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State Street (STT) Beats Q4 Earnings as Trading Fees Rise
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Improved trading revenues drove State Street Corporation’s (STT - Free Report) fourth-quarter 2016 operating earnings of $1.48 per share, which handily outpaced the Zacks Consensus Estimate of $1.34. Also, the figure was up 22.3% year over year. The reported quarter’s operating earnings included certain notable items.
Better-than-expected results were supported by a rise in net interest income and fee income. Further, asset growth aided the results. However, a significant rise in expenses hurt the quarterly numbers.
After considering certain non-recurring items, net income available to common shareholders came in at $557 million or $1.43 per share, down from $547 million or $1.34 per share in the year-ago quarter.
For 2016, operating earnings of $5.27 per share significantly beat the Zacks Consensus Estimate of $5.11 and were above the 2015 figure of $4.89. Net income available to common shareholders (GAAP basis) amounted to $1.97 billion, up 7% year over year.
Net Interest Income Rise, Expenses High
Revenues, on a GAAP basis, totaled $2.53 billion, down marginally from the prior-year quarter. Also, the top line came in lower than the Zacks Consensus Estimate of $2.77 billion.
Revenues (GAAP basis) totaled $10.21 billion, down 2% year over year. Moreover, it lagged the Zacks Consensus Estimate of $10.71 billion.
Net interest revenue, on an operating basis, increased 7% from the year-ago quarter to $547 million. The rise was mainly driven by higher market interest rates in the U.S., disciplined liability pricing and several discrete security prepayments in the investment portfolio.
Also, net interest margin increased 7 basis points year over year to 1.08%.
Fee revenues came in at $2.20 billion, up 6% from the prior-year quarter. All components of fee income showed improvement except processing fees and other revenue.
On an operating basis, non-interest expenses were $2.14 billion, up 17.7% on a year-over-year basis. Increase in compensation and employee benefits costs, and information systems and communications expenses were partly offset by lower occupancy costs and other expenses.
As of Dec 31, 2016, total assets under custody and administration were $28.8 trillion, up 5% year over year. Moreover, assets under management were $2.5 trillion, up 10% year over year.
Strong Capital and Profitability Ratios
Under Basel III (Advanced approach), the estimated Tier 1 common ratio was 11.7% as of Dec 31, 2016, down from 12.3% as of Sep 30, 2016.
Return on common equity (on an operating basis) came in at 12.5% compared with 10.5% in the year-ago quarter.
Share Repurchases
During the reported quarter, State Street repurchased shares worth $325 million at an average price of $76.70 per share. This was part of the company’s buyback plan, which authorized the purchase of up to $1.4 billion of stock through second-quarter 2017.
Our Viewpoint
We expect State Street’s restructuring programs, along with stable core servicing and investment management franchises, to help offset its top-line pressure. Further, the acquisition of GE Asset Management is expected to lead to revenue synergies in the quarters ahead. Also, the company remains on track to achieve its cost-saving targets.
State Street Corporation Price, Consensus and EPS Surprise
A notable rise in the top line drove BB&T Corporation’s fourth-quarter 2016 adjusted earnings of 73 cents per share. This was in line with the Zacks Consensus Estimate. An improved net interest income and non-interest income as well as stable provisions supported the results. However, higher operating expenses remained a headwind, while credit quality was a mixed bag.
KeyCorp.’s (KEY - Free Report) fourth-quarter 2016 adjusted earnings of 31 cents per share outpaced the Zacks Consensus Estimate of 29 cents. Better-than-expected quarterly results indicate revenue synergies from the First Niagara Financial Group acquisition deal (completed in Aug 2016). However, higher operating expenses and a rise in provision for credit losses were the downsides.
Improvement in revenues drove SunTrust Banks, Inc.'s (STI - Free Report) fourth-quarter 2016 earnings of 90 cents per share, which outpaced the Zacks Consensus Estimate of 88 cents. Results reflected an improvement in net interest income and a rise in non-interest income. However, a jump in provision for credit losses and an increase in operating expenses were the downsides.
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State Street (STT) Beats Q4 Earnings as Trading Fees Rise
Improved trading revenues drove State Street Corporation’s (STT - Free Report) fourth-quarter 2016 operating earnings of $1.48 per share, which handily outpaced the Zacks Consensus Estimate of $1.34. Also, the figure was up 22.3% year over year. The reported quarter’s operating earnings included certain notable items.
Better-than-expected results were supported by a rise in net interest income and fee income. Further, asset growth aided the results. However, a significant rise in expenses hurt the quarterly numbers.
After considering certain non-recurring items, net income available to common shareholders came in at $557 million or $1.43 per share, down from $547 million or $1.34 per share in the year-ago quarter.
For 2016, operating earnings of $5.27 per share significantly beat the Zacks Consensus Estimate of $5.11 and were above the 2015 figure of $4.89. Net income available to common shareholders (GAAP basis) amounted to $1.97 billion, up 7% year over year.
Net Interest Income Rise, Expenses High
Revenues, on a GAAP basis, totaled $2.53 billion, down marginally from the prior-year quarter. Also, the top line came in lower than the Zacks Consensus Estimate of $2.77 billion.
Revenues (GAAP basis) totaled $10.21 billion, down 2% year over year. Moreover, it lagged the Zacks Consensus Estimate of $10.71 billion.
Net interest revenue, on an operating basis, increased 7% from the year-ago quarter to $547 million. The rise was mainly driven by higher market interest rates in the U.S., disciplined liability pricing and several discrete security prepayments in the investment portfolio.
Also, net interest margin increased 7 basis points year over year to 1.08%.
Fee revenues came in at $2.20 billion, up 6% from the prior-year quarter. All components of fee income showed improvement except processing fees and other revenue.
On an operating basis, non-interest expenses were $2.14 billion, up 17.7% on a year-over-year basis. Increase in compensation and employee benefits costs, and information systems and communications expenses were partly offset by lower occupancy costs and other expenses.
As of Dec 31, 2016, total assets under custody and administration were $28.8 trillion, up 5% year over year. Moreover, assets under management were $2.5 trillion, up 10% year over year.
Strong Capital and Profitability Ratios
Under Basel III (Advanced approach), the estimated Tier 1 common ratio was 11.7% as of Dec 31, 2016, down from 12.3% as of Sep 30, 2016.
Return on common equity (on an operating basis) came in at 12.5% compared with 10.5% in the year-ago quarter.
Share Repurchases
During the reported quarter, State Street repurchased shares worth $325 million at an average price of $76.70 per share. This was part of the company’s buyback plan, which authorized the purchase of up to $1.4 billion of stock through second-quarter 2017.
Our Viewpoint
We expect State Street’s restructuring programs, along with stable core servicing and investment management franchises, to help offset its top-line pressure. Further, the acquisition of GE Asset Management is expected to lead to revenue synergies in the quarters ahead. Also, the company remains on track to achieve its cost-saving targets.
State Street Corporation Price, Consensus and EPS Surprise
State Street Corporation Price, Consensus and EPS Surprise | State Street Corporation Quote
Currently, State Street 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 Major Regional Banks
A notable rise in the top line drove BB&T Corporation’s fourth-quarter 2016 adjusted earnings of 73 cents per share. This was in line with the Zacks Consensus Estimate. An improved net interest income and non-interest income as well as stable provisions supported the results. However, higher operating expenses remained a headwind, while credit quality was a mixed bag.
KeyCorp.’s (KEY - Free Report) fourth-quarter 2016 adjusted earnings of 31 cents per share outpaced the Zacks Consensus Estimate of 29 cents. Better-than-expected quarterly results indicate revenue synergies from the First Niagara Financial Group acquisition deal (completed in Aug 2016). However, higher operating expenses and a rise in provision for credit losses were the downsides.
Improvement in revenues drove SunTrust Banks, Inc.'s (STI - Free Report) fourth-quarter 2016 earnings of 90 cents per share, which outpaced the Zacks Consensus Estimate of 88 cents. Results reflected an improvement in net interest income and a rise in non-interest income. However, a jump in provision for credit losses and an increase in operating expenses were the downsides.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>