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State Street (STT) Q1 Earnings Beat, Assets Balance Improves

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State Street’s (STT - Free Report) first-quarter 2019 adjusted earnings of $1.24 per share handily beat the Zacks Consensus Estimate of $1.19. However, the figure was 27.2% below the prior-year quarter level.

Results reflect lower fee income, rise in expenses and decline in assets under custody and administration. However, higher net interest income (reflecting rise in interest rates) and rise in assets under management (AUM) balance acted as tailwinds.

After considering several non-recurring items, net income available to common shareholders was $452 million or $1.18 per share, down from $603 million or $1.62 per share in the year-ago quarter.

Revenues Down, Expenses Rise

Total revenues were $2.93 billion, decreasing 4.1% year over year. However, the top line beat the Zacks Consensus Estimate of $2.91 billion.

Net interest revenues grew 4.7% from the year-ago quarter to $673 million. This upside was mainly driven by higher interest rates and a disciplined liability pricing, partly offset by lower average deposit balances.

Also, net interest margin increased 14 basis points year over year to 1.54%.

Fee revenues declined 6.4% to $2.26 billion. This fall was mainly due to decrease in all components except processing fees and other revenues.

Non-interest expenses were $2.29 billion, up 1.1% on a year-over-year basis. The rise was due to rise in information systems and communications costs, and amortization of other intangible assets. Excluding notable items, adjusted expenses declined 2%.

As of Mar 31, 2019, total assets under custody and administration were $32.6 trillion, down 1.9% year over year. However, AUM was $2.8 trillion, up 2.8%.

Strong Capital and Profitability Ratios

Under Basel III (Standardized approach), estimated Tier 1 common ratio was 11.5% as of Mar 31, 2019, compared with 10.8% as of Mar 31, 2018.

Return on common equity came in at 8.7% compared with 12.8% in the year-ago quarter.

Share Repurchase Update

During the reported quarter, State Street repurchased $300 million worth of shares. This was part of its 2018 capital plan.

Our Viewpoint

State Street's new business wins, higher interest rates, strong balance sheet and strategic acquisitions are likely to continue supporting its profitability. However, uncertainty about the performance of capital markets, which is expected to affect its trading services revenues, makes us apprehensive.

State Street Corporation Price, Consensus and EPS Surprise

 

State Street Corporation Price, Consensus and EPS Surprise | 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 Major Regional Banks

SunTrust Banks' (STI - Free Report) first-quarter 2019 adjusted earnings of $1.33 per share outpaced the Zacks Consensus Estimate of $1.29. Also, the bottom line came in 3% above the prior-year quarter figure.

KeyCorp’s (KEY - Free Report) first-quarter 2019 adjusted earnings of 40 cents per share missed the Zacks Consensus Estimate of 42 cents. However, the figure compared favorably with earnings of 38 cents recorded in the prior-year quarter.

The Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2019 earnings per share of 94 cents lagged the Zacks Consensus Estimate of 96 cents. Moreover, the figure reflects a decline of 15% from the prior-year quarter.

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