State Street Corporation · NYSE:STT
State Street — Q4 2016 Earnings Presentation
28 slides from State Street's earnings presentation, Jan 25, 2017
Slide 1: Fourth-Quarter 2016 Financial Highlights
State Street Corporation Fourth-Quarter 2016 Financial Highlights January 25, 2017 Exhibit 99.3
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s (State Street’s) news release announcing its fourth quarter and full year 2016 financial results. That news release contains a more detailed discussion of many
Slide 3: Our focused strategy supports long-term financial goals
3 1 Long-term goals are presented on an operating-basis, a non-GAAP presentation, and do not reflect the near-term expectations. As a result, information needed to provide corresponding GAAP-basis long-term goals, which is primarily dependent on future events or conditions that may be uncertain, is
Slide 4: Summary of GAAP-Basis Results
4 Summary of GAAP-Basis Results 1 Diluted earnings per common share for year to date December 31, 2016 does not equal the sum of the quarters. % Change $ in millions 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 4Q16 vs 4Q15 4Q16 vs 3Q16 2015 2016 2016 vs 2015 Fee revenue: Servicing fees 1,296$ 1,268
Slide 5: In 2016 we made substantial progress on our strategic priorities
5 In 2016 we made substantial progress on our strategic priorities Strategic Priorities: 2016 Performance (Versus 2015, Where Applicable): 1. Become a digital leader in financial services: • By leveraging our strength as a middle and back office provider to deliver integrated solutions that improve
Slide 6: 2017 Strategic Priorities
6 2017 Strategic Priorities: 1. Advance our digital leadership through State Street Beacon 2. Drive growth from core franchise 3. Continue to invest in new products and solutions 4. Achieve our financial goals, including generating positive fee operating leverage and continuing to return capital to
Slide 7: Notable items in 4Q16 netted to $0.13 per share benefit
7 Notable items in 4Q16 netted to $0.13 per share benefit1 4Q16 Operating-Basis (Non-GAAP) Financial Highlights2 Notable Items in 4Q16: • Income taxes include items that represent aggregate benefits of $0.54 per share1: • A $145M tax benefit from the designation of certain of our foreign earnings as
Slide 8: 2016 results driven by continued expense control and common stock purchases
8 2016 results driven by continued expense control and common stock purchases 5.27 4.895.05 4.51 3.92 2016 vs 2015 7.8% 2016 2015 2014 2013 2012 Operating-Basis (Non-GAAP) EPS1 ($) Full Year 2016 compared to 20151: • EPS of $5.27 increased 7.8%, including a net $0.13 per share3 benefit associated wi
Slide 9: Positive fee operating leverage excluding acceleration of compensation expense
9 Excluding the acceleration of compensation expense, generated positive fee operating leverage in both 4Q16 and full year 2016 compared to the same periods in 2015 Operating-Basis (Non-GAAP) Results1 4Q16 vs 4Q15 Operating Leverage Fee Operating Leverage As reported Impact of compensation expense a
Slide 10: 4Q16 fee revenue up 4% from 4Q15 excluding GEAM and currency
10 4Q16 operating-basis (non-GAAP) fee revenue was up 4% from 4Q15 excluding the contribution from the acquired GEAM operations and the impact of the stronger U.S. dollar1, reflecting improved market conditions and new business wins Operating-Basis (Non-GAAP) Fee Revenue2 ($M) 247 293 282 361 121 12
Slide 11: 4Q16 fee revenue slightly up from 3Q16 excluding currency impact
11 4Q16 operating-basis (non-GAAP) fee revenue was slightly up from 3Q16 excluding the impact of the strengthening U.S. dollar1 Operating-Basis (Non-GAAP) Fee Revenue2 ($M) GEAM: • Estimated contribution from the acquired GEAM3 operations of $64M to management fee revenue Operating-basis (non-GAAP)2
Slide 12: 4Q16 net interest revenue and NIM benefitted from higher Fed Funds Rate
12 4Q16 operating-basis (non-GAAP) net interest revenue (NIR) and NIM benefitted from higher Federal Funds Rate at end of 4Q16 and continued disciplined liability pricing Average Earning Assets ($B) 1 Includes operating-basis (non-GAAP) financial information where noted. Refer to the Appendix includ
Slide 13: 4Q16 operating-basis expenses versus 4Q15 and 3Q16
13 4Q16 operating-basis (non-GAAP) expenses were up 0.9% versus 4Q15 and down 0.9% versus 3Q16, excluding acquired GEAM operations expenses and the acceleration of compensation expense1 Operating-Basis (Non-GAAP) Expenses2 ($M) 313 295 311 194 200 199 261 285 278 940 1,022 997 109107 249 2,143 3Q16
Slide 14: Continue to maintain high-quality balance sheet
14 1 As of period-end where applicable. 2 Excludes foreign T-Bills 3 Based on numerous assumptions, including holding the securities to maturity, anticipated prepayment speeds and credit quality. See discussion in State Street’s 2015 Annual Report on Form 10-K filed with the SEC. 4 Assumptions for N
Slide 15: Capital ratios remain strong
15 • Refer to the Appendix included with this presentation for footnotes 1 to 4. …and our capital ratios remain strong, though most ratios declined slightly in 4Q16 due to the impact of rising interest rates on Other Comprehensive Income (OCI) 4Q16 Quarter-End Capital1 Positions Dec 31, 2015 Sept 30
Slide 16: GE Asset Management acquisition update
16 • Associated AUM of the acquired GEAM operations was $118B at December 31, 2016, including the new OCIO GE UK plan that will begin generating revenue in 2017 • Excluding merger and integration charges, the transaction is expected to be accretive to operating-basis2 EPS for the first full twelve–m
Slide 17: 2017 Outlook
17 2017 Outlook1: Expect new business wins to generate solid fee revenue growth, together with expense initiatives, to generate positive fee operating leverage Refer to the Appendix included with this presentation for footnotes 1 to 4. Category: 2017 Outlook/ Objective2 (Vs 2016 where applicable): A
Slide 18: 2017 Balance Sheet & Capital Outlook
18 2017 Balance Sheet & Capital Outlook: Returning capital to shareholders remains a priority • Under both Static and Rising interest rate scenarios1, the balance sheet is projected to modestly decline during 2017 due to client deposits and wholesale CD run-off (range of $0- 15B) with a potential re
Slide 19: Appendix
19 Appendix State Street Beacon 20 Footnotes to Slides 5, 7, 8, 10,11,13,15 & 17 21-24 Definitions 25-26 Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations 27-28
Slide 20: State Street Beacon on track to deliver financial benefits through 2020
20 State Street Beacon on track to deliver financial benefits to be achieved through 2020 1 Estimated pre-tax expense savings improvement relate only to State Street Beacon and the targeted staff reductions announced as part of our 3Q15 financial results, and are based on projected improvement from
Slide 21: Footnotes to Slides 5, 7, 8, 10, 11, 13 & 15
21 Footnotes to Slides 5, 7, 8, 10,11,13 15 & 17
Slide 22: Footnotes to slides 5 and 7
22 Footnotes to slides 5, 7 & 8 1 Estimated year-over-year pre-tax expense savings improvement relate only to State Street Beacon and the targeted staff reductions announced as part of our 3Q15 financial results (includes targeted staff reductions in October 2015), all else equal. The full effect of
Slide 23: Footnotes to slides 10, 11 and 13
23 Footnotes to slides 10,11 & 13 Footnotes to slides 10 & 11: 1 Includes operating-basis (non-GAAP) information, excluding the effects of changes in foreign exchange rates and the revenues and expenses associated with the GEAM business, as applicable. This presentation is a non-GAAP presentation. R
Slide 24: Footnotes to slide 17
24 Footnotes to slide 15 & 17 1 Includes operating-basis (non-GAAP) financial information. Operating-basis financial outlook is a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures. 2 Daily averages as of January 23, 2017: S&P
Slide 25: Definitions
25 Definitions
Slide 26: Definitions
26 Definitions Available for sale (AFS) Available for sale security that is purchased with the intent of holding before it reaches maturity AUCA Assets under custody and administration AUM Assets under management Diluted earnings per share (EPS) Net income available to common shareholders divided by
Slide 27: Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations
27 Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations
Slide 28: Non-GAAP measures, regulatory capital ratios and reconciliations
28 Non-GAAP measures, regulatory capital ratios and reconciliations 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 that this pre