Back to top

Image: Bigstock

State Street (STT) Stock Up on Q2 Earnings Beat, Revenues Dip

Read MoreHide Full Article

State Street’s (STT - Free Report) second-quarter 2022 adjusted earnings of $1.94 per share have outpaced the Zacks Consensus Estimate of $1.76. The bottom line was 1.5% lower than the prior-year level.

Shares of STT have gained 1.8% 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, higher net interest revenues, a marginal decline in expenses and growth in net interest margin. A decline in fee revenues and higher provisions hurt results to some extent.

Results excluded non-recurring items. After considering those, net income available to common shareholders was $712 million or $1.91 per share, down from $728 million or $2.07 per share in the year-ago quarter.

Revenues & Expenses Decline

Total revenues were $2.95 billion, decreasing 2.7% year over year. Also, the top line missed the Zacks Consensus Estimate of $3.00 billion.

Net interest revenues were $584 million, up 25.1% year over year. The rise was largely driven by higher short and long-term interest rates, and growth in loan balances.

The net interest margin rose 23 basis points year over year to 0.94%.

Total fee revenues declined 5.7% year over year to $2.37 billion. The fall was due to a decline in almost all fee income components, except for foreign exchange trading services revenues.

Non-interest expenses were $2.11 billion, down marginally year over year.

Provision for credit losses was $10 million in the reported quarter against a provision benefit of $15 million in the prior-year quarter.

Asset Balances Decline

As of Jun 30, 2022, total assets under custody and administration were $38.2 trillion, down 10.4% year over year.  The fall was due to lower equity and fixed-income market levels, partially offset by net new business and client flows.

Assets under management were $3.5 trillion, down 10.8% year over year, reflecting lower equity and fixed-income market levels and institutional net outflows, partially offset by ETF and cash net inflows.

Capital Ratios Improve, Profitability Ratios Deteriorate

Common equity Tier 1 ratio was 12.9% as of Jun 30, 2022, compared with 11.2% in the corresponding period of 2021.

Return on common equity was 12.1% compared with 12.6% in the year-ago quarter.

Our Take

Persistently rising expenses due to the company’s strategic buyouts and investments in franchise will likely hurt the bottom line to an extent. A tough operating backdrop is another major concern for STT.

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 #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Large Banks

Higher reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) second-quarter 2022 earnings of $2.76 per share, which missed the Zacks Consensus Estimate of $2.85. The reported quarter’s results included a net credit reserve build of $428 million.

Higher interest rates and a solid rise in loan balances aided JPM’s net interest income. Operating expenses recorded a year-over-year rise.

First Republic Bank’s (FRC - Free Report) second-quarter 2022 earnings per share of $2.16 surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.

FRC’s results were supported by an increase in net interest income and non-interest income. The company’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.

Free Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

JPMorgan Chase & Co. (JPM) - free report >>

State Street Corporation (STT) - free report >>

First Republic Bank (FRC) - free report >>