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State Street (STT) Stock Up as Q4 Earnings Beat on Higher NIR
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State Street’s (STT - Free Report) fourth-quarter 2022 adjusted earnings of $2.07 per share outpaced the Zacks Consensus Estimate of $2.00. The bottom line was 3.5% higher than the prior-year level. Our estimate for adjusted earnings was $1.78 per share.
Shares of STT rallied almost 4% in pre-market trading on better-than-expected quarterly performance. Also, the company’s new share repurchase program for this year cheered investors.
Results reflected new investment servicing wins (bringing servicing assets to be installed in the future to $3.6 trillion), higher net interest revenues (NIR), a slight fall in expenses and growth in net interest margin. A decline in fee revenues, lower assets balance and higher provisions hurt STT’s results to some extent.
After considering non-recurring items, net income available to common shareholders was $696 million or $1.91 per share, up from $662 million or $1.78 per share in the year-ago quarter. We had projected net income available to common shareholders (GAAP basis) to be $648.1 million.
In 2022, adjusted earnings per share of $7.44 beat the consensus estimate of $7.35 but fell marginally year over year. Our estimate for adjusted earnings was $7.13 per share. Net income available to common shareholders grew 3.4% to $2.66 billion.
Revenues Rise, Expenses Decline
Quarterly total revenues were $3.16 billion, increasing 3.3% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $3.06 billion. Our estimate for the metric was $2.97 billion.
In 2022, total revenues grew 1% year over year to $12.15. Also, the top line beat the Zacks Consensus Estimate of $12.06 billion. Our estimate for the metric was $11.97 billion.
NIR was $791 million, jumping 63.4% year over year. The rise was largely driven by higher global interest rates and growth in loan balances. The net interest margin (NIM) rose 56 basis points year over year to 1.29%. Our estimates for NIR and NIM were $709.2 million and 1.19%, respectively.
The total fee revenues declined 5.9% to $2.36 billion. The fall was due to a decline in servicing fees and management fees. We had projected total fee revenues to be $2.23 billion.
Non-interest expenses were $2.26 billion, down 3.2%. This reflected continued productivity and optimization savings and gains from currency translation, largely offset by continued business investments and a rise in wages. Our estimate for the metric was $2.15 billion. Excluding non-recurring items, expenses were $2.2 billion, down marginally.
The provision for credit losses was $10 million in the reported quarter against a provision benefit of $7 million in the prior-year quarter.
The common equity Tier 1 ratio was 13.6% as of Dec 31, 2022, compared with 14.3% in the corresponding period of 2021. The return on common equity was 11.8% compared with 10.3% in the year-ago quarter.
Asset Balances Decline
As of Dec 31, 2022, total assets under custody and administration (AUC/A) were $36.7 trillion, down 15.9% year over year. The fall was due to lower equity and fixed-income market levels, previously disclosed client transition and unfavorable currency translation partially offset by net new business installations.
The assets under management (AUM) were $3.5 trillion, down 15.9%, reflecting lower equity and fixed-income market levels, institutional net outflows and unfavorable currency translation, which were partially offset by ETF net inflows.
Share Repurchase Update
During the reported quarter, State Street repurchased shares worth $1.5 billion.
Also, the company announced a new authorization to buy back up to shares worth $4.5 billion in 2023.
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. Nonetheless, higher interest rates and solid business servicing wins are expected to keep supporting State Street’s financials.
State Street Corporation Price, Consensus and EPS Surprise
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
Results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt BK’s results to some extent.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income (NII) driven by higher rates acted as a tailwind for NTRS.
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State Street (STT) Stock Up as Q4 Earnings Beat on Higher NIR
State Street’s (STT - Free Report) fourth-quarter 2022 adjusted earnings of $2.07 per share outpaced the Zacks Consensus Estimate of $2.00. The bottom line was 3.5% higher than the prior-year level. Our estimate for adjusted earnings was $1.78 per share.
Shares of STT rallied almost 4% in pre-market trading on better-than-expected quarterly performance. Also, the company’s new share repurchase program for this year cheered investors.
Results reflected new investment servicing wins (bringing servicing assets to be installed in the future to $3.6 trillion), higher net interest revenues (NIR), a slight fall in expenses and growth in net interest margin. A decline in fee revenues, lower assets balance and higher provisions hurt STT’s results to some extent.
After considering non-recurring items, net income available to common shareholders was $696 million or $1.91 per share, up from $662 million or $1.78 per share in the year-ago quarter. We had projected net income available to common shareholders (GAAP basis) to be $648.1 million.
In 2022, adjusted earnings per share of $7.44 beat the consensus estimate of $7.35 but fell marginally year over year. Our estimate for adjusted earnings was $7.13 per share. Net income available to common shareholders grew 3.4% to $2.66 billion.
Revenues Rise, Expenses Decline
Quarterly total revenues were $3.16 billion, increasing 3.3% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $3.06 billion. Our estimate for the metric was $2.97 billion.
In 2022, total revenues grew 1% year over year to $12.15. Also, the top line beat the Zacks Consensus Estimate of $12.06 billion. Our estimate for the metric was $11.97 billion.
NIR was $791 million, jumping 63.4% year over year. The rise was largely driven by higher global interest rates and growth in loan balances. The net interest margin (NIM) rose 56 basis points year over year to 1.29%. Our estimates for NIR and NIM were $709.2 million and 1.19%, respectively.
The total fee revenues declined 5.9% to $2.36 billion. The fall was due to a decline in servicing fees and management fees. We had projected total fee revenues to be $2.23 billion.
Non-interest expenses were $2.26 billion, down 3.2%. This reflected continued productivity and optimization savings and gains from currency translation, largely offset by continued business investments and a rise in wages. Our estimate for the metric was $2.15 billion. Excluding non-recurring items, expenses were $2.2 billion, down marginally.
The provision for credit losses was $10 million in the reported quarter against a provision benefit of $7 million in the prior-year quarter.
The common equity Tier 1 ratio was 13.6% as of Dec 31, 2022, compared with 14.3% in the corresponding period of 2021. The return on common equity was 11.8% compared with 10.3% in the year-ago quarter.
Asset Balances Decline
As of Dec 31, 2022, total assets under custody and administration (AUC/A) were $36.7 trillion, down 15.9% year over year. The fall was due to lower equity and fixed-income market levels, previously disclosed client transition and unfavorable currency translation partially offset by net new business installations.
The assets under management (AUM) were $3.5 trillion, down 15.9%, reflecting lower equity and fixed-income market levels, institutional net outflows and unfavorable currency translation, which were partially offset by ETF net inflows.
Share Repurchase Update
During the reported quarter, State Street repurchased shares worth $1.5 billion.
Also, the company announced a new authorization to buy back up to shares worth $4.5 billion in 2023.
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. Nonetheless, higher interest rates and solid business servicing wins are expected to keep supporting State Street’s financials.
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 Banks
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
Results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt BK’s results to some extent.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income (NII) driven by higher rates acted as a tailwind for NTRS.