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State Street's (STT) Q1 Earnings Beat on Higher Fee Income
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State Street’s (STT - Free Report) first-quarter 2020 adjusted earnings of $1.67 per share comfortably outpaced the Zacks Consensus Estimate of $1.35. Also, the figure was 34.7% higher than the prior-year level.
The stock surged 7.8% in pre-market trading, driven by success of the company’s cost-saving efforts and improvement in fee income. Notably, the full-day trading session will depict a better picture.
The results reflect new investment servicing wins of $171 billion, improvement in fee income and successful implementation of its cost-saving initiatives. However, lower net interest income mainly due to lower rates and rise in provisions were headwinds.
After considering several non-recurring items, net income available to common shareholders was $580 million, up 28.3% from the year-ago quarter.
Revenues Up, Expenses Down
Total revenues were $3.07 billion, increasing 4.5% year over year. Also, the top line beat the Zacks Consensus Estimate of $2.91 billion.
Net interest revenues declined 1.3% from the year-ago quarter to $664 million. The fall was mainly due to lower market rates, partially offset by solid deposit balance and episodic market-related benefits.
Net interest margin decreased 24 basis points year over year to 1.30%.
Total fee revenues grew 6.2% from the prior-year quarter to $2.40 billion. This rise was mainly driven by higher foreign exchange trading services, which surged 63.9% from the year-ago quarter.
Non-interest expenses were $2.26 billion, down 1.7% from a year ago. The decline was attributed to the company’s cost-savings efforts. Excluding notable items, adjusted expenses decreased 1.1% from the prior-year period to $2.24 billion.
Provision for credit losses jumped 49.4% from the year-ago period to $124 million.
As of Mar 31, 2020, total assets under custody and administration were $31.9 trillion, down 2.4% year over year. Also, assets under management were $2.7 trillion, up 4.1% from the prior-year figure.
Strong Capital and Profitability Ratios
Under Basel III (Standardized approach), estimated Tier 1 common ratio was 10.7% as of Mar 31, 2020 compared with 11.5% in the corresponding period of 2019.
Return on common equity came in at 10.9% compared with 8.7% in the year-ago quarter.
Share Repurchase Update
During the reported quarter, State Street repurchased $500 million worth of shares. This was part of its 2019 capital plan. In mid-March, the company suspended the share buyback plan amid coronavirus pandemic.
Our Take
New business wins, strong balance sheet position and cost-saving efforts are likely to continue supporting State Street's profitability. However, lower interest rates and coronavirus-induced economic slowdown remain major near-term concerns.
State Street Corporation Price, Consensus and EPS Surprise
The Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2020 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of 90 cents. Moreover, the figure reflects a rise of 11.7% from the prior-year quarter.
KeyCorp’s (KEY - Free Report) first-quarter 2020 earnings of 12 cents per share surpassed the Zacks Consensus Estimate of 6 cents. The figure takes into account the Current Expected Credit Losses accounting methodology, impact of coronavirus and market-related valuation adjustments.
U.S. Bancorp (USB - Free Report) reported first-quarter 2020 earnings per share of 72 cents, which surpassed the Zacks Consensus Estimate of 49 cents. However, the bottom line declined 28% from the prior-year figure.
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State Street's (STT) Q1 Earnings Beat on Higher Fee Income
State Street’s (STT - Free Report) first-quarter 2020 adjusted earnings of $1.67 per share comfortably outpaced the Zacks Consensus Estimate of $1.35. Also, the figure was 34.7% higher than the prior-year level.
The stock surged 7.8% in pre-market trading, driven by success of the company’s cost-saving efforts and improvement in fee income. Notably, the full-day trading session will depict a better picture.
The results reflect new investment servicing wins of $171 billion, improvement in fee income and successful implementation of its cost-saving initiatives. However, lower net interest income mainly due to lower rates and rise in provisions were headwinds.
After considering several non-recurring items, net income available to common shareholders was $580 million, up 28.3% from the year-ago quarter.
Revenues Up, Expenses Down
Total revenues were $3.07 billion, increasing 4.5% year over year. Also, the top line beat the Zacks Consensus Estimate of $2.91 billion.
Net interest revenues declined 1.3% from the year-ago quarter to $664 million. The fall was mainly due to lower market rates, partially offset by solid deposit balance and episodic market-related benefits.
Net interest margin decreased 24 basis points year over year to 1.30%.
Total fee revenues grew 6.2% from the prior-year quarter to $2.40 billion. This rise was mainly driven by higher foreign exchange trading services, which surged 63.9% from the year-ago quarter.
Non-interest expenses were $2.26 billion, down 1.7% from a year ago. The decline was attributed to the company’s cost-savings efforts. Excluding notable items, adjusted expenses decreased 1.1% from the prior-year period to $2.24 billion.
Provision for credit losses jumped 49.4% from the year-ago period to $124 million.
As of Mar 31, 2020, total assets under custody and administration were $31.9 trillion, down 2.4% year over year. Also, assets under management were $2.7 trillion, up 4.1% from the prior-year figure.
Strong Capital and Profitability Ratios
Under Basel III (Standardized approach), estimated Tier 1 common ratio was 10.7% as of Mar 31, 2020 compared with 11.5% in the corresponding period of 2019.
Return on common equity came in at 10.9% compared with 8.7% in the year-ago quarter.
Share Repurchase Update
During the reported quarter, State Street repurchased $500 million worth of shares. This was part of its 2019 capital plan. In mid-March, the company suspended the share buyback plan amid coronavirus pandemic.
Our Take
New business wins, strong balance sheet position and cost-saving efforts are likely to continue supporting State Street's profitability. However, lower interest rates and coronavirus-induced economic slowdown remain major near-term concerns.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Regional Banks
The Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2020 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of 90 cents. Moreover, the figure reflects a rise of 11.7% from the prior-year quarter.
KeyCorp’s (KEY - Free Report) first-quarter 2020 earnings of 12 cents per share surpassed the Zacks Consensus Estimate of 6 cents. The figure takes into account the Current Expected Credit Losses accounting methodology, impact of coronavirus and market-related valuation adjustments.
U.S. Bancorp (USB - Free Report) reported first-quarter 2020 earnings per share of 72 cents, which surpassed the Zacks Consensus Estimate of 49 cents. However, the bottom line declined 28% from the prior-year figure.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>