We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
State Street (STT) Q1 Earnings Beat on Higher Fee Income
Read MoreHide Full Article
State Street’s (STT - Free Report) first-quarter 2021 adjusted earnings of $1.47 per share outpaced the Zacks Consensus Estimate of $1.34. However, the bottom line was 12% lower than the prior-year level.
Results reflected new investment servicing wins of $343 billion, provision benefits and improvement in fee income. However, a decline in net interest income (mainly due to lower rates) and rise in expenses were the undermining factors.
Results excluded certain non-recurring items. After considering those, net income available to common shareholders was $489 million, down 15.7% from the year-ago quarter.
Revenues Decline, Costs Rise
Total revenues were $2.95 billion, decreasing 3.8% year over year. However, the top line beat the Zacks Consensus Estimate of $2.88 billion.
Net interest revenues were $467 million, down 29.7%. The fall was mainly due to lower market rates, partially offset by higher investment portfolio and deposits balances.
Net interest margin (NIM) contracted 55 basis points to 0.75%.
Total fee revenues grew 3.5% to $2.48 billion. The rise was mainly driven by improvement in servicing, management, and software and processing fees, partly offset by lower foreign exchange trading revenues.
Non-interest expenses were $2.33 billion, increasing 3.4%. The rise was primarily due to higher compensation and employee benefits, information systems and communications, and transaction processing services. Excluding notable items, adjusted expenses increased 2.2% to $2.29 billion.
Provision for credit losses was benefit of $9 million in the reported quarter against provision of $36 million in the prior-year quarter.
Asset Balances Improves
As of Mar 31, 2021, total assets under custody and administration were $40.3 trillion, up 26.4% year over year. The rise was mainly due to higher market levels, net new business installations and client flows.
Also, assets under management were $3.6 trillion, up 33.5%. The growth was driven largely by higher market levels and net inflows from exchange traded funds and cash, partly offset by institutional net outflows.
Capital and Profitability Ratios Strong
Under Basel III (Standardized approach), estimated Tier 1 common equity ratio was 10.8% as of Mar 31, 2021, compared with 10.7% in the corresponding period of 2020.
Return on common equity was 8.4% compared with 10.9% in the year-ago quarter.
Share Repurchase Update
During the quarter, State Street repurchased shares worth $475 million.
Concurrently, the company announced buyback authorization of $425 million for second-quarter 2021.
Our Take
New business wins and a strong balance sheet position are expected to continue supporting State Street's profitability. However, near-zero interest rates are likely to continue hurting interest income and NIM growth to an extent in the near term.
State Street Corporation Price, Consensus and EPS Surprise
U.S. Bancorp (USB - Free Report) reported first-quarter 2021 earnings per share of $1.45, which surpassed the Zacks Consensus Estimate of 95 cents. The bottom line compared favorably with the prior-year quarter’s figure of 72 cents.
Solid mortgage and capital markets performance supported Wells Fargo’s (WFC - Free Report) first-quarter 2021 earnings of $1.05 per share, which surpassed the Zacks Consensus Estimate of 69 cents.
Truist Financial’s (TFC - Free Report) first-quarter 2021 adjusted earnings of $1.18 per share outpaced the Zacks Consensus Estimate of $1.12. Results excluded restructuring and BB&T-SunTrust Banks merger-related charges, and incremental operating expenses related to the merger. Compared with the previous quarter, the bottom line improved 42%.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Image: Bigstock
State Street (STT) Q1 Earnings Beat on Higher Fee Income
State Street’s (STT - Free Report) first-quarter 2021 adjusted earnings of $1.47 per share outpaced the Zacks Consensus Estimate of $1.34. However, the bottom line was 12% lower than the prior-year level.
Results reflected new investment servicing wins of $343 billion, provision benefits and improvement in fee income. However, a decline in net interest income (mainly due to lower rates) and rise in expenses were the undermining factors.
Results excluded certain non-recurring items. After considering those, net income available to common shareholders was $489 million, down 15.7% from the year-ago quarter.
Revenues Decline, Costs Rise
Total revenues were $2.95 billion, decreasing 3.8% year over year. However, the top line beat the Zacks Consensus Estimate of $2.88 billion.
Net interest revenues were $467 million, down 29.7%. The fall was mainly due to lower market rates, partially offset by higher investment portfolio and deposits balances.
Net interest margin (NIM) contracted 55 basis points to 0.75%.
Total fee revenues grew 3.5% to $2.48 billion. The rise was mainly driven by improvement in servicing, management, and software and processing fees, partly offset by lower foreign exchange trading revenues.
Non-interest expenses were $2.33 billion, increasing 3.4%. The rise was primarily due to higher compensation and employee benefits, information systems and communications, and transaction processing services. Excluding notable items, adjusted expenses increased 2.2% to $2.29 billion.
Provision for credit losses was benefit of $9 million in the reported quarter against provision of $36 million in the prior-year quarter.
Asset Balances Improves
As of Mar 31, 2021, total assets under custody and administration were $40.3 trillion, up 26.4% year over year. The rise was mainly due to higher market levels, net new business installations and client flows.
Also, assets under management were $3.6 trillion, up 33.5%. The growth was driven largely by higher market levels and net inflows from exchange traded funds and cash, partly offset by institutional net outflows.
Capital and Profitability Ratios Strong
Under Basel III (Standardized approach), estimated Tier 1 common equity ratio was 10.8% as of Mar 31, 2021, compared with 10.7% in the corresponding period of 2020.
Return on common equity was 8.4% compared with 10.9% in the year-ago quarter.
Share Repurchase Update
During the quarter, State Street repurchased shares worth $475 million.
Concurrently, the company announced buyback authorization of $425 million for second-quarter 2021.
Our Take
New business wins and a strong balance sheet position are expected to continue supporting State Street's profitability. However, near-zero interest rates are likely to continue hurting interest income and NIM growth to an extent in the near term.
State Street Corporation Price, Consensus and EPS Surprise
State Street Corporation price-consensus-eps-surprise-chart | State Street Corporation Quote
State Street currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
U.S. Bancorp (USB - Free Report) reported first-quarter 2021 earnings per share of $1.45, which surpassed the Zacks Consensus Estimate of 95 cents. The bottom line compared favorably with the prior-year quarter’s figure of 72 cents.
Solid mortgage and capital markets performance supported Wells Fargo’s (WFC - Free Report) first-quarter 2021 earnings of $1.05 per share, which surpassed the Zacks Consensus Estimate of 69 cents.
Truist Financial’s (TFC - Free Report) first-quarter 2021 adjusted earnings of $1.18 per share outpaced the Zacks Consensus Estimate of $1.12. Results excluded restructuring and BB&T-SunTrust Banks merger-related charges, and incremental operating expenses related to the merger. Compared with the previous quarter, the bottom line improved 42%.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>