State Street (STT) Beats On Q1 Earnings As Revenues Improve
Zacks Investment Research | Apr 20, 2018 08:49AM ET
State Street’s (NYSE:STT) first-quarter 2018 earnings of $1.62 per share handily outpaced the Zacks Consensus Estimate of $1.58. Also, it was 40.9% above the prior-year quarter.
Higher net interest income (reflecting rise in interest rates) and fee income (indicating higher trading services income) supported top-line growth. Also, improvement in assets under custody and administration and assets under management (AUM) acted as a tailwind. However, increase in non-interest expenses was an undermining factor.
Net income available to common shareholders came in at $605 million, up 35.7% from the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues were $3.02 billion, increasing 13.2% from the prior-year quarter. Further, the top line matched the Zacks Consensus Estimate.
Net interest revenues jumped 29% from the year-ago quarter to $658 million. The rise was mainly driven by higher interest rates, loan growth and increase in client balances. Also, net interest margin increased 26 basis points year over year to 1.43%.
Fee revenues grew 7.5% from the prior-year quarter to $2.37 billion. All components of fee income showed improvement except processing fees and other revenues.
During the reported quarter, new asset servicing mandates totaled $1.3 trillion.
Non-interest expenses were $2.26 billion, up 8.1% on a year-over-year basis. The rise was due to increase in other expense components.
As of Mar 31, 2018, total assets under custody and administration were $33.3 trillion, up 11.6% year over year. Moreover, AUM was $2.7 trillion, up 6.6%.
Strong Capital and Profitability Ratios
Under Basel III (Advanced approach), estimated Tier 1 common ratio was 12.1% as of Mar 31, 2018, up from 12.0% as of Dec 31, 2017.
Return on common equity came in at 12.8% compared with 9.9% in the year-ago quarter.
Share Repurchase Update
During the reported quarter, State Street repurchased shares worth $350 million. This was part of the company’s 2017 capital plan.
Our Viewpoint
State Street is well poised to benefit from higher interest rates and synergies from the acquisition of GE Asset Management. Also, the company remains on track to improve efficiency through its multi-year restructuring plan. However, mounting expenses are expected to continue hurting its bottom line in the upcoming quarters.
State Street Corporation Price, Consensus and EPS Surprise
Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.