirect effects
on counterparties of the sovereign-debt risks in the U.S., Europe
and other regions;
- increases in the volatility of, or
declines in the level of, our net interest income, changes in the
composition or valuation of the assets recorded in our consolidated
statement of condition (and our ability to measure the fair value
of investment securities) and the possibility that we may change
the manner in which we fund those assets;
- the liquidity of the U.S. and
international securities markets, particularly the markets for
fixed-income securities and inter-bank credits, and the liquidity
requirements of our clients;
- the level and volatility of interest
rates, the valuation of the U.S. dollar relative to other
currencies in which we record revenue or accrue expenses and the
performance and volatility of securities, credit, currency and
other markets in the U.S. and internationally; and the impact of
monetary and fiscal policy in the United States and internationally
on prevailing rates of interest and currency exchange rates in the
markets in which we provide services to our clients;
- the credit quality, credit-agency
ratings and fair values of the securities in our investment
securities portfolio, a deterioration or downgrade of which could
lead to other-than-temporary impairment of the respective
securities and the recognition of an impairment loss in our
consolidated statement of income;
- our ability to attract deposits and
other low-cost, short-term funding, our ability to manage levels of
such deposits and the relative portion of our deposits that are
determined to be operational under regulatory guidelines and our
ability to deploy deposits in a profitable manner consistent with
our liquidity needs, regulatory requirements and risk profile;
- the manner and timing with which the
Federal Reserve and other U.S. and foreign regulators implement or
reevaluate changes to the regulatory framework applicable to our
operations, including implementation or modification of the
Dodd-Frank Act, the Basel III final rule and European legislation
(such as the Alternative Investment Fund Managers Directive,
Undertakings for Collective Investment in Transferable Securities
Directives and Markets in Financial Instruments Directive II);
among other consequences, these regulatory changes impact the
levels of regulatory capital we must maintain, acceptable levels of
credit exposure to third parties, margin requirements applicable to
derivatives, and restrictions on banking and financial activities.
In addition, our regulatory posture and related expenses have been
and will continue to be affected by changes in regulatory
expectations for global systemically important financial
institutions applicable to, among other things, risk management,
liquidity and capital planning, resolution planning, compliance
programs, and changes in governmental enforcement approaches to
perceived failures to comply with regulatory or legal
obligations;
- we may not successfully implement our
plans to have a credible resolution plan by July 2017, or that plan
may not be considered to be sufficient by the Federal Reserve and
the FDIC, due to a number of factors, including, but not limited
to, challenges we may experience in interpreting and addressing
regulatory expectations, failure to implement remediation in a
timely manner, the complexities of development of a comprehensive
plan to resolve a global custodial bank and related costs and
dependencies. If we fail to meet regulatory expectations to the
satisfaction of the Federal Reserve and the FDIC in any future
submission, we could be subject to more stringent capital, leverage
or liquidity requirements, or restrictions on our growth,
activities or operations;
- adverse changes in the regulatory
ratios that we are required or will be required to meet, whether
arising under the Dodd-Frank Act or the Basel III final rule, or
due to changes in regulatory positions, practices or regulations in
jurisdictions in which we engage in banking activities, including
changes in internal or external data, formulae, models, assumptions
or other advanced systems used in the calculation of our capital
ratios that cause changes in those ratios as they are measured from
period to period;
- requirements to obtain the prior
approval or non-objection of the Federal Reserve or other U.S. and
non-U.S. regulators for the use, allocation or distribution of our
capital or other specific capital actions or corporate activities,
including, without limitation, acquisitions, investments in
subsidiaries, dividends and stock purchases, without which our
growth plans, distributions to shareholders, share repurchase
programs or other capital or corporate initiatives may be
restricted;
- changes in law or regulation, or the
enforcement of law or regulation, that may adversely affect our
business activities or those of our clients or our counterparties,
and the products or services that we sell, including additional or
increased taxes or assessments thereon, capital adequacy
requirements, margin requirements and changes that expose us to
risks related to the adequacy of our controls or compliance
programs;
- economic or financial market
disruptions in the U.S. or internationally, including those which
may result from recessions or political instability; for example,
the U.K.'s decision to exit from the European Union may continue to
disrupt financial markets or economic growth in Europe or,
similarly, financial markets may react sharply or abruptly to
actions taken by the new administration in the United States;
- our ability to develop and execute
State Street Beacon, our multi-year transformation program to
digitize our business, deliver significant value and innovation for
our clients and lower expenses across the organization, any failure
of which, in whole or in part, may among other things, reduce our
competitive position, diminish the cost-effectiveness of our
systems and processes or provide an insufficient return on our
associated investment;
- our ability to promote a strong culture
of risk management, operating controls, compliance oversight,
ethical behavior and governance that meets our expectations and
those of our clients and our regulators, and the financial,
regulatory, reputation and other consequences of our failure to
meet such expectations; the impact on our compliance and controls
enhancement programs of the appointment of a monitor under the
deferred prosecution agreement with the DOJ and compliance
consultant expected to be appointed under a potential settlement
with the SEC, including the potential for such monitor and
compliance consultant to require changes to our programs or to
identify other issues that require substantial expenditures,
changes in our operations, or payments to clients or reporting to
U.S. authorities;
- the results of our review of our
billing practices, including additional amounts we may be required
to reimburse clients, as well as potential consequences of such
review, including damage to our client relationships and adverse
actions by governmental authorities;
- the results of, and costs associated
with, governmental or regulatory inquiries and investigations,
litigation and similar claims, disputes; or civil or criminal
proceedings;
- changes or potential changes in the
amount of compensation we receive from clients for our services,
and the mix of services provided by us that clients choose;
- the large institutional clients on
which we focus are often able to exert considerable market
influence, and this, combined with strong competitive market
forces, subjects us to significant pressure to reduce the fees we
charge, to potentially significant changes in our assets under
custody and administration or our assets under management in the
event of the acquisition or loss of a client, in whole or in part,
and to potentially significant changes in our fee revenue in the
event a client re-balances or changes its investment approach or
otherwise re-directs assets to lower- or higher-fee asset
classes;
- the potential for losses arising from
our investments in sponsored investment funds;
- the possibility that our clients will
incur substantial losses in investment pools for which we act as
agent, and the possibility of significant reductions in the
liquidity or valuation of assets underlying those pools;
- our ability to anticipate and manage
the level and timing of redemptions and withdrawals from our
collateral pools and other collective investment products;
- the credit agency ratings of our debt
and depositary obligations and investor and client perceptions of
our financial strength;
- adverse publicity, whether specific to
State Street or regarding other industry participants or
industry-wide factors, or other reputational harm;
- our ability to control operational
risks, data security breach risks and outsourcing risks, our
ability to protect our intellectual property rights, the
possibility of errors in the quantitative models we use to manage
our business and the possibility that our controls will prove
insufficient, fail or be circumvented;
- our ability to expand our use of
technology to enhance the efficiency, accuracy and reliability of
our operations and our dependencies on information technology and
our ability to control related risks, including cyber-crime and
other threats to our information technology infrastructure and
systems (including those of our third-party service providers) and
their effective operation both independently and with external
systems, and complexities and costs of protecting the security of
such systems and data;
- our ability to grow revenue, manage
expenses, attract and retain highly skilled people and raise the
capital necessary to achieve our business goals and comply with
regulatory requirements and expectations;
- changes or potential changes to the
competitive environment, including changes due to regulatory and
technological changes, the effects of industry consolidation and
perceptions of State Street as a suitable service provider or
counterparty;
- our ability to complete acquisitions,
joint ventures and divestitures, including the ability to obtain
regulatory approvals, the ability to arrange financing as required
and the ability to satisfy closing conditions;
- the risks that our acquired businesses
and joint ventures will not achieve their anticipated financial and
operational benefits or will not be integrated successfully, or
that the integration will take longer than anticipated, that
expected synergies will not be achieved or unexpected negative
synergies or liabilities will be experienced, that client and
deposit retention goals will not be met, that other regulatory or
operational challenges will be experienced, and that disruptions
from the transaction will harm our relationships with our clients,
our employees or regulators;
- our ability to recognize evolving needs
of our clients and to develop products that are responsive to such
trends and profitable to us, the performance of and demand for the
products and services we offer, and the potential for new products
and services to impose additional costs on us and expose us to
increased operational risk;
- changes in accounting standards and
practices; and
- changes in tax legislation and in the
interpretation of existing tax laws by U.S. and non-U.S. tax
authorities that affect the amount of taxes due.
Other important factors that could cause actual results to
differ materially from those indicated by any forward-looking
statements are set forth in our 2016 Annual Report on Form 10-K and
our subsequent SEC filings. We encourage investors to read these
filings, particularly the sections on risk factors, for additional
information with respect to any forward-looking statements and
prior to making any investment decision. The forward-looking
statements contained in this News Release should not by relied on
as representing our expectations or beliefs as of any time
subsequent to the time this News Release is first issued, and we do
not undertake efforts to revise those forward-looking statements to
reflect events after that time.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170426005658/en/
State Street CorporationInvestor Contact:Anthony Ostler, +1
617-664-3477orMedia Contact:Hannah Grove, +1 617-664-3377
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