Revenue of $2.8 Billion, up 9%, and Fee
Revenue of $2.2 Billion, up 8%, with Pre-Tax Margin of 28.9%, up
4.6% Points
Results Reflect Strength in Servicing and
Management Fees and Higher AUCA and AUM Levels
On an operating-basis, results for 3Q17
compared to 3Q16 include:
- EPS of $1.71, up 27%
- ROE of 13.4%, up 2.3%
points
- Revenue up 8%; and fee revenue up
5%
- Fee operating leverage of
0.7%
- Pre-tax operating margin of 32.9%,
up 2.2% points
In announcing today’s financial results, Joseph L. Hooley, State
Street’s Chairman and Chief Executive Officer, said, "Third-quarter
results, including double-digit EPS growth and a meaningful
increase in return on equity, reflect continued strength in equity
markets and strong business momentum. We continue to develop new
product solutions to support our clients' success, which in turn
has helped drive new servicing commitments. Importantly, new
business opportunities remain robust across both the asset
servicing and asset management businesses."
This press release features multimedia. View
the full release here:
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Hooley added, "We remain well positioned to achieve our 2017
financial objectives, including those objectives associated with
State Street Beacon, our multi-year program to digitize our
business and provide insights to help our clients enhance their
operational performance and risk management."
Hooley concluded, "While we continue to invest in our
businesses, returning capital to our shareholders remains a key
priority. In 3Q17, we purchased approximately $350 million of our
common stock and declared a quarterly common stock dividend of
$0.42 per share."
3Q17 Highlights
AUCA/AUM
- Broad-based business momentum:
Asset servicing AUCA increased 10% compared to 3Q16, due to
strength in equity markets and new business (4% growth compared to
2Q17). Asset management AUM increased 9% compared to 3Q16, driven
by strength in equity markets (3% growth compared to 2Q17).
- New business: New asset
servicing mandates during 3Q17 totaled approximately $105
billion.(1) Servicing assets remaining to be installed in future
periods totaled approximately $390 billion at quarter-end.(1) In
our asset management business, we experienced net outflows of $25
billion during 3Q17.
Revenue
- Fee Revenue: Increased from
3Q16, primarily driven by strength in servicing fees, management
fees, securities finance revenue, and the impact of the weaker U.S.
dollar, partially offset by lower trading services revenue
- Servicing and Management fees:
Benefiting from higher global equity markets and new business,
servicing and management fees increased 4% and 14% compared to
3Q16, respectively
- Net interest income: Increased
from 3Q16, driven by higher market interest rates in the U.S. and
continued focus on the optimization of our liability mix
Expenses
- Expenses: Increased compared to
3Q16, primarily reflecting installation of new business, annual
merit and performance based incentive compensation increases, and
the impact of the weaker U.S. dollar, partially offset by Beacon
savings
- Beacon savings: Beacon remains
on track to achieve at least $140 million in pre-tax savings in
2017, including $35 million of pre-tax savings achieved in
3Q17
- Restructuring expenses: To
achieve future cost savings and efficiencies, GAAP-basis 3Q17
results included $33 million, or $0.06 per share, in restructuring
expenses related to Beacon
Capital
- Key Metrics: Estimated Basel III
common equity tier 1 ratio for 3Q17 was 11.6% and our estimated
leverage ratio increased to 7.4%, while delivering GAAP and
operating-basis ROE of 13.0% and 13.4%, respectively
(1) These amounts exclude new business which has been
contracted, but for which the client has not yet provided
permission to publicly disclose and is not yet installed.
3Q17 GAAP-Basis Results
(Table presents summary results, dollars
inmillions, except per share amounts, or whereotherwise noted)
3Q17 2Q17
Increase(Decrease)
3Q16
Increase(Decrease)
Total fee revenue
$ 2,242 $ 2,235 0.3 %
$ 2,079 7.8 % Net interest income
603 575 4.9 537 12.3 Total
revenue
2,846 2,810 1.3 2,620 8.6 Provision for loan losses
3 3 — —
nm
Total expenses
2,021 2,031 (0.5 ) 1,984 1.9 Net income
available to common shareholders
629 584 7.7 507 24.1
Earnings per common share: Diluted earnings per share
1.66 1.53 8.5 1.29 28.7
Financial ratios: Quarterly
average total assets
218,369 223,917 (2.5 ) 233,017 (6.3 )
Fee operating leverage(1) 80 bps 598 bps Operating leverage(1) 177
677 Return on average common equity
13.0 % 12.6 % 40
10.6 % 240 Return on tangible common equity(2)
18.0 17.3 70
15.8 220 Pre-tax operating margin
28.9 27.6 130 24.3 460
(1) The financial ratio represents the rate of
growth of total revenue (or fee revenue) less the rate of growth of
expenses relative to the preceding or prior year period, as
applicable. (2) Return on tangible common equity is calculated by
dividing year-to-date annualized net income available to common
shareholders (GAAP-basis) by tangible common equity. For additional
information on the Reconciliation of Tangible Common Equity Ratio
refer to the addendum included with this News Release. nm Not
meaningful
3Q17 Operating-Basis (Non-GAAP) Results
(Table presents summary results, dollars
inmillions, except per share amounts, or whereotherwise noted)
3Q17 2Q17
Increase(Decrease)
3Q16
Increase(Decrease)
Total fee revenue
$ 2,321 $ 2,324 (0.1 )% $ 2,213 4.9
% Net interest income(1)
645 617 4.5 537 20.1 Total
revenue(1)
2,967 2,941 0.9 2,754 7.7 Provision for loan
losses
3 3 — — nm Total expenses
1,988 1,960 1.4
1,909 4.1 Net income available to common shareholders
648
635 2.0 532 21.8
Earnings per common share: Diluted earnings
per share
1.71 1.67 2.4 1.35 26.7
Financial ratios:
Fee operating leverage(2) (156 ) bps 74 bps Operating leverage(2)
(55 ) 359 Return on average common equity
13.4 % 13.7
% (30 ) 11.1 % 230 Return on tangible common equity(3)
19.0
18.6 40 16.9 210 Pre-tax operating margin
32.9 33.3 (40 )
30.7 220 (1) Beginning in 1Q17, management no
longer presents discount accretion associated with former conduit
securities as an operating-basis adjustment. Therefore, 3Q17 and
2Q17 GAAP and operating-basis results included $4 million and $6
million, respectively, of discount accretion. In 3Q16,
operating-basis NII excluded $42 million of discount accretion, and
such results have not been revised. (2) See footnote 1 in the 3Q17
GAAP-Basis Results table above. (3) See footnote 2 in the 3Q17
GAAP-Basis Results table above. nm Not meaningful
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 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.
The following table reconciles select 3Q17 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.
3Q17 Selected Operating-Basis (Non-GAAP)
Reconciliations
(In millions, except per
share amounts)
IncomeBeforeIncome TaxExpense
Net IncomeAvailable
toCommonShareholders
EarningsPerCommonShare
GAAP-basis
$ 822 $ 629 $
1.66 Tax-equivalent non-operating adjustments Tax-advantaged
investments (processing fees and other revenue)
79
Tax-exempt investment securities (net interest income)
42
Total
121 Other non-operating adjustments Acquisition
& restructuring costs (expenses)(1)
33 22
.06 Effect on income tax of non-operating adjustments
— (3 ) (.01 ) Total
33 19 .05 Operating-basis
$ 976 $ 648 $
1.71 (1) Represents a pre-tax
charge of $33 million ($22 million after tax or $0.06 per share)
related to Beacon.
Selected Financial Information and Metrics
The tables below provide a summary of selected financial
information and key ratios for the indicated periods.
The following table presents AUCA, AUM, market indices and
average foreign exchange rates for the periods indicated.
(Dollars in billions, except market
indices andforeign exchange rates)
3Q17 2Q17
Increase(Decrease)
3Q16
Increase(Decrease)
Assets under custody and administration(1)(2)
$
32,110 $ 31,037 3.5 % $ 29,178 10.0 % Assets under
management(2)
2,673 2,606 2.6 2,446 9.3 Market Indices(3):
S&P 500® daily average
2,467 2,398 2.9 2,162 14.1 MSCI
EAFE® daily average
1,934 1,856 4.2 1,678 15.3 MSCI®
Emerging Markets daily average
1,068 993 7.6 887 20.4 HFRI
Asset Weighted Composite® monthly average
1,358 1,339 1.4
1,274 6.6 Barclays Capital U.S. Aggregate Bond Index® period-end
2,038 2,021 0.8 2,037 — Barclays Capital Global Aggregate
Bond Index® period-end
480 471 1.9 486 (1.2 ) Average
Foreign Exchange Rate (Euro vs. USD)
1.175 1.101 6.7 1.116
5.3 Average Foreign Exchange Rate (GBP vs. USD)
1.309 1.280
2.3 1.312 (0.2 ) (1) Includes assets under custody of
$24,240 billion, $23,362 billion and $21,910 billion, as of 3Q17,
2Q17, and 3Q16, respectively. (2) As of period-end. (3) The index
names listed in the table are service marks of their respective
owners.
Assets Under Management
The following table presents 3Q17 activity in AUM by product
category.
(Dollars in billions)
Equity
Fixed-Income
Cash(2)
Multi-Asset-ClassSolutions
AlternativeInvestments(3)
Total Balance as of June 30, 2017 $ 1,594 $
398 $ 334 $ 131 $ 149 $ 2,606 Long-term institutional inflows(1)
48 20 — 9 4 81 Long-term
institutional outflows(1)
(79 ) (28 )
— (10 ) (3 ) (120
) Long-term institutional flows, net
(31 )
(8 ) — (1 ) 1 (39
) ETF flows, net
(2 ) 3 —
— 1 2 Cash fund flows, net
—
— 12 — —
12 Total flows, net
(33 ) (5
) 12 (1 ) 2 (25 )
Market appreciation
72 4 — 3 —
79 Foreign exchange impact
7 2
1 1 2 13
Total market/foreign exchange impact
79 6
1 4 2 92
Balance as of September 30, 2017
$ 1,640 $ 399 $
347 $ 134 $ 153
$ 2,673 (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.
The following table presents year-to-date activity for the
period ended September 30, 2017 of AUM 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)
182
65 — 30 16 293 Long-term
institutional outflows(1)
(242 ) (73 )
— (33 ) (32 ) (380
) Long-term institutional flows, net
(60 )
(8 ) — (3 ) (16 )
(87 ) ETF flows, net
(1 ) 8
— — 3 10 Cash fund flows, net
—
— 13 — —
13 Total flows, net
(61 )
— 13 (3 ) (13 )
(64 ) Market appreciation
203 12
(2 ) 6 4 223 Foreign exchange
impact
24 9 3 5
5 46 Total market/foreign
exchange impact
227 21 1
11 9 269 Balance as of
September 30, 2017
$ 1,640 $ 399
$ 347 $ 134
$ 153 $ 2,673 (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)
3Q17 2Q17
Increase(Decrease)
3Q16
Increase(Decrease)
Servicing fees
$ 1,351 $ 1,339 0.9 % $ 1,303 3.7 %
Management fees
419 397 5.5 368 13.9 Trading services
revenue: Foreign exchange trading
150 178 (15.7 ) 159 (5.7 )
Brokerage and other fees
109 111 (1.8 ) 108
0.9 Total trading services revenue
259 289 (10.4 )
267 (3.0 ) Securities finance revenue
147 179 (17.9 ) 136
8.1 Processing fees and other revenue
66 31
112.9 5 nm Total fee revenue
2,242 2,235 0.3 2,079
7.8 Net interest income
603 575 4.9 537 12.3 Gains (losses)
related to investment securities, net
1 — nm 4
nm
Total Revenue $ 2,846 $ 2,810
1.3 $ 2,620 8.6 Net interest margin
1.35
% 1.27 % 8 bps 1.14 % 21 bps
nm
Not meaningful
Operating-Basis (Non-GAAP) Revenue
(Dollars in millions)
3Q17 2Q17
Increase(Decrease)
3Q16
Increase(Decrease)
Servicing fees
$ 1,351 $ 1,339 0.9 % $ 1,303 3.7 %
Management fees
419 397 5.5 368 13.9 Trading services
revenue: Foreign exchange trading
150 178 (15.7 ) 159 (5.7 )
Brokerage and other fees
109 111 (1.8 ) 108
0.9 Total trading services revenue
259 289 (10.4 )
267 (3.0 ) Securities finance revenue
147 179 (17.9 ) 136
8.1 Processing fees and other revenue
145 120
20.8 139 4.3 Total fee revenue
2,321 2,324 (0.1 )
2,213 4.9 Net interest income(1)
645 617 4.5 537 20.1 Gains
(losses) related to investment securities, net
1 —
nm 4 nm
Total Revenue(1) $
2,967 $ 2,941 0.9 $ 2,754 7.7 Net
interest margin
1.35 % 1.27 % 8 bps 1.06 % 29 bps
(1) Beginning in 1Q17, management no longer presents
discount accretion associated with former conduit securities as an
operating-basis adjustment. Therefore, 3Q17 and 2Q17 GAAP and
operating-basis results included $4 million and $6 million,
respectively, of discount accretion. In 3Q16, operating-basis NII
excluded $42 million of discount accretion, and such results have
not been revised. nm Not meaningful
The following highlights primary drivers of changes in our 3Q17
revenue for the noted periods, indicating differences between our
GAAP-basis and operating-basis results as appropriate.
Servicing fees increased from 3Q16, primarily due to
higher global equity markets, new business and the impact of the
weaker U.S. dollar. Compared to 2Q17, servicing fees increased,
primarily due to the impact of higher global equity markets and the
weaker U.S. dollar.
Management fees increased from 3Q16, primarily due to
higher global equity markets, new business, and higher revenue
yielding ETF inflows. Compared to 2Q17, management fees increased
primarily due to higher global equity markets, higher
revenue-yielding ETF inflows, and the impact of the weaker U.S.
dollar.
Trading Services revenue decreased from 3Q16, primarily
due to lower foreign exchange volatility, partially offset by
higher client-related volumes. Compared to 2Q17, trading services
revenue decreased primarily related to seasonality and low foreign
exchange volatility.
Securities finance revenue increased from 3Q16,
reflecting higher revenue from enhanced custody. Compared to 2Q17,
securities finance revenue decreased, primarily due to 2Q17
seasonality.
Processing fees and other revenue was up slightly from
3Q16. Compared to 2Q17, processing fees and other revenue
increased, primarily reflecting a gain related to the sale of an
equity trading platform in 3Q17.
Net interest income increased from 3Q16, primarily due to
higher U.S. market interest rates, loan portfolio growth, lower
wholesale CD balances, and disciplined liability pricing, partially
offset by a smaller balance sheet. Compared to 2Q17, NII increased
primarily due to higher U.S. market interest rates and disciplined
liability pricing, partially offset by a smaller balance sheet.
GAAP-basis NII does not include a taxable equivalent adjustment.
Net interest margin, calculated on an operating-basis, increased 29
basis points compared to 3Q16, and increased 8 basis points
compared to 2Q17.
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)
3Q17 2Q17
Increase(Decrease)
3Q16
Increase(Decrease)
Compensation and employee benefits
$ 1,090 $ 1,071
1.8 % $ 1,013 7.6 % Information systems and communications
296 283 4.6 285 3.9 Transaction processing services
215 207 3.9 200 7.5 Occupancy
118 116 1.7 107 10.3
Acquisition and restructuring costs(1)
33 71 (53.5 ) 42
(21.4 ) Other
269 283 (4.9 ) 337 (20.2
)
Total Expenses $ 2,021 $ 2,031
(0.5 ) $ 1,984 1.9 Effective income tax rate
16.7
% 20.1 % 11.4 % (1) The 2Q17 and 3Q16
acquisition costs associated with the GEAM business acquired on
July 1, 2016 were $9 million and $29 million, respectively. In
3Q17, 2Q17 and 3Q16, the restructuring costs associated with Beacon
were $33 million, $62 million and $10 million, respectively.
Operating-Basis (Non-GAAP) Expenses
(Dollars in millions)
3Q17 2Q17
Increase(Decrease)
3Q16
Increase(Decrease)
Compensation and employee benefits
$ 1,090 $ 1,071
1.8 % $ 1,022 6.7 % Information systems and communications
296 283 4.6 285 3.9 Transaction processing services
215 207 3.9 200 7.5 Occupancy
118 116 1.7 107 10.3
Other
269 283 (4.9 ) 295 (8.8 )
Total Expenses $ 1,988 $ 1,960
1.4 $ 1,909 4.1 Effective income tax rate
27.9
% 31.4 % 30.3 %
The following highlights primary drivers of changes in our 3Q17
expenses for the noted periods, indicating differences between our
GAAP-basis and operating-basis results as appropriate.
Compensation and employee benefits expenses increased
from 3Q16, primarily due to increased costs to support new
business, annual merit and performance based incentive compensation
increases, and the impact of the weaker U.S. dollar, partially
offset by Beacon savings. Compared to 2Q17, compensation and
employee benefits expenses increased, primarily due to increased
costs to support new business and the impact of the weaker U.S.
dollar, partially offset by Beacon savings.
Information systems and communications expenses increased
from 3Q16 and 2Q17. The increase from both periods is due to higher
technology infrastructure costs, new business and Beacon
investments.
Transaction processing services expenses increased from
3Q16 and 2Q17. The increase from both periods reflects higher
client volumes.
Occupancy expenses increased from 3Q16, primarily due to
a tax credit in 3Q16 and Beacon-related global footprint
investments. Occupancy expenses increased from 2Q17, reflecting
Beacon-related global footprint investments.
Other expenses decreased from 3Q16, primarily reflecting
lower professional services fees. Other expenses decreased slightly
from 2Q17.
3Q17 acquisition and restructuring costs of $33
million decreased from $42 million and $71 million compared to 3Q16
and 2Q17, respectively.
The 3Q17 GAAP-basis effective tax rate was 16.7% compared
to 11.4% in 3Q16 and 20.1% in 2Q17. The 3Q17 rate reflects a
decrease in alternative energy investments compared to 3Q16, and a
change in the mix of earnings compared to 2Q17.
The 3Q17 operating-basis effective tax rate was 27.9%
compared to 30.3% in 3Q16 and 31.4% in 2Q17. The 3Q17 operating
rate reflects a decrease in alternative energy investments compared
to 3Q16, and a change in the mix of earnings compared to 2Q17.
The following table presents our regulatory capital ratios as of
September 30, 2017 and June 30, 2017. 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). 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.
September 30, 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
12.6 % 11.6
% 12.3 % 11.3 % Tier 1 capital
ratio
15.7 14.5 15.5 14.3 Total capital
ratio
16.8 15.6 16.6 15.4 Tier 1
leverage ratio
7.4 7.4 7.3 7.3
June 30, 2017 Common equity tier 1 ratio 12.0 % 11.2 % 11.7
% 10.9 % Tier 1 capital ratio 15.1 14.2 14.8 13.9 Total capital
ratio 16.2 15.2 15.9 15.0 Tier 1 leverage ratio 7.0 7.0 6.9 6.9
State Street State Street Bank
As of September 30, 2017(Dollars in millions)(1) Transitional SLR
Fully Phased-InSLR(4)
Transitional SLR
Fully Phased-InSLR(4)
Tier 1 Capital $ 15,606 $ 15,339
$ 16,324 $ 16,070 Total assets for SLR
240,666 240,366 237,579 237,319
Supplementary Leverage Ratio 6.5 % 6.4
% 6.9 % 6.8 % As of June
30, 2017(Dollars in millions)
Tier 1 Capital $ 15,165 $
14,888 $ 16,002 $ 15,738 Total assets for SLR 243,910 243,705
240,919 240,722
Supplementary Leverage Ratio 6.2 % 6.1 % 6.6
% 6.5 % (1) September 30, 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
September 30, 2017 and June 30, 2017 (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 September 30, 2017 and June
30, 2017 (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,
Monday, October 23, 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 # 72483122.
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 # 72483122.
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, and the liquidity coverage ratio, 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 3Q17, State Street expects to publish its updates
during the period beginning today and ending on or about
November 2, 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 $32.1 trillion in assets under custody and
administration and $2.7 trillion* in assets under management as of
September 30, 2017, State Street operates globally in more
than 100 geographic markets and employs 36,303 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 $36
billion as of September 30, 2017), for which State Street
Global Markets, LLC, an affiliate of SSgA, serves as the marketing
agent.
Additional Information
In this News Release:
- All earnings per share amounts
represent fully diluted earnings per common share.
- Return on average common shareholders'
equity 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 AUCA after we begin servicing the assets, and
new business in assets to be managed is reflected in our AUM after
we begin managing the assets. As such, only a portion of any new
asset servicing and asset management mandate is reflected in our
AUCA and AUM as of September 30, 2017. Distribution fees from
the SPDR® Gold ETF and the SPDR® Long Dollar Gold Trust ETF are
recorded in brokerage and other fee revenue and not in management
fee revenue.
- State Street’s common stock and other
stock dividends, including the declaration, timing and amount
thereof, remain subject to consideration and approval by its Board
of Directors at the relevant times. Stock purchases may be made
using various types of mechanisms, including open market purchases
under our announced common stock purchase program, accelerated
share repurchases, or transactions off market, and may be made
under Rule 10b5-1 trading programs. The timing of stock purchases,
types of transactions and number of shares purchased will depend on
several factors, including market conditions and State Street’s
capital position, its financial performance and investment
opportunities. The common stock purchase programs do not have
specific price targets and may be suspended at any time.
Forward-Looking
Statements
This News Release (and the conference call referenced herein)
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
October 23, 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 NII, 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;
- our resolution plan, submitted to the
Federal Reserve and FDIC in June 2017, 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 our resolution plan submission
filed in June 2017 or 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 appointed under a 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 AUCA or our AUM
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/20171023005376/en/
State Street CorporationInvestors:Ilene Fiszel Bieler, +1
617-664-3477orMedia:Julie Kane, +1 617-664-3001
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