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State Street (STT) Stock Gains on Q4 Earnings Beat, NIR Down
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State Street’s (STT - Free Report) fourth-quarter 2023 adjusted earnings of $2.04 per share surpassed the Zacks Consensus Estimate of $1.81. The bottom line, however, declined 1.4% from the prior-year quarter.
Shares of STT jumped almost 4.5% in pre-market trading on a better-than-expected quarterly performance.
Results were primarily aided by stable fee revenues. Also, the company witnessed an improvement in total assets under custody and assets under management (AUM) balances. However, lower net interest revenues (NIR), higher expenses and an increase in provisions acted as headwinds.
Net income available to common shareholders (after considering the notable items) was $172 million, down 56.8% from the year-ago quarter. Our projection for the metric was $399.3 million.
In 2023, adjusted earnings per share of $7.66 surpassed the Zacks Consensus Estimate of $7.42 and grew 3.4% year over year. Net income available to common shareholders (after considering the notable items) was $1.82 billion, down 31.5%.
Revenues Decline, Expenses Rise
Quarterly total revenues of $3.04 billion declined 3.5% year over year. However, the top line beat the Zacks Consensus Estimate of $2.94 billion.
In 2023, total revenues fell 1.7% to $11.94 billion. Also, the top line missed the Zacks Consensus Estimate of $11.99 billion.
NIR was $678 million, down 14.3% year over year. The decline was due to lower average deposit balances and deposit mix shift, partially offset by the impacts of higher interest rates. The net interest margin (NIM) declined 13 basis points to 1.16%.
Total fee revenues were relatively stable at $2.37 billion. We estimated the metric to be $2.39 billion.
Non-interest expenses were $2.82 billion, up 25.1%. The rise was due to an increase in almost all cost components. Our estimate for the metric was $2.37 billion and didn’t include non-recurring charges incurred during the quarter.
Provision for credit losses was $20 million, up from $10 million in the prior-year quarter. Our prediction for the metric was $23.3 million.
The common equity Tier 1 ratio was 11.6% as of Dec 31, 2023, compared with 13.6% in the corresponding period of 2022. The return on common equity was 3.1% compared with 11.8% in the year-ago quarter.
Assets Balances Increase
As of Dec 31, 2023, total assets under custody and administration were $41.81 trillion, up 13.8% year over year. The rise was driven by higher quarter-end equity market levels and net new business. We had projected the metric to be $39.51 trillion.
Assets under management (AUM) were $4.13 trillion, up 18.6% year over year, primarily driven by higher quarter-end market levels and net inflows. Our estimate for the metric was $3.69 trillion.
Share Repurchase Update
In the reported quarter, State Street repurchased shares worth $500 million.
The company announced a new buyback authorization worth $5 billion with no expiration date.
Our Take
Persistently rising expenses and a tough operating backdrop are major concerns. Yet, 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
The Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2023 adjusted earnings of $1.28 per share surpassed the Zacks Consensus Estimate of $1.12. However, the bottom line reflects a fall of 1.5% from the prior-year quarter.
Results have been primarily aided by a rise in NIR and fee revenues. AUM balance witnessed a rise, which was another major positive for BK. However, higher expenses have hurt the results to some extent. Also, the credit quality was weak in the reported quarter.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impact of loss on available for sale debt securities and FDIC special assessment fees) of $1.46 surpassed the Zacks Consensus Estimate of $1.33. However, the bottom line declined 11.5% year over year.
Rising fee income was a positive for NTRS. Also, an increase in total assets under custody and AUM balances supported financials. Nonetheless, a fall in net interest income and deterioration in the credit quality were headwinds.
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State Street (STT) Stock Gains on Q4 Earnings Beat, NIR Down
State Street’s (STT - Free Report) fourth-quarter 2023 adjusted earnings of $2.04 per share surpassed the Zacks Consensus Estimate of $1.81. The bottom line, however, declined 1.4% from the prior-year quarter.
Shares of STT jumped almost 4.5% in pre-market trading on a better-than-expected quarterly performance.
Results were primarily aided by stable fee revenues. Also, the company witnessed an improvement in total assets under custody and assets under management (AUM) balances. However, lower net interest revenues (NIR), higher expenses and an increase in provisions acted as headwinds.
Net income available to common shareholders (after considering the notable items) was $172 million, down 56.8% from the year-ago quarter. Our projection for the metric was $399.3 million.
In 2023, adjusted earnings per share of $7.66 surpassed the Zacks Consensus Estimate of $7.42 and grew 3.4% year over year. Net income available to common shareholders (after considering the notable items) was $1.82 billion, down 31.5%.
Revenues Decline, Expenses Rise
Quarterly total revenues of $3.04 billion declined 3.5% year over year. However, the top line beat the Zacks Consensus Estimate of $2.94 billion.
In 2023, total revenues fell 1.7% to $11.94 billion. Also, the top line missed the Zacks Consensus Estimate of $11.99 billion.
NIR was $678 million, down 14.3% year over year. The decline was due to lower average deposit balances and deposit mix shift, partially offset by the impacts of higher interest rates. The net interest margin (NIM) declined 13 basis points to 1.16%.
Total fee revenues were relatively stable at $2.37 billion. We estimated the metric to be $2.39 billion.
Non-interest expenses were $2.82 billion, up 25.1%. The rise was due to an increase in almost all cost components. Our estimate for the metric was $2.37 billion and didn’t include non-recurring charges incurred during the quarter.
Provision for credit losses was $20 million, up from $10 million in the prior-year quarter. Our prediction for the metric was $23.3 million.
The common equity Tier 1 ratio was 11.6% as of Dec 31, 2023, compared with 13.6% in the corresponding period of 2022. The return on common equity was 3.1% compared with 11.8% in the year-ago quarter.
Assets Balances Increase
As of Dec 31, 2023, total assets under custody and administration were $41.81 trillion, up 13.8% year over year. The rise was driven by higher quarter-end equity market levels and net new business. We had projected the metric to be $39.51 trillion.
Assets under management (AUM) were $4.13 trillion, up 18.6% year over year, primarily driven by higher quarter-end market levels and net inflows. Our estimate for the metric was $3.69 trillion.
Share Repurchase Update
In the reported quarter, State Street repurchased shares worth $500 million.
The company announced a new buyback authorization worth $5 billion with no expiration date.
Our Take
Persistently rising expenses and a tough operating backdrop are major concerns. Yet, 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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..
Performance of Other Banks
The Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2023 adjusted earnings of $1.28 per share surpassed the Zacks Consensus Estimate of $1.12. However, the bottom line reflects a fall of 1.5% from the prior-year quarter.
Results have been primarily aided by a rise in NIR and fee revenues. AUM balance witnessed a rise, which was another major positive for BK. However, higher expenses have hurt the results to some extent. Also, the credit quality was weak in the reported quarter.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impact of loss on available for sale debt securities and FDIC special assessment fees) of $1.46 surpassed the Zacks Consensus Estimate of $1.33. However, the bottom line declined 11.5% year over year.
Rising fee income was a positive for NTRS. Also, an increase in total assets under custody and AUM balances supported financials. Nonetheless, a fall in net interest income and deterioration in the credit quality were headwinds.