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State Street (STT) Q1 Earnings Beat on Higher Revenues, Stock Up

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State Street’s (STT - Free Report) first-quarter 2022 adjusted earnings of $1.59 per share outpaced the Zacks Consensus Estimate of $1.47. The bottom line was 8.2% higher than the prior-year level.

Shares of STT have gained almost 1% in pre-market market trading on better-than-expected earnings. The full-day trading session will display a clearer picture.

Results reflected new investment servicing wins, nil provision, fall in expenses and improvement in fee income. Also, an increase in net interest revenues on the back of higher rates was a major positive.
Results excluded non-recurring items. After considering those, net income available to common shareholders was $583 million or $1.57 per share, up from $489 million or $1.37 per share in the year-ago quarter.

Revenues Improve, Expenses Down

Total revenues were $3.08 billion, increasing 4.4% year over year. Also, the top line beat the Zacks Consensus Estimate of $3.03 billion.

Net interest revenues were $509 million, up 9% year over year. The rise was largely driven by an increase in loan balance, higher market interest rates, and a jump in deposits and investment portfolio balances.

Net interest margin rose 5 basis points to 0.80%.

Total fee revenues grew 3.6% year over year to $2.57 billion. The rise was driven by improvement in all fee components, except securities finance revenues and service fees.

Non-interest expenses were $2.33 billion, down almost 1%. Excluding notable items, adjusted expenses were up 1.1% to $2.32 billion.

Provision for credit losses was nil in the reported quarter against a provision benefit of $9 million in the prior-year quarter.

Asset Balances Improve

As of Mar 31, 2022, total assets under custody (AUC) and administration were $41.7 trillion, up 3.6% year over year.  The rise was mainly due to higher market levels, net new business growth and client flow.

Assets under management were $4 trillion, up 12% year over year. The growth was driven largely by higher market levels and net inflows.

Capital and Profitability Ratios Strong

Common equity Tier 1 ratio was 11.9% as of Mar 31, 2022, compared with 10.8% in the corresponding period of 2021.

Return on common equity was 9.5% compared with 8.4% in the year-ago quarter.

Our Take

New business wins and a strong balance sheet position are expected to continue supporting State Street's profitability. The planned acquisition of BBH Investor Services will make the company the leading asset servicer globally (in terms of AUC). However, elevated costs due to the company’s restructuring efforts pose a major concern.

State Street Corporation Price, Consensus and EPS Surprise

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.

Earnings Dates & Expectations of Other Custodian Banks

The Bank of New York Mellon Corporation (BK - Free Report) is slated to report first-quarter 2022 results on Apr 18.

Over the past 30 days, the Zacks Consensus Estimate for BK’s quarterly earnings has moved 10.4% lower to 86 cents. This indicates an 11.3% decline from the prior-year quarter.

Northern Trust Corporation (NTRS - Free Report) is scheduled to announce first-quarter 2022 numbers on Apr 26.

Over the past 30 days, the Zacks Consensus Estimate for NTRS’ quarterly earnings has moved 1.2% upward to $1.66, implying a 2.4% decline from the prior-year reported number.

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