First-quarter 2016
operating-basis(a) EPS was $0.98, on revenue of $2.6
billion
In announcing today's financial results, Joseph L. Hooley, State
Street's Chairman and Chief Executive Officer said, “Our first
quarter 2016 fee revenues reflect the challenging market
environment experienced at the beginning of the year. However, I am
encouraged by the signs of stability in March and the strength of
our pipeline across the firm. The first quarter included new asset
servicing wins of $264 billion, with approximately $400 billion of
servicing commitments remaining at quarter-end to be installed from
current and prior periods. In addition, we had $13 billion in
positive net flows in our asset management business. We also made
progress on our strategy to invest in higher growth and return
businesses. Our recent agreement to acquire GE Asset Management
will extend our core investment management capabilities, including
in the high growth outsourced CIO market.”
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Hooley continued, “Our results reflect our commitment to
maintaining a strong focus on managing expenses, with first quarter
operating-basis expenses flat compared to the same period a year
ago and also flat excluding the seasonal impact of equity
compensation for retirement-eligible employees and payroll taxes
compared to the fourth quarter of 2015.”
Hooley also said, “State Street Beacon, which is the next phase
of our multi-year transformation program to create cost
efficiencies and to fully digitize our business to support the
development of new solutions and capabilities for our clients, is
contributing to our expense management efforts. We are on track to
generate at least $100 million in annualized pre-tax net run-rate
expense savings this year from this program.”
Hooley concluded, “Returning capital to shareholders remains a
top priority. We purchased approximately $325 million of our common
stock in the first quarter of 2016. We expect our second quarter
2016 common stock repurchases to be up to $390 million.”
First-Quarter 2016 GAAP-Basis Results:
(Table presents summary results, dollars in millions, except per
share amounts, or where otherwise noted)
1Q16
4Q15
Increase(Decrease)
1Q15
Increase(Decrease)
Total fee revenue
$ 1,970 $ 2,044 (3.6 )% $
2,055 (4.1 )% Net interest revenue
512 494 3.6 546 (6.2 )
Total revenue
2,484 2,538 (2.1 ) 2,600 (4.5 ) Provision for
loan losses
4 1 nm 4 nm Total expenses
2,050 1,857
10.4 2,097 (2.2 ) Net income available to common shareholders
319 547 (41.7 ) 373 (14.5 )
Earnings per common
share(1)
: Diluted
0.79 1.34 (41.0 ) 0.89 (11.2 )
Financial ratios: Return on average common equity
6.8 % 11.6 % (480 ) bps 7.9 % (110 ) bps
(1) First-quarter 2016 included a net after-tax charge of $62
million, or $0.15 per share related to State Street Beacon.
Fourth-quarter and first-quarter 2015 included net after-tax
charges of $9 million or $0.02 per share and $150 million or $0.36
per share, respectively, to increase our legal accruals.
nm Not meaningful
First quarter of 2016 GAAP-basis results included pre-tax
restructuring charges of $97 million related to State Street
Beacon.
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, in order to highlight comparable financial trends with
respect to State Street's business operations from period to
period. Non-GAAP information is not a substitute for, and is not
superior to, information presented on a GAAP basis. 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 first-quarter 2016
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.
First-Quarter 2016 Selected Operating-Basis (Non-GAAP)
Reconciliations:
(In millions, except per share amounts)
IncomeBeforeIncome TaxExpense
Net IncomeAvailable
toCommonShareholders
EarningsPerCommonShare
GAAP basis
$ 430 $ 319 $
.79 Tax-equivalent adjustments Tax-advantaged investments
(processing fees and other revenue)
63 Tax-exempt investment
securities (net interest revenue)
42 Total
105
Non-operating adjustments Discount accretion associated with former
conduit securities (net interest revenue)
(15 )
(8 ) (.02 ) Severance costs associated
with staffing realignment (compensation and employee benefits
expenses)
3 2 .01 Acquisition &
restructuring costs (expenses)(1)
104 66 .16
Effect on income tax of non-operating adjustments
—
17 .04 Total
92 77
.19 Operating basis
$ 627
$ 396 $ 0.98
(1) Includes a pre-tax charge of $97 million ($62 million after
tax or $0.15 per share) related to State Street Beacon.
First-Quarter 2016 Operating-Basis (Non-GAAP)
Results:
(Table presents summary results, dollars in millions, except per
share amounts, or where otherwise noted)
1Q16
4Q15
Increase(Decrease)
1Q15
Increase(Decrease)
Operating-Basis Results: Total fee revenue
$
2,033 $ 2,075 (2.0 )% $ 2,108 (3.6 )% Net interest revenue
539 513 5.1 565 (4.6 ) Total revenue
2,574 2,588 (0.5
) 2,672 (3.7 ) Total expenses
1,943 1,820 6.8 1,942 0.1 Net
income available to common shareholders
396 494 (19.8 ) 487
(18.7 )
Earnings per common share: Diluted
0.98 1.21 (19.0 ) 1.16 (15.5 )
Financial
ratios: Return on average common equity
8.4 %
10.5 % (210 ) bps 10.4 % (200 ) bps
1Q 2016 Highlights(a):
- Agreement to acquire GE Asset
Management: Acquisition will add new alternatives capabilities
and strengthen fundamental equity and active fixed income teams,
while establishing State Street Global Advisors (SSGA) as a leader
in outsourced chief investment officer (OCIO) services.
- Currency impact: Compared to the
first quarter of 2015, the strengthening of the U.S. dollar reduced
our fee revenue outside of the U.S. by $15 million, but a
corresponding reduction in expenses largely offset the currency
impact on our bottom line.
- New business(b):
New asset servicing mandates during the first quarter of 2016
totaled $264 billion. In our asset management business, we
experienced net inflows of $13 billion during the first quarter of
2016.
- Fee operating leverage: The
growth rate of operating-basis total fee revenue was below the
growth rate of operating-basis expenses by 361 basis points during
the first quarter of 2016 relative to the first quarter of
2015.
- State Street Beacon, our multi-year
transformation program(c): We are currently on
track to deliver at least $100 million in annualized pre-tax net
run-rate expense savings in 2016 including targeted staff
reductions announced in October
2015.Capital(d): Our common equity tier 1
ratios as of March 31, 2016 were 12.3% and 12.5%, calculated
under the advanced approaches and standardized approach,
respectively, in conformity with the Basel III final rule. On a
fully phased-in basis, our estimated pro forma Basel III common
equity tier 1 ratios as of March 31, 2016 were 11.9% and
12.0%, calculated under the advanced approaches and standardized
approach, respectively, in conformity with the Basel III final
rule.
- Return of capital to
shareholders(e): We purchased approximately $325
million of our common stock at an average price of $57.88 per
share. We expect our second quarter 2016 common stock repurchases
to be up to $390 million. In addition, we declared a quarterly
common stock dividend of $0.34 per share in the first quarter of
2016.
(a) Operating basis is a non-GAAP presentation. For an
explanation of operating-basis information and related
reconciliations, refer to the addendum included with this news
release.
(b) 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 new asset servicing and asset management
mandates is reflected in our assets under custody and
administration and assets under management, as of March 31,
2016. 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.
(c) Estimated pre-tax expense savings relate only to State
Street Beacon, our multi-year transformation program, and are based
on projected improvement from our full-year 2015 operating-basis
expenses, all else equal. The full effect of the savings generated
each year will be felt the following year. Actual expenses may
increase or decrease in the future due to other factors.
(d) Our estimated pro forma fully phased-in Basel III common
equity tier 1 ratios calculated under the Basel III advanced
approaches and standardized approach (in each case, fully phased in
as of January 1, 2019, as per Basel III phase-in requirements for
capital) are preliminary estimates based on our interpretations of
the Basel III final rule as applied to our current businesses and
operations as currently conducted. Refer to the “Capital” section
of this news release for important information about the Basel III
final rule, our calculations of our common equity tier 1 ratios
thereunder, factors that could influence State Street's
calculations of its common equity tier 1 ratios and other
information about our capital ratios. Unless otherwise specified,
all capital ratios referenced in this news release refer to State
Street Corporation and not State Street Bank and Trust Company.
Refer to the addendum included with this news release for a further
description of these ratios.
(e) Stock purchases may be made using various types of
mechanisms, including open market purchases 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 our capital position, our financial performance and
investment opportunities. The common stock purchase program does
not have specific price targets and may be suspended at any time.
Our common stock and other stock dividends, including the
declaration, timing and amount thereof, remain subject to
consideration and approval by our Board of Directors at the
relevant times.
Items of Note Post March 31, 2016:
Sale of WM/Reuters: On April 1, 2016, we sold the
WM/Reuters branded foreign exchange benchmark business to Thomson
Reuters. This sale will result in a gain of approximately $53
million ($40 million after-tax) in our results of operations for
the second quarter of 2016.
Preferred Share Issuance: On April 11, 2016, we issued
and sold 20,000,000 depositary shares each representing a
1/4,000th ownership interest in a share of our Fixed-to-Floating
Rate Non-Cumulative Perpetual Preferred Stock, Series G, without
par value per share, with a liquidation preference of $100,000 per
share (equivalent to $25 per Depositary Share) and an initial
dividend rate of 5.35% per anum.
Selected Financial Information and Ratios
The tables below provide a summary of selected financial
information and key ratios for the indicated periods, presented on
an operating, or non-GAAP, basis where noted. Amounts are presented
in millions of dollars, except for per-share amounts or where
otherwise noted.
Financial Highlights(1)
(Table presents summary results, dollars in millions, except
per share amounts, or where otherwise noted)
1Q16 4Q15
Increase(Decrease)
1Q15
Increase(Decrease)
Total revenue
$ 2,574 $ 2,588 (0.5 )% $ 2,672 (3.7 )%
Total expenses
1,943 1,820 6.8 1,942 0.1 Net income
available to common shareholders
396 494 (19.8 ) 487 (18.7 )
Earnings per common share
.98 1.21 (19.0 ) 1.16 (15.5 )
Return on average common equity
8.4 % 10.5 % (210 )
bps 10.4 % (200 ) bps Total assets as of period-end
$
243,685 $ 245,155 (0.6 )% $ 279,448 (12.8 )% Quarterly
average total assets
223,623 228,163 (2.0 ) 259,053 (13.7 )
Net interest margin
1.12 % 1.01 %
11.0
bps 1.01 % 11.0 bps Net unrealized gains on investment securities,
after-tax, as of period-end(2)
$ 522 $ 58 $ 699
(1) Operating basis is a non-GAAP presentation. For an
explanation of operating-basis information and related
reconciliations, refer to the addendum included with this news
release.
(2) Includes net unrealized gains on investment securities,
after tax, for securities classified as available for sale and held
to maturity.
Assets Under Custody and Administration and Assets Under
Management (Dollars in billions, except market indices)
1Q16 4Q15
Increase(Decrease)
1Q15
Increase(Decrease)
Assets under custody and administration(1)(2)
$
26,943 $ 27,508 (2.1 )% $ 28,491 (5.4 )% Assets under
management(2)
2,296 2,245 2.3 2,443 (6.0 )
Market Indices(3):
S&P 500® daily average
1,951 2,052 (4.9 ) 2,064 (5.5 )
MSCI EAFE® daily average
1,594 1,732 (8.0 ) 1,817 (12.3 ) S&P 500® average of
month-end
1,977 2,068 (4.4 ) 2,056 (3.8 ) MSCI EAFE® average
of month-end
1,601 1,743 (8.1 ) 1,839 (12.9 ) Average
Foreign Exchange Rate (Euro vs. USD)
1.103 1.095 0.7 1.127
(2.2 ) Average Foreign Exchange Rate (GBP vs. USD)
1.433
1.517 (5.6 ) 1.515 (5.4 )
(1) Includes assets under custody of $20,788 billion, $21,258
billion and $21,978 billion, as of March 31, 2016,
December 31, 2015 and March 31, 2015, respectively.
(2) As of period-end.
(3) The index names listed in the table are service marks of
their respective owners.
The following table presents first-quarter 2016 activity in
assets under management, by product category.
Assets Under Management
(In billions) Equity
Fixed-Income
Cash(2)
Multi-Asset-ClassSolutions
AlternativeInvestments(3)
Total Balance as of December 31, 2015 $ 1,326 $ 312 $
368 $ 103 $ 136
2,245 Long-term institutional inflows(1)
63 17 — 12 2 94 Long-term
institutional outflows(1)
(67 ) (20 )
— (9 ) (3 ) (99
) Long-term institutional flows, net
(4 )
(3 ) — 3 (1 ) (5
) ETF flows, net
(4 ) 4 —
— 7 7 Cash fund flows, net
—
— 11 — —
11 Total flows, net
(8 ) 1
11 3 6 13 Market appreciation
(1
) 9 — 2 7 17 Foreign
exchange impact
10 5 2
1 3 21 Total
market/foreign exchange impact
9 14
2 3 10 38
Balance as of March 31, 2016
$ 1,327 $
327 $ 381 $ 109
$ 152 $ 2,296
(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 Fund, for which State Street is
not the investment manager, but acts as distribution agent.
Revenue(1)
The following table provides the components of our
operating-basis (non-GAAP) revenue for the periods noted:
(Dollars in millions)
1Q16 4Q15
Increase(Decrease)
1Q15
Increase(Decrease)
Servicing fees
$ 1,242 $ 1,277 (2.7 )% $ 1,268 (2.1
)% Management fees
270 282 (4.3 ) 301 (10.3 ) Trading
services revenue: Foreign exchange trading
156 143 9.1 203
(23.2 ) Brokerage and other fees
116 104 11.5
121 (4.1 ) Total trading services revenue
272
247 10.1 324 (16.0 ) Securities finance revenue
134 127 5.5
101 32.7 Processing fees and other revenue(2)
115 142
(19.0 ) 114 0.9 Total fee revenue
2,033
2,075 (2.0 ) 2,108 (3.6 ) Net interest revenue(3)
539 513
5.1 565 (4.6 ) Gains (losses) related to investment securities, net
2 — nm (1 ) nm
Total Operating-Basis
Revenue $ 2,574 $ 2,588 (0.5 )% $
2,672 (3.7 )%
(1) Operating basis is a non-GAAP presentation. For an
explanation of operating-basis information and related
reconciliations, refer to the addendum included with this news
release.
(2) GAAP basis processing fees and other for the quarters ended
March 31, 2016, December 31, 2015 and March 31, 2015 are $52
million, $111 million and $61 million, respectively.
(3) GAAP basis net interest revenue for the quarters ended March
31, 2016, December 31, 2015 and March 31, 2015 are $512 million,
$494 million and $546 million, respectively.
nm Not meaningful.
Servicing fees of $1,242 million in the first quarter of
2016 decreased 2.7% from the fourth quarter of 2015, primarily due
to lower global equity markets. Compared to the first quarter of
2015, servicing fees decreased 2.1%, primarily due to lower global
equity markets and the impact of the stronger U.S. dollar,
partially offset by net new business.
Management fees of $270 million in the first quarter of
2016 decreased 4.3% from the fourth quarter of 2015 primarily due
to lower global equity markets. Compared to the first quarter of
2015 management fees decreased 10.3%, primarily due to lower global
equity markets and net outflows, partially offset by lower money
market fee waivers.
Foreign exchange trading revenue of $156 million in the
first quarter of 2016 increased 9.1% from the fourth quarter of
2015, due to higher currency volatility and client-related volumes.
Compared to the first quarter of 2015, foreign exchange trading
revenue decreased 23.2%, primarily due to lower currency volatility
and client-related volumes.
Brokerage and other fees of $116 million in the first
quarter of 2016 increased 11.5% from the fourth quarter of 2015,
primarily due to higher electronic foreign exchange trading
revenue. Compared to the first quarter of 2015, brokerage and other
fees decreased 4.1%, primarily due to an unfavorable valuation
adjustment.
Securities finance revenue of $134 million in the first
quarter of 2016 increased 5.5% and 32.7% from the fourth quarter of
2015 and the first quarter of 2015, respectively. The increase from
both periods reflects higher revenue from both enhanced custody and
agency lending.
Processing fees and other revenue of $115 million in the
first quarter of 2016 decreased 19.0% compared to the fourth
quarter of 2015, primarily due to lower equity earnings from joint
ventures and lower revenue associated with tax-advantaged
investments. Compared to the first quarter of 2015, processing fees
and other revenue increased 0.9%.
Net interest revenue of $539 million in the first quarter
of 2016 increased 5.1% from the fourth quarter of 2015, primarily
due to the impact of higher U.S. market interest rates and
disciplined liability pricing. Compared to the first quarter of
2015, net interest revenue decreased 4.6%, primarily due to our
success in reducing the size of the balance sheet in 2015,
partially offset by higher U.S. market interest rates.
Operating-basis net interest revenue excludes discount accretion
on former conduit securities and is presented on a fully
taxable-equivalent basis. The Company expects to record aggregate
pre-tax conduit-related accretion of approximately $201 million in
interest revenue from April 1, 2016 through the remaining lives of
the former conduit securities. This expectation is based on
numerous assumptions, including holding the securities to maturity,
anticipated prepayment speeds and credit quality.
Net interest margin, including balances held at the
Federal Reserve and other central banks, increased to 112 basis
points in the first quarter of 2016 from 101 basis points in both
the fourth quarter of 2015 and the first quarter of 2015. Refer to
the addendum included with this news release for reconciliations of
our operating-basis net interest margin.
Expenses(1)
The following table provides the components of our
operating-basis (non-GAAP) expenses for the periods noted:
(Dollars in millions)
1Q16 4Q15
Increase(Decrease)
1Q15
Increase(Decrease)
Compensation and employee benefits(2)
$ 1,104 $ 940
17.4 % $ 1,088 1.5 % Information systems and communications
272 261 4.2 247 10.1 Transaction processing services
200 194 3.1 197 1.5 Occupancy
113 112 0.9 113 — Other
254 313 (18.8 ) 297 (14.5 )
Total
Operating-Basis Expenses(2)(3)
$ 1,943 $
1,820 6.8 % $ 1,942 0.1 %
(1) Operating basis is a non-GAAP presentation. For an
explanation of operating-basis information and related
reconciliations, refer to the addendum included with this news
release.
(2) Excludes severance costs associated with staffing
realignment of $3 million, $(1) million and $(1) million for the
quarters ended March 31, 2016, December 31, 2015 and March 31,
2015, respectively.
(3) GAAP basis total expenses of $2,050 million, $1,857 million
and $2,097 million for the quarters ended March 31, 2016, December
31, 2015 and March 31, 2015, respectively, include acquisition and
restructuring charges of $104 million, $6 million and $6 million
for the quarters ended March 31, 2016, December 31, 2015 and March
31, 2015, respectively.
Compensation and employee benefits expenses of $1,104
million in the first quarter of 2016 increased 17.4% from the
fourth quarter of 2015, primarily due to an incremental $122
million, or $0.25 per share, primarily associated with the seasonal
deferred incentive compensation expense for retirement-eligible
employees and payroll taxes. Compared to the first quarter of 2015,
compensation and employee benefits expenses increased 1.5%,
primarily due to increased costs to support regulatory initiatives
and new business, partially offset by lower incentive compensation
expense and the impact of the stronger U.S. dollar.
Information systems and communications expenses of $272
million in the first quarter of 2016 increased 4.2% and 10.1% from
the fourth quarter of 2015 and the first quarter of 2015,
respectively. The increase from both periods reflects investments
associated with supporting business and regulatory initiatives.
Transaction processing services expenses of $200
million in the first quarter of 2016 increased 3.1% and 1.5% from
the fourth quarter of 2015 and the first quarter of 2015,
respectively.
Occupancy expenses of $113 million in the first quarter
of 2016 were relatively flat compared to the fourth quarter of 2015
and the first quarter of 2015.
Other expenses of $254 million in the first quarter of
2016 decreased 18.8% from the fourth quarter of 2015, primarily due
to lower professional fees and travel expenses as well as a
settlement with the Securities and Exchange Commission recorded in
the fourth quarter of 2015. Compared to the first quarter of 2015,
other expenses decreased 14.5%, primarily due to lower securities
processing costs and deposit insurance premiums as well as lower
travel expenses.
Income Taxes
Our first-quarter 2016 GAAP-basis effective tax rate was 14.4%
compared to 15.1% in the fourth quarter of 2015 and 18.8% in the
first quarter of 2015. Our operating-basis effective tax rates for
the first-quarter of 2016 was 29.1% compared to 31.8% in the fourth
quarter of 2015 and 28.4% in the first quarter of 2015.
Capital
The following table presents our regulatory capital ratios as of
March 31, 2016 and December 31, 2015. 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. 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, 2016
Basel
IIIAdvancedApproaches(1)(2)
Basel
IIIStandardizedApproach(1)
Basel III
FullyPhased-InAdvancedApproaches(Estimated)
Pro-Forma(2)(3)
Basel III
FullyPhased-InStandardizedApproach(Estimated)
Pro-Forma(3)
Common equity tier 1 ratio
12.3 % 12.5
% 11.9 % 12.0 % Tier 1 capital ratio
14.9 15.1
14.5 14.7 Total capital ratio
17.1 17.3 16.7 16.9
Tier 1 leverage ratio
6.9 6.9 6.7 6.7
(1) Ratios are preliminary estimates and are calculated in
conformity with the advanced approaches and standardized approach
provisions of the Basel III final rule, as the case may be.
(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,” in effect and used
by us for those purposes as of the respective date of each ratio’s
first public announcement. Significant components of these advanced
systems involve the exercise of judgment by us and our regulators,
and these advanced systems may not, individually or collectively,
precisely represent or calculate the scenarios, circumstances,
outputs or other results for which they are designed or intended.
Due to the influence of changes in these advanced systems, whether
resulting from changes in data inputs, regulation or regulatory
supervision or interpretation, State Street-specific or market
activities or experiences or other updates or factors, we expect
that our advanced systems and our capital ratios calculated in
conformity with the Basel III framework will change and may be
volatile over time, and that those latter changes or volatility
could be material as calculated and measured from period to
period.
(3) Estimated pro-forma fully phased-in ratios as of March 31,
2016 (fully phased in as of January 1, 2019, as per Basel III
phase-in requirements for capital) reflect capital calculated under
the Basel III final rule and total risk-weighted assets calculated
in conformity with the advanced approaches and standardized
approach as the case may be, each on a fully phased-in basis under
the Basel III final rule, based on our interpretations of the Basel
III final rule as of April 27, 2016 and as applied to our
businesses and operations as of March 31, 2016. 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.
December 31, 2015
Basel
IIIAdvancedApproaches(1)
Basel
IIIStandardizedApproach
Basel III
FullyPhased-InAdvancedApproaches(Estimated)
Pro-Forma(1)(2)
Basel III
FullyPhased-InStandardizedApproach(Estimated)
Pro-Forma(2)
Common equity tier 1 ratio 12.5 % 13.0 % 11.6 % 12.0 % Tier 1
capital ratio 15.3 15.9 14.3 14.9 Total capital ratio 17.4 18.1
16.5 17.2 Tier 1 leverage ratio 6.9 6.9 6.4 6.4
(1) 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,” in effect and used
by us for those purposes as of the respective date of each ratio’s
first public announcement. Significant components of these advanced
systems involve the exercise of judgment by us and our regulators,
and these advanced systems may not, individually or collectively,
precisely represent or calculate the scenarios, circumstances,
outputs or other results for which they are designed or intended.
Due to the influence of changes in these advanced systems, whether
resulting from changes in data inputs, regulation or regulatory
supervision or interpretation, State Street-specific or market
activities or experiences or other updates or factors, we expect
that our advanced systems and our capital ratios calculated in
conformity with the Basel III framework will change and may be
volatile over time, and that those latter changes or volatility
could be material as calculated and measured from period to
period.
(2) Estimated pro-forma fully phased-in ratios as of December
31, 2015 (fully phased in as of January 1, 2019, as per Basel III
phase-in requirements for capital) are preliminary estimates and
reflect capital calculated under the Basel III final rule and total
risk-weighted assets calculated in conformity with the advanced
approaches and standardized approach as the case may be, each on a
fully phased-in basis under the Basel III final rule, based on our
interpretations of the Basel III final rule as of February 19, 2016
and as applied to our businesses and operations as of December 31,
2015. 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.
In addition, the following table presents 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 as
of March 31, 2016 and December 31, 2015.
State Street State Street Bank As of
March 31, 2016(Dollars in millions)(1)
Transitional SLR
Fully Phased-InSLR(2)
Transitional SLR
Fully Phased-InSLR(2)
Tier 1 Capital $ 15,032 $ 14,546 15,071 14,628
Total assets for SLR 241,785 241,520 237,252 237,021
Supplementary Leverage Ratio 6.2 % 6.0 % 6.4 % 6.2 %
State Street State Street Bank As of December
31, 2015(Dollars in millions) Transitional SLR
Fully Phased-InSLR(2)
Transitional SLR
Fully Phased-InSLR(2)
Tier 1 Capital $ 15,264 $ 14,188 14,647 13,869
Total assets for SLR 246,857 246,312 242,200 241,700
Supplementary Leverage Ratio 6.2 % 5.8 % 6.0 % 5.7 %
(1) Ratios are preliminary estimates.
(2) Estimated pro-forma fully phased-in SLRs as of
March 31, 2016 and December 31, 2015 (fully phased-in as
of January 1, 2018, as per the phase-in requirements of the SLR
final rule) are preliminary estimates, calculated based on our
interpretations of the SLR final rule as of April 27, 2016 and
February 19, 2016, respectively, and as applied to our businesses
and operations as of March 31, 2016 and December 31,
2015, respectively. 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.
Additional Information
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.
Investor Conference Call and Quarterly
Website Disclosures
State Street will webcast an investor conference call today,
Wednesday, April 27, 2016, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. 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 #
76037131.
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 # 76037131.
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
(including those concerning our investment portfolio), and
additional financial information are available on State Street's
website, at www.statestreet.com/stockholder 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
www.statestreet.com/stockholder, 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 the first quarter of 2016,
State Street expects to publish its updates during the period
beginning today and ending on or about May 6, 2016.
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 $27 trillion in assets under custody and
administration and $2 trillion* in assets under management as of
March 31, 2016, State Street operates globally in more than
100 geographic markets and employs 32,527 worldwide. For more
information, visit State Street's website at
www.statestreet.com.
* Assets under management include the assets of the SPDR® Gold
ETF (approximately $33 billion as of March 31, 2016), for
which State Street Global Markets, LLC, an affiliate of SSgA,
serves as the distribution agent.
Forward-Looking
Statements
This news release contains forward-looking statements as defined
by United States securities laws, including statements relating to
our goals and expectations regarding our business, financial and
capital condition, results of operations, investment portfolio
performance and strategies (including without limitation regarding
expected savings associated with our State Street Beacon multi-year
transformation program), 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 27,
2016.
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 revenue, 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;
- 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 requirements and risk profile;
- the manner and timing with which the
Federal Reserve and other U.S. and foreign regulators implement
changes to the regulatory framework applicable to our operations,
including implementation 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 and
compliance programs, and changes in governmental enforcement
approaches to perceived failures to comply with regulatory or legal
obligations;
- we may not achieve our goals and
expectations regarding our plans to address the deficiencies
jointly identified by the Federal Reserve and the FDIC in April
2016 with respect to our 2015 resolution plan 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 due on October 1,
2016 or 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;
- increasing requirements to obtain the
prior approval of the Federal Reserve or our other U.S. and
non-U.S. regulators for the use, allocation or distribution of our
capital or other specific capital actions or programs, including
acquisitions, dividends and stock purchases, without which our
growth plans, distributions to shareholders, share repurchase
programs or other capital 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;
- financial market disruptions or
economic recession, whether in the U.S., Europe, Asia or other
regions;
- our ability to develop and execute
State Street Beacon, our multi-year transformation program to
create cost efficiencies and to fully digitize our business to
support the development of new solutions and capabilities for
delivery to our clients, 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 and
governance that meet our expectations and those of our clients and
our regulators;
- the results of our review of the manner
in which we invoiced certain client expenses, including the amount
of expenses determined to be reimbursable, as well as potential
consequences of such review including with respect to our client
relationships and potential investigations by regulators;
- the results of, and costs associated
with, governmental or regulatory inquiries and investigations,
litigation and similar claims, disputes, or proceedings;
- 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 depository 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 and their effective operation both independently and with
external systems, and complexities and costs of protecting the
security of our 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;
- 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;
- 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 emerging 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 2015 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 speak only as of the date
hereof, April 27, 2016, and we do not undertake efforts to
revise those forward-looking statements to reflect events after
that date.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160427005477/en/
State Street CorporationInvestor Contact:Anthony Ostler, +1
617-664-3477orMedia Contact:Hannah Grove, +1 617-664-3377
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