On an operating-basis, fourth-quarter 2016 EPS was $1.48 and ROE of
12.5%, on revenue of $2.7 billion; Full-year 2016 operating-basis EPS
was $5.27 and ROE of 11.1%, on revenue of $10.8 billion
Two notable items during the fourth quarter of 2016 which affected
both GAAP and operating-basis results, with a net benefit of $0.13 per
share, were an acceleration of deferred compensation expense of $0.41
per share and an aggregate reduction of accrued tax expense of $0.54 per
share, attributable to indefinitely invested foreign earnings and
benefits attributable to incremental foreign tax credits and a foreign
affiliate tax loss
BOSTON--(BUSINESS WIRE)--
In announcing today’s financial results, Joseph L. Hooley, State
Street’s Chairman and Chief Executive Officer, said, “Our fourth-quarter
and full-year 2016 results reflect the strength of our business and our
commitment to advancing key strategic priorities that support State
Street’s growth. Highlights for full-year 2016 include:
This Smart News Release features multimedia. View the full release here:
http://www.businesswire.com/news/home/20170125005382/en/
-
New asset servicing commitments of $1.4 trillion, including $180
billion in the fourth quarter, reflecting strong growth with
significant participation from Europe;
-
Strong expense management and continued focus on positive fee
operating leverage;
-
Advancement of our strategic priority to become a digital leader in
financial services through our State Street Beacon initiative,
delivering tangible benefits to clients and more than doubling the
expected annual pre-tax savings in 2016 to $175 million;
-
Significant progress across all of our other strategic priorities -
driving growth from our core franchise; continuing to invest in new
products and solutions; and leveraging our strong capital position to
return capital to shareholders.
Hooley concluded, “We are focused on our 2017 strategic priorities,
which include: advancing our digital leadership through State Street
Beacon; driving growth from core franchises; continuous investment in
new products and solutions; and achieving our financial goals, including
generating positive fee operating leverage and continuing to return
capital to shareholders. We look forward to updating you on our progress
throughout the year."
Fourth-Quarter 2016 and Full-Year 2016 Highlights:
- New business: New asset servicing mandates during the
fourth-quarter of 2016 and full-year 2016 totaled approximately $180
billion and $1.4 trillion, respectively. In our asset management
business, we experienced fourth quarter net inflows of $16 billion and
net outflows of $42 billion during full-year 2016. Notably, ETFs
experienced $36 billion and $52 billion of net inflows during the
fourth-quarter and full-year 2016, respectively.
- Currency impact: Compared to third-quarter 2016 and
fourth-quarter of 2015, the strengthening of the U.S. dollar reduced
our fee revenue outside of the U.S. in the fourth-quarter of 2016 by
approximately $21 million and $27 million, respectively. Compared to
full-year 2015, the strengthening U.S. dollar reduced our fee revenue
outside the U.S. for full-year 2016 by approximately $67 million. A
corresponding benefit to expenses in 2016 largely offset the currency
impact on our fee revenues in each of the comparisons.
- Capital(a): Our common equity tier 1
ratios as of December 31, 2016 were 11.7% and 11.6%, calculated under
the advanced approaches and standardized approach, respectively, in
conformity with the Basel III final rule. On a fully phased-in basis,
our estimated pro forma Basel III common equity tier 1 ratios as of
December 31, 2016 were 10.9% and 10.9%, calculated under both the
advanced approaches and standardized approach, respectively, in
conformity with the Basel III final rule.
- Return of capital to shareholders: We purchased approximately
$325 million of our common stock at an average price of $76.70 per
share in the fourth-quarter of 2016. In addition, we declared a
quarterly common stock dividend of $0.38 per share in the
fourth-quarter of 2016.
(a) Estimated pro forma fully phased-in Basel III common
equity tier 1 ratios calculated under the Basel III advanced approaches
and standardized approach (in each case, fully phased in as of January
1, 2019, as per Basel III phase-in requirements for capital) are
preliminary estimates. Refer to the “Capital” section of this news
release for important information about the Basel III final rule, our
calculations of our common equity tier 1 ratios thereunder, factors that
could influence State Street's calculations of its common equity tier 1
ratios and other information about our capital ratios. Unless otherwise
specified, all capital ratios referenced in this news release refer to
State Street Corporation and not State Street Bank and Trust Company.
Refer to the addendum included with this news release for a further
description of these ratios.
Fourth-quarter of 2016 GAAP-basis and operating-basis results included
the following notable items:
-
A $145 million ($0.37 per share) tax benefit from the designation of
certain of our foreign earnings as indefinitely invested overseas,
based on a review of our need for capital, liquidity and future
investment.
-
Income taxes were also impacted by a $66 million ($0.17 per share) tax
benefit attributable to incremental foreign tax credits and a foreign
affiliate tax loss.
-
A pre-tax charge of $249 million ($161 million after-tax, or $0.41 per
share) associated with an amendment of the terms of outstanding
deferred cash-settled incentive compensation awards for employees
below executive vice president to remove continued service
requirements, thereby accelerating the future expense that would have
been recognized over the remaining term of the awards (1-4 years,
depending on the award) had the continued service requirement not been
removed. The deferred portion of many of our bonus-eligible employees'
total compensation had become disproportionate relative to our peer
organizations hindering our efforts to attract and retain talent. The
expense that would otherwise have been associated with the amended
awards will no longer be reflected in future periods. We expect that
the acceleration of the expense will financially allow us to increase
the immediate cash component of our mix of incentive compensation in
future periods relative to what we have had in recent years and that
the impact of increased immediate cash awards in 2017 will offset the
going-forward effects of the 2016 expense acceleration in 2017. The
expense impact of future immediate and deferred incentive compensation
awards will depend upon corporate performance and market, regulatory,
and other factors and conditions, including the form of those awards.
-
Fourth-quarter results included estimated revenue of $64 million and
estimated expenses of $58 million associated with the GE Asset
Management (GEAM) business acquired on July 1, 2016. In addition to
the estimated $58 million of fourth-quarter expenses, fourth-quarter
results included $25 million of non-recurring acquisition costs
related to the acquired GEAM business.
Fourth-Quarter 2016 GAAP-Basis Results:
|
|
| |
|
| |
|
| | |
|
| |
|
| |
(Table presents summary results, dollars in
millions,
except per share amounts, or where
otherwise noted) | | | 4Q16 | | |
3Q16
| | |
Increase
(Decrease)
|
| | |
4Q15
| | |
Increase
(Decrease)
|
|
Total fee revenue
| | | $ | 2,014 | | | |
$
|
2,079
| | | |
(3.1
|
)%
| | | |
$
|
2,044
| | | |
(1.5
|
)%
| |
|
Net interest revenue
| | | 514 | | | |
537
| | | |
(4.3
|
)
| | | |
494
| | | |
4.0
| | |
|
Total revenue
| | | 2,530 | | | |
2,620
| | | |
(3.4
|
)
| | | |
2,538
| | | |
(0.3
|
)
| |
|
Provision for loan losses
| | | 2 | | | |
—
| | | |
nm
| | | |
1
| | | |
nm
| |
|
Total expenses
| | | 2,183 | | | |
1,984
| | | |
10.0
| | | | |
1,857
| | | |
17.6
| | |
|
Net income available to common shareholders
| | | 557 | | | |
507
| | | |
9.9
| | | | |
547
| | | |
1.8
| | |
| | | | | | | | | | | | | | | |
|
| Earnings per common share: | | | | | | | | | | | | | | | | |
|
Diluted
| | | 1.43 | | | |
1.29
| | | |
10.9
| | | | |
1.34
| | | |
6.7
| | |
| | | | | | | | | | | | | | | |
|
| Financial ratios:
| | | | | | | | | | | | | | | | |
|
Return on average common equity
| | | 12.1 | % | | |
10.6
|
%
| | |
150
| |
bps
| | |
11.6
|
%
| | |
50
| |
bps
|
| | | | | | | | | | | | | | | | | |
|
|
Total assets as of period-end
| | | $ | 242,698 | | | |
$
|
256,140
| | | |
(5.2
|
)%
| | | |
$
|
245,155
| | | |
(1.0
|
)%
| |
|
Quarterly average total assets
| | | 232,999 | | | |
233,017
| | | |
—
| | | | |
228,163
| | | |
2.1
| | |
nm Not meaningful
Full-Year 2016 GAAP-Basis Results:
|
|
| |
|
| |
|
| |
(Table presents summary results, dollars in millions, except
per share
amounts, or where otherwise noted) | | | 2016 | | |
2015
| | |
Increase
(Decrease)
|
|
Total fee revenue
| | | $ | 8,116 | | | |
$
|
8,278
| | | |
(2.0
|
)%
| |
|
Net interest revenue
| | | 2,084 | | | |
2,088
| | | |
(0.2
|
)
| |
|
Total revenue
| | | 10,207 | | | |
10,360
| | | |
(1.5
|
)
| |
|
Provision for loan losses
| | | 10 | | | |
12
| | | |
nm
| |
|
Total expenses
| | | 8,077 | | | |
8,050
| | | |
0.3
| | |
|
Net income available to common shareholders
| | | 1,968 | | | |
1,848
| | | |
6.5
| | |
| | | | | | | | |
|
Earnings per common share(1): | | | | | | | | | |
|
Diluted
| | | 4.97 | | | |
4.47
| | | |
11.2
| | |
| | | | | | | | |
|
| Financial ratios:
| | | | | | | | | |
|
Return on average common equity
| | | 10.5 | % | | |
9.8
|
%
| | |
70
| |
bps
|
| | | | | | | | | |
|
|
Total assets as of year-end
| | | $ | 242,698 | | | |
$
|
245,155
| | | |
(1.0
|
)%
| |
|
Average total assets
| | | 229,727 | | | |
250,432
| | | |
(8.3
|
)
| |
(1) The 2016 and 2015 results included net after-tax charges
of $83 million and $4 million, respectively, or $0.21 and $0.01 per
share, respectively, primarily related to State Street Beacon.
nm
Not meaningful
Operating-Basis (Non-GAAP) Financial Measures:
In addition to presenting State Street's financial results in conformity
with U.S. generally accepted accounting principles, or GAAP, management
also presents results on a non-GAAP, or operating-basis, as it believes
this presentation supports meaningful analysis and comparisons of trends
with respect to State Street's normal ongoing business operations from
period to period, as well as additional information (such as capital
ratios calculated under regulatory standards scheduled to be effective
in the future) that management uses in evaluating State Street’s
business and activities. Non-GAAP information is not a substitute for,
and is not superior to, information presented on a GAAP-basis. Summary
results presented on a GAAP-basis, descriptions of our non-GAAP, or
operating-basis, financial measures, and reconciliations of
operating-basis information to GAAP-basis information are provided in
the addendum included with this news release.
Fourth-Quarter 2016 Operating-Basis (Non-GAAP) Results:
|
|
| |
|
| |
|
| |
|
| |
|
| |
(Table presents summary results, dollars in
millions,
except per share amounts, or where
otherwise noted) | | | 4Q16 | | |
3Q16
| | |
Increase
(Decrease)
| | |
4Q15
| | |
Increase
(Decrease)
|
|
Total fee revenue
| | | $ | 2,200 | | | |
$
|
2,213
| | | |
(0.6
|
)%
| | | |
$
|
2,075
| | | |
6.0
|
%
| |
|
Net interest revenue
| | | 547 | | | |
537
| | | |
1.9
| | | | |
513
| | | |
6.6
| | |
|
Total revenue
| | | 2,749 | | | |
2,754
| | | |
(0.2
|
)
| | | |
2,588
| | | |
6.2
| | |
|
Provision for loan losses
| | | 2 | | | |
—
| | | |
nm
| | | |
1
| | | |
nm
| |
|
Total expenses
| | | 2,143 | | | |
1,909
| | | |
12.3
| | | | |
1,820
| | | |
17.7
| | |
|
Net income available to common shareholders
| | | 577 | | | |
532
| | | |
8.5
| | | | |
494
| | | |
16.8
| | |
|
Total assets as of period-end
| | | 242,698 | | | |
256,140
| | | |
(5.2
|
)
| | | |
245,155
| | | |
(1.0
|
)
| |
|
Quarterly average total assets
| | | 232,999 | | | |
233,017
| | | |
—
| | | | |
228,163
| | | |
2.1
| | |
|
Diluted Earnings per Share
| | | 1.48 | | | |
1.35
| | | |
9.6
| | | | |
1.21
| | | |
22.3
| | |
|
Return on average common equity
| | | 12.5 | % | | |
11.1
|
%
| | |
140
| |
bps
| | |
10.5
|
%
| | |
200
| |
bps
|
|
Net unrealized (losses) gains on investment securities, after-tax,
as of period-end(1) | | | $ | (170 | ) | | |
$
|
703
| | | |
(124.2
|
)%
| | | |
$
|
58
| | | |
(393.1
|
)%
| |
nm Not meaningful
(1) Includes net unrealized
(losses) gains on investment securities, after tax, for securities
classified as available for sale (included in accumulated other
comprehensive income) of $(35) million, and held-to-maturity,
representing the unrecognized difference between amortized cost and fair
value, of $(135) million as of December 31, 2016.
The growth rate of operating-basis total expenses exceeded the growth
rate of operating-basis fee revenue during the fourth-quarter of 2016
relative to the fourth-quarter of 2015, representing negative fee
operating leverage of 1,173 basis points. The growth rate of
operating-basis total expenses exceeded the growth rate of
operating-basis fee revenue by 280 basis points during full-year 2016
relative to full-year 2015.
Excluding the expense associated with the acceleration of deferred cash
awards and the impact of the acquired GEAM business1, the
growth rate of operating-basis fee revenue exceeded the growth rate of
operating-basis expenses during the fourth-quarter of 2016 relative to
the fourth-quarter of 2015, representing positive fee operating leverage
of 206 basis points. Excluding the items noted above1, the
growth rate of operating-basis total fee revenue exceeded the growth
rate of operating-basis total expenses by 51 basis points during
full-year 2016 relative to full-year 2015.
State Street Beacon, our multi-year transformation program, delivered
$175 million in estimated annual pre-tax savings in 2016.
1Please refer to the addendum for a reconciliation of
operating leverage on a stated basis to operating leverage excluding the
impact of the acceleration of deferred cash awards and the acquired GEAM
business.
Full-Year 2016 Operating-Basis (Non-GAAP) Results:
|
|
| |
|
| |
|
| |
(Table presents summary results, dollars in millions, except per
share
amounts, or where otherwise noted) | | | 2016 | | |
2015
| | |
Increase
(Decrease)
|
|
Total fee revenue
| | | $ | 8,576 | | | |
$
|
8,472
| | | |
1.2
|
%
| |
|
Net interest revenue
| | | 2,169 | | | |
2,163
| | | |
0.3
| | |
|
Total revenue
| | | 10,752 | | | |
10,629
| | | |
1.2
| | |
|
Provision for loan losses
| | | 10 | | | |
12
| | | |
nm
| |
|
Total expenses
| | | 7,823 | | | |
7,520
| | | |
4.0
| | |
|
Net income available to common shareholders
| | | 2,087 | | | |
2,022
| | | |
3.2
| | |
|
Total assets as of year-end
| | | 242,698 | | | |
245,155
| | | |
(1.0
|
)
| |
|
Average total assets
| | | 229,727 | | | |
250,432
| | | |
(8.3
|
)
| |
|
Diluted Earnings per Share
| | | 5.27 | | | |
4.89
| | | |
7.8
| | |
|
Return on average common equity
| | | 11.1 | % | | |
10.7
|
%
| | |
40
| |
bps
|
|
Net unrealized (losses) gains on investment securities, after-tax,
as of period-end(1) | | | $ | (170 | ) | | |
$
|
58
| | | |
(393.1
|
)%
| |
nm Not meaningful
(1) Includes net unrealized
(losses) gains on investment securities, after tax, for securities
classified as available for sale (included in accumulated other
comprehensive income) of $(35) million, and held-to-maturity,
representing the unrecognized difference between amortized cost and fair
value, of $(135) million as of December 31, 2016.
The following tables reconcile select fourth-quarter 2016 and full-year
2016 operating-basis financial information to financial information
prepared and reported in conformity with GAAP for the same period. The
addendum included with this news release includes additional
reconciliations.
Fourth-Quarter 2016 Selected Operating-Basis (Non-GAAP)
Reconciliations:
|
|
| |
|
| |
|
| |
| (In millions, except per share amounts) | | |
Income
Before
Income Tax
Expense
| | |
Net Income
Available to
Common
Shareholders
| | |
Earnings
Per
Common
Share
|
|
GAAP-basis
| | | $ | 345 | | | | $ | 557 | | | | $ | 1.43 | |
| Tax-equivalent adjustments | | | | | | | | | |
|
Tax-advantaged investments (processing fees and other revenue)
| | | 186 | | | | | | | |
|
Tax-exempt investment securities (net interest revenue)
| | | 43 |
| | | | | | |
|
Total
| | | 229 | | | | | | | |
| Non-operating adjustments | | | | | | | | | |
|
Discount accretion associated with former conduit securities (net
interest revenue)
| | | (10 | ) | | | (6 | ) | | | (.01 | ) |
|
Severance costs associated with staffing realignment (compensation
and employee benefits expenses)
| | | (2 | ) | | | (1 | ) | | | — | |
|
Provision for legal contingencies
| | | (1 | ) | | | 9 | | | | .02 | |
|
Acquisition & restructuring costs (expenses)(1) | | | 43 | | | | 23 | | | | .05 | |
|
Effect on income tax of non-operating adjustments
| | | — |
| | | (5 | ) | | | (.01 | ) |
|
Total
| | | 30 |
| | | 20 |
| | | .05 |
|
|
Operating-basis
| | | $ | 604 |
| | | $ | 577 |
| | | $ | 1.48 |
|
(1) Includes a pre-tax charge of $21 million ($8 million
after tax or $0.02 per share) primarily related to State Street Beacon.
Full-Year 2016 Selected Operating-Basis (Non-GAAP) Reconciliations:
|
|
| |
|
| |
|
| |
| (In millions, except per share amounts) | | |
Income
Before
Income Tax
Expense
| | |
Net Income
Available to
Common
Shareholders
| | |
Earnings
Per
Common
Share
|
|
GAAP-basis
| | | $ | 2,120 | | | | $ | 1,968 | | | | $ | 4.97 | |
| Tax-equivalent adjustments | | | | | | | | | |
|
Tax-advantaged investments (processing fees and other revenue)
| | | 470 | | | | | | | |
|
Tax-exempt investment securities (net interest revenue)
| | | 167 |
| | | | | | |
|
Total
| | | 637 | | | | | | | |
| Non-operating adjustments | | | | | | | | | |
|
Discount accretion associated with former conduit securities (net
interest revenue)
| | | (82 | ) | | | (50 | ) | | | (.13 | ) |
|
Severance costs associated with staffing realignment (compensation
and employee benefits expenses)
| | | (11 | ) | | | (6 | ) | | | (.02 | ) |
|
Provision for legal contingencies
| | | 41 | | | | 51 | | | | .13 | |
|
Acquisition & restructuring costs (expenses)(1) | | | 209 | | | | 126 | | | | .32 | |
|
Gain on sale of WM/Reuters
| | | (53 | ) | | | (40 | ) | | | (.10 | ) |
|
Expense billing matter(2) | | | 58 |
| | | 38 |
| | | .10 |
|
|
Total
| | | 162 |
| | | 119 |
| | | .30 |
|
|
Operating-basis
| | | $ | 2,919 |
| | | $ | 2,087 |
| | | $ | 5.27 |
|
(1) Includes a pre-tax charge of $140 million ($83 million
after tax or $0.21 per share) primarily related to State Street Beacon.
(2)
Expense billing matter, net, includes a charge of $48 million to
servicing fee revenue, a credit of $5 million to management fee revenue
and $15 million of other expenses. Refer to reconciliations of GAAP to
operating-basis expenses on the following pages.
Selected Financial Information and Ratios
The tables below provide a summary of selected financial information and
key ratios for the indicated periods. Amounts are presented in millions
of dollars, except for per-share amounts or where otherwise noted
Assets Under Custody and Administration
The following table presents assets under custody and administration,
assets under management, market indices and average foreign exchange
rates for the periods indicated.
|
|
| Assets Under Custody and Administration and Assets Under
Management |
| (Dollars in billions, except market indices) |
| 4Q16 |
|
3Q16
|
|
Increase
(Decrease)
|
|
4Q15
|
|
Increase
(Decrease)
|
|
Assets under custody and administration(1)(2) | | $ | 28,771 | | |
$
|
29,178
| | |
(1.4
|
)%
| |
$
|
27,508
| | |
4.6
|
%
|
|
Assets under management(2)(3) | | 2,468 | | |
2,446
| | |
0.9
| | |
2,245
| | |
9.9
| |
| Market Indices(4): | | | | | | | | | | |
|
S&P 500® daily average
| | 2,185 | | |
2,162
| | |
1.1
| | |
2,052
| | |
6.5
| |
|
MSCI EAFE® daily average
| | 1,660 | | |
1,678
| | |
(1.1
|
)
| |
1,732
| | |
(4.2
|
)
|
|
MSCI® Emerging Markets daily average
| | 877 | | |
887
| | |
(1.1
|
)
| |
828
| | |
5.9
| |
|
S&P 500® average of month-end
| | 2,188 | | |
2,171
| | |
0.8
| | |
2,068
| | |
5.8
| |
|
MSCI EAFE® average of month-end
| | 1,660 | | |
1,692
| | |
(1.9
|
)
| |
1,743
| | |
(4.8
|
)
|
|
MSCI® Emerging Markets average of month-end
| | 877 | | |
890
| | |
(1.5
|
)
| |
819
| | |
7.1
| |
|
Barclays Capital U.S. Aggregate Bond Index® period-end
| | 1,976 | | |
2,037
| | |
(3.0
|
)
| |
1,925
| | |
2.6
| |
|
Barclays Capital Global Aggregate Bond Index® period-end
| | 451 | | |
486
| | |
(7.2
|
)
| |
442
| | |
2.0
| |
|
Average Foreign Exchange Rate (Euro vs. USD)
| | 1.078 | | |
1.116
| | |
(3.4
|
)
| |
1.095
| | |
(1.6
|
)
|
|
Average Foreign Exchange Rate (GBP vs. USD)
| | 1.242 | | |
1.312
| | |
(5.3
|
)
| |
1.517
| | |
(18.1
|
)
|
(1) Includes assets under custody of $21,725 billion, $21,910
billion and $21,258 billion, as of December 31, 2016, September 30, 2016
and December 31, 2015, respectively.
(2) As of
period-end.
(3) Includes assets under management as part
of the GEAM business acquired on July 1, 2016.
(4) The
index names listed in the table are service marks of their respective
owners.
Assets Under Management
The following table presents fourth-quarter 2016 activity in assets
under management, by product category.
|
| |
| |
| |
| |
| |
| |
(Dollars in billions) | | Equity | | Fixed-
Income | | Cash(3) | | Multi-Asset-
Class
Solutions | | Alternative
Investments(4) | | Total |
|
Balance as of September 30, 2016 | |
$
|
1,410
| | |
$
|
391
| | |
$
|
351
| | |
$
|
125
| | |
$
|
169
| | |
$
|
2,446
| |
|
Long-term institutional inflows(1) | | 83 | | | 29 | | | — | | | 14 | | | 4 | | | 130 | |
|
Long-term institutional outflows(1) | | (95 | ) | | (25 | ) | | — |
| | (9 | ) | | (6 | ) | | (135 | ) |
|
Long-term institutional flows, net
| | (12 | ) | | 4 | | | — | | | 5 | | | (2 | ) | | (5 | ) |
|
ETF flows, net
| | 41 | | | 1 | | | — | | | — | | | (6 | ) | | 36 | |
|
Cash fund flows, net
| | — |
| | — |
| | (15 | ) | | — |
| | — |
| | (15 | ) |
|
Total flows, net
| | 29 | | | 5 | | | (15 | ) | | 5 | | | (8 | ) | | 16 | |
|
Market appreciation
| | 56 | | | (9 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | 44 | |
|
Foreign exchange impact
| | (21 | ) | | (9 | ) | | (2 | ) | | (3 | ) | | (3 | ) | | (38 | ) |
|
Total market/foreign exchange impact
| | 35 |
| | (18 | ) | | (3 | ) | | (4 | ) | | (4 | ) | | 6 |
|
|
Balance as of December 31, 2016 | | $ | 1,474 |
| | $ | 378 |
| | $ | 333 |
| | $ | 126 |
| | $ | 157 |
| | $ | 2,468 |
|
The following table presents year-to-date activity for the period ending
December 31, 2016 of assets under management, by product category.
|
| |
| |
| |
| |
| |
| |
| (Dollars in billions) | | Equity | | Fixed-
Income | | Cash(3) | | Multi-Asset-
Class
Solutions | | Alternative
Investments(4) | | Total |
|
Balance as of December 31, 2015 | |
$
|
1,326
| | |
$
|
312
| | |
$
|
368
| | |
$
|
103
| | |
$
|
136
| | |
$
|
2,245
| |
|
Long-term institutional inflows(1) | | 244 | | | 90 | | | — | | | 48 | | | 13 | | | 395 | |
|
Long-term institutional outflows(1) | | (301 | ) | | (96 | ) | | — |
| | (34 | ) | | (21 | ) | | (452 | ) |
|
Long-term institutional flows, net
| | (57 | ) | | (6 | ) | | — | | | 14 | | | (8 | ) | | (57 | ) |
|
ETF flows, net
| | 37 | | | 9 | | | — | | | — | | | 6 | | | 52 | |
|
Cash fund flows, net
| | — |
| | — |
| | (37 | ) | | — |
| | — |
| | (37 | ) |
|
Total flows, net
| | (20 | ) | | 3 | | | (37 | ) | | 14 | | | (2 | ) | | (42 | ) |
|
Market appreciation
| | 140 | | | 10 | | | — | | | 9 | | | 14 | | | 173 | |
|
Foreign exchange impact
| | (10 | ) | | (3 | ) | | (2 | ) | | (3 | ) | | (2 | ) | | (20 | ) |
|
Total market/foreign exchange impact
| | 130 | | | 7 | | | (2 | ) | | 6 | | | 12 | | | 153 | |
|
Acquisitions and transfers(2) | | 38 |
| | 56 |
| | 4 |
| | 3 |
| | 11 |
| | 112 |
|
|
Balance as of December 31, 2016 | | $ | 1,474 |
| | $ | 378 |
| | $ | 333 |
| | $ | 126 |
| | $ | 157 |
| | $ | 2,468 |
|
(1) Amounts represent long-term portfolios, excluding ETFs.
(2)
Includes assets under management acquired as part of the acquisition of
GEAM.
(3) Includes both floating- and
constant-net-asset-value portfolios held in commingled structures or
separate accounts.
(4) Includes real estate investment
trusts, currency and commodities, including SPDR® Gold Fund,
for which State Street is not the investment manager, but acts as
distribution agent.
Revenue
The following tables provide the components of our GAAP-basis and
operating-basis revenuefor the periods noted:
GAAP- basis Revenue
|
|
| |
|
| |
|
| |
|
| |
|
| |
| (Dollars in millions) | | | 4Q16 | | |
3Q16
| | |
Increase
(Decrease)
| | |
4Q15
| | |
Increase
(Decrease)
|
|
Servicing fees
| | | $ | 1,289 | | | |
$
|
1,303
| | | |
(1.1
|
)%
| | |
$
|
1,277
| | | |
0.9
|
%
|
|
Management fees
| | | 361 | | | |
368
| | | |
(1.9
|
)
| | |
282
| | | |
28.0
| |
|
Trading services revenue:
| | | | | | | | | | | | | | | |
|
Foreign exchange trading
| | | 182 | | | |
159
| | | |
14.5
| | | |
143
| | | |
27.3
| |
|
Brokerage and other fees
| | | 111 |
| | |
108
|
| | |
2.8
|
| | |
104
|
| | |
6.7
|
|
|
Total trading services revenue
| | | 293 | | | |
267
| | | |
9.7
| | | |
247
| | | |
18.6
| |
|
Securities finance revenue
| | | 136 | | | |
136
| | | |
—
| | | |
127
| | | |
7.1
| |
|
Processing fees and other revenue
| | | (65 | ) | | |
5
|
| | |
nm
| | |
111
|
| | |
(158.6
|
)
|
|
Total fee revenue
| | | 2,014 | | | |
2,079
| | | |
(3.1
|
)
| | |
2,044
| | | |
(1.5
|
)
|
|
Net interest revenue
| | | 514 | | | |
537
| | | |
(4.3
|
)
| | |
494
| | | |
4.0
| |
|
Gains (losses) related to investment securities, net
| | | 2 |
| | |
4
|
| | |
nm
| | |
—
|
| | |
nm
|
| Total Revenue | | | $ | 2,530 |
| | |
$
|
2,620
|
| | |
(3.4
|
)%
| | |
$
|
2,538
|
| | |
(0.3
|
)%
|
nm Not meaningful
Operating-Basis (non-GAAP) Revenue
|
| |
| |
| |
| |
| |
| (Dollars in millions) | | 4Q16 | |
3Q16
| |
Increase
(Decrease)
| |
4Q15
| |
Increase
(Decrease)
|
|
Servicing fees
| | $ | 1,289 | | |
$
|
1,303
| | |
(1.1
|
)%
| |
$
|
1,277
| | |
0.9
|
%
|
|
Management fees
| | 361 | | |
368
| | |
(1.9
|
)
| |
282
| | |
28.0
| |
|
Trading services revenue:
| | | | | | | | | | |
|
Foreign exchange trading
| | 182 | | |
159
| | |
14.5
| | |
143
| | |
27.3
| |
|
Brokerage and other fees
| | 111 |
| |
108
|
| |
2.8
|
| |
104
|
| |
6.7
|
|
|
Total trading services revenue
| | 293 | | |
267
| | |
9.7
| | |
247
| | |
18.6
| |
|
Securities finance revenue
| | 136 | | |
136
| | |
—
| | |
127
| | |
7.1
| |
|
Processing fees and other revenue
| | 121 |
| |
139
|
| |
(12.9
|
)
| |
142
|
| |
(14.8
|
)
|
|
Total fee revenue
| | 2,200 | | |
2,213
| | |
(0.6
|
)
| |
2,075
| | |
6.0
| |
|
Net interest revenue
| | 547 | | |
537
| | |
1.9
| | |
513
| | |
6.6
| |
|
Gains (losses) related to investment securities, net
| | 2 |
| |
4
|
| |
nm
| |
—
|
| |
nm
|
| Total Revenue | | $ | 2,749 |
| |
$
|
2,754
|
| |
(0.2
|
)%
| |
$
|
2,588
|
| |
6.2
|
%
|
nm Not meaningful
The following highlights primary drivers of changes in our revenue for
the noted periods, indicating (where relevant) differences between our
GAAP-basis and operating-basis results.
Servicing fees decreased from the third-quarter of 2016,
primarily due to the impact of the stronger U.S. dollar. Compared to the
fourth-quarter of 2015, servicing fees increased primarily due to net
new business, partially offset by the stronger U.S. dollar.
Management fees decreased from the third-quarter of 2016,
primarily due to the impact of the stronger U.S. dollar and cash
outflows, partially offset by ETF inflows. Compared to the
fourth-quarter of 2015, management fees increased primarily due to an
estimated $64 million from the acquired GEAM business, lower money
market fee waivers, higher global equity markets, and ETF inflows,
partially offset by the stronger U.S. dollar and cash outflows.
Foreign exchange trading revenue increased from the third-quarter
of 2016 and the fourth-quarter of 2015, in each case reflecting higher
volatility and client-related volumes.
Brokerage and other fees increased slightly from the
third-quarter of 2016. Compared to the fourth-quarter of 2015, brokerage
and other fees increased, primarily due to higher transition management
revenue.
Securities finance revenue was flat from the third-quarter of
2016. Compared to the fourth-quarter of 2015, securities finance revenue
increased, primarily due to increased revenue from enhanced custody,
partially offset by lower agency revenue.
Processing fees and other revenue on a GAAP-basis decreased
compared to the third-quarter of 2016, primarily due to increased
amortization related to the tax advantaged investment business,
unfavorable valuation adjustments (including the impact of foreign
exchange swaps), and lower revenue from joint ventures. Compared to the
fourth-quarter of 2015, processing fees and other revenue decreased,
reflecting a gain recorded in the fourth-quarter of 2015 related to the
sale of commercial real estate acquired as a result of the Lehman
Brothers bankruptcy, increased amortization related to the tax
advantaged investment business, unfavorable valuation adjustments, and
lower revenue from joint ventures.
Processing fees and other revenueon an operating basis
decreased compared to the third-quarter of 2016 and the fourth-quarter
of 2015. The decrease from both periods reflects unfavorable valuation
adjustments (including the impact of foreign exchange swaps) and lower
revenue from joint ventures, partially offset by higher revenue
associated with tax advantaged investments.
Net interest revenue on a GAAP-basis in the fourth-quarter of
2016 reflects lower discount accretion associated with the former
conduit securities compared to the third-quarter of 2016 and the
fourth-quarter of 2015.
Net interest revenue on an operating basis increased from the
third-quarter of 2016, primarily due to a decrease in wholesale funding
from elevated levels in the third-quarter of 2016 and several discrete
security prepayments in the investment portfolio that represented $8
million net interest revenue. These benefits were partially offset by
continued declines in foreign security yields. Compared to the
fourth-quarter of 2015, net interest revenue increased, primarily due to
higher market interest rates in the U.S., disciplined liability pricing
and several discrete security prepayments in the investment portfolio
that represented $8 million in net interest revenue. Net interestmargin,calculated based on operating-basis net interest revenue, increased
to 108 basis points in the fourth-quarter of 2016 from 106 and 101 basis
points in the third-quarter of 2016 and the fourth-quarter of 2015,
respectively.
Expenses
The following tables provide the components of our GAAP-basis and
operating-basis expensesfor the periods noted:
GAAP-basis Expenses
|
|
| |
|
| |
|
| |
|
| |
|
| |
| (Dollars in millions) | | | 4Q16 | | |
3Q16
| | |
Increase
(Decrease)
| | |
4Q15
| | |
Increase
(Decrease)
|
|
Compensation and employee benefits
| | | $ | 1,244 | | | |
$
|
1,013
| | | |
22.8
|
%
| | |
$
|
939
| | | |
32.5
|
%
|
|
Information systems and communications
| | | 278 | | | |
285
| | | |
(2.5
|
)
| | |
261
| | | |
6.5
| |
|
Transaction processing services
| | | 199 | | | |
200
| | | |
(0.5
|
)
| | |
194
| | | |
2.6
| |
|
Occupancy
| | | 109 | | | |
107
| | | |
1.9
| | | |
112
| | | |
(2.7
|
)
|
|
Acquisition and restructuring costs(1) | | | 43 | | | |
42
| | | |
2.4
| | | |
6
| | | |
616.7
| |
|
Other
| | | 310 |
| | |
337
|
| | |
(8.0
|
)
| | |
345
|
| | |
(10.1
|
)
|
| Total Expenses | | | $ | 2,183 |
| | |
$
|
1,984
|
| | |
10.0
|
%
| | |
$
|
1,857
|
| | |
17.6
|
%
|
(1) The acquisition costs associated with the GEAM business
acquired on July 1, 2016 were $25 million and $29 million for the
fourth-quarter and third-quarter of 2016, respectively.
Operating-basis (non-GAAP) Expenses
|
|
| |
|
| |
|
| |
|
| |
|
| |
| (Dollars in millions) | | | 4Q16 | | |
3Q16
| | |
Increase
(Decrease)
| | |
4Q15
| | |
Increase
(Decrease)
|
|
Compensation and employee benefits
| | | $ | 1,246 | | | |
$
|
1,022
| | | |
21.9
|
%
| | |
$
|
940
| | | |
32.6
|
%
|
|
Information systems and communications
| | | 278 | | | |
285
| | | |
(2.5
|
)
| | |
261
| | | |
6.5
| |
|
Transaction processing services
| | | 199 | | | |
200
| | | |
(0.5
|
)
| | |
194
| | | |
2.6
| |
|
Occupancy
| | | 109 | | | |
107
| | | |
1.9
| | | |
112
| | | |
(2.7
|
)
|
|
Other
| | | 311 |
| | |
295
|
| | |
5.4
|
| | |
313
|
| | |
(0.6
|
)
|
| Total Expenses | | | $ | 2,143 |
| | |
$
|
1,909
|
| | |
12.3
|
%
| | |
$
|
1,820
|
| | |
17.7
|
%
|
Compensation and employee benefits expenses increased from the
third-quarter of 2016, primarily due to $249 million associated with the
acceleration of certain deferred cash settled awards, partially offset
by the impact of the stronger U.S. dollar, one fewer payroll day in the
fourth quarter of 2016, and State Street Beacon savings. Compensation
and employee benefits expensesincreased from the fourth-quarter
of 2015, primarily due to costs associated with the acceleration of
certain deferred cash settled awards, higher incentive compensation,
costs associated with the acquired GEAM business, and higher costs to
support regulatory initiatives and new business, partially offset by
State Street Beacon savings.
Information systems and communications expenses decreased
slightly from the third-quarter of 2016. Compared to the fourth-quarter
of 2015, Information systems and communication expenses increased, due
to investments supporting new business and State Street Beacon, and the
impact of the acquired GEAM business.
Occupancy expenses increased slightly compared to the
third-quarter of 2016. Compared to fourth-quarter of 2015, occupancy
expenses decreased, reflecting the impact of the stronger U.S. dollar.
Other expenses on a GAAP-basis decreased from the third-quarter
of 2016, primarily due to lower litigation-related expenses, partially
offset by higher professional services fees and securities processing
costs. Other expenses decreased compared to the fourth-quarter of 2015,
reflecting lower litigation-related expenses and higher expenses in the
fourth quarter of 2015 associated with the previously disclosed expense
billing matter.
Other expenses on an operating-basis increased from the
third-quarter of 2016, primarily due to higher professional service fees
and securities processing costs, partially offset by lower insurance
expenses. Other expenses decreased slightly from the fourth-quarter of
2015, reflecting lower professional services fees and travel expenses,
partially offset by costs associated with the acquired GEAM business and
higher securities processing costs.
Fourth-quarter of 2016 GAAP-basis effective tax rate was -72.3%
compared to 11.4% in the third-quarter of 2016 and 15.1% in the
fourth-quarter of 2015. The fourth-quarter of 2016 reflects a reduction
of $145 million in accrued tax expense attributable to the designation
of certain of our foreign earnings as indefinitely invested overseas and
tax benefits of $66 million from incremental foreign tax credits and a
foreign affiliate tax loss.
Fourth-quarter of 2016 operating-basis effective tax rate was
-1.5% compared to 30.3% in the third-quarter of 2016 and 31.8% in the
fourth-quarter of 2015. Excluding the $145 million reduction of accrued
tax expense and the $66 million of tax benefits from capital actions,
the operating-basis effective tax rate in the fourth-quarter of 2016 was
34% which was higher than both the third-quarter of 2016 and the
fourth-quarter of 2015 due to an increase in alternative energy
investments.
Capital
The following table presents our regulatory capital ratios as of
December 31, 2016 and September 30, 2016. The lower of our capital
ratios calculated under the Basel III advanced approaches and under the
Basel III standardized approach are applied in the assessment of our
capital adequacy for regulatory purposes. Also presented is the
calculation of State Street's and State Street Bank's supplementary
leverage ratio (SLR) under final U.S. banking regulator rules adopted in
2014, as of December 31, 2016 and September, 2016. Unless otherwise
noted, all capital ratios presented in the table and elsewhere in this
news release refer to State Street Corporation and not State Street Bank
and Trust Company.
|
|
| |
|
| |
|
| |
|
| |
| December 31, 2016(1) | | |
Basel III
Advanced
Approaches(2) | | |
Basel III
Standardized
Approach
| | |
Basel III Fully
Phased-In
Advanced
Approaches
(Estimated)Pro-
Forma(2)(3) | | |
Basel III Fully
Phased-In
Standardized
Approach
(Estimated)Pro-
Forma(3) |
|
Common equity tier 1 ratio
| | | 11.7 | % | | | 11.6 | % | | | 10.9 | % | | | 10.9 | % |
|
Tier 1 capital ratio
| | | 14.8 | | | | 14.7 | | | | 14.1 | | | | 14.1 | |
|
Total capital ratio
| | | 16.0 | | | | 16.0 | | | | 15.3 | | | | 15.3 | |
|
Tier 1 leverage ratio
| | | 6.5 | | | | 6.5 | | | | 6.2 | | | | 6.2 | |
| | | | | | | | | | | |
|
| September, 2016 | | | | | | | | | | | | |
|
Common equity tier 1 ratio
| | |
12.3
|
%
| | |
12.5
|
%
| | |
11.8
|
%
| | |
12.0
|
%
|
|
Tier 1 capital ratio
| | |
15.4
| | | |
15.7
| | | |
15.0
| | | |
15.3
| |
|
Total capital ratio
| | |
17.6
| | | |
17.9
| | | |
17.2
| | | |
17.5
| |
|
Tier 1 leverage ratio
| | |
6.8
| | | |
6.8
| | | |
6.6
| | | |
6.6
| |
|
|
|
|
|
| |
State Street
| | State Street Bank |
As of December 31, 2016
(Dollars in millions)(1) | |
Transitional SLR
|
|
|
Fully Phased-In
SLR(4) | |
Transitional SLR
|
|
Fully Phased-In
SLR(4) |
| Tier 1 Capital | | $ | 14,717 | | | $ | 14,051 | | | $ | 15,805 | | | $ | 15,169 | |
|
Total assets for SLR
| | | |
| 251,032 | | | | 250,558 | | | | 247,410 | | | | 246,956 | |
| Supplementary Leverage Ratio | | | | | 5.9 | % | | | 5.6 | % | | | 6.4 | % | | | 6.1 | % |
| | | | | | | | |
| | | |
|
| | | |
| |
As of September 30, 2016
(Dollars in millions)
| | | | | | | | | | | | | | | | | | | |
| Tier 1 Capital | |
$
| | |
|
15,407
| | |
$
|
14,928
| | | |
15,817
| | | |
15,374
| |
|
Total assets for SLR
| | |
250,991
| | | |
250,694
| | | |
246,306
| | | |
246,032
| |
| Supplementary Leverage Ratio | | |
6.1
|
%
| | |
6.0
|
%
| | |
6.4
|
%
| | |
6.2
|
%
|
(1)December 31, 2016 capital ratios are preliminary
estimates.
(2) The advanced approaches-based ratios (actual and
estimated) included in this presentation reflect calculations and
determinations with respect to our capital and related matters, based on
State Street and external data, quantitative formulae, statistical
models, historical correlations and assumptions, collectively referred
to as “advanced systems.” Refer to the addendum included with this news
release for a description of the advanced approaches and a discussion of
related risks.
(3) Estimated pro-forma fully phased-in ratios as of
December 31, 2016 and September, 2016 (fully phased in as of January 1,
2019, as per Basel III phase-in requirements for capital) reflect
capital and total risk-weighted assets calculated under the Basel III
final rule. Refer to the addendum included with this news release for
reconciliations of these estimated pro-forma fully phased-in ratios to
our capital ratios calculated under the currently applicable regulatory
requirements.
(4) Estimated pro-forma fully phased-in SLRs as of
December 31, 2016 and September, 2016 (fully phased-in as of January 1,
2018, as per the phase-in requirements of the SLR final rule) are
preliminary estimates as calculated under the SLR final rule. Refer to
the addendum included with this news release for reconciliations of
these estimated pro-forma fully phased-in SLRs to our SLRs under
currently applicable regulatory requirements.
Additional Information
In this news release:
-
All earnings per share amounts (EPS) represent fully diluted earnings
per common share.
-
Return on average common shareholders' equity (ROE) is determined by
dividing annualized net income available to common equity by average
common shareholders' equity for the period. Operating-basis return on
average common equity utilizes annualized operating-basis net income
available to common equity in the calculation.
-
References to expense savings associated with State Street Beacon are:
(1) estimated pre-tax expense savings and relate only to State Street
Beacon, our multi-year transformation program; and (2) are based on
projected improvement from our full-year 2015 operating-basis
expenses, all else equal. In addition, 2016 State Street Beacon
expense savings include targeted staff reductions announced in October
2015. The full effect of the savings generated each year will be
reflected the following year. Actual expenses may increase or decrease
in the future due to other factors.
-
New business in assets to be serviced is reflected in our assets under
custody and administration after we begin servicing the assets, and
new business in assets to be managed is reflected in our assets under
management after we begin managing the assets. As such, only a portion
of any new asset servicing and asset management mandates is reflected
in our assets under custody and administration and assets under
management, as of December 31, 2016. Distribution fees from the SPDR®
Gold Exchange-Traded Fund, or ETF, are recorded in brokerage and other
fee revenue and not in management fee revenue.
-
The fourth-quarter 2016 charge associated with an amendment of the
terms of outstanding deferred cash-settled incentive compensation
awards was accomplished by removing the continued service requirement
associated with those awards for employees below the executive vice
president level. The change did not affect deferred equity-settled
incentive compensation awards (which, in the aggregate, represents a
majority of the outstanding deferred compensation awards for the
relevant employees), and we expect that future deferred cash-settled
incentive compensation awards will retain the continued service
requirement. The payment schedule associated with the recent deferred
cash-settled incentive compensation awards will no longer be reflected
in future periods.
Investor Conference Call and Quarterly Website
Disclosures
State Street will webcast an investor conference call today, Wednesday,
January 25, 2017, at 9:30 a.m. EST, available at http://investors.statestreet.com/.
The conference call will also be available via telephone, at +1
877-423-4013 inside the U.S. or at +1 706-679-5594 outside of the U.S.
The Conference ID is # 46613806.
Recorded replays of the conference call will be available on the
website, and by telephone at +1 855-859-2056 inside the U.S. or at +1
404-537-3406 outside the U.S. beginning approximately two hours after
the call's completion. The Conference ID is # 46613806.
The telephone replay will be available for approximately two weeks
following the conference call. This news release, presentation materials
referred to on the conference call (including those concerning our
investment portfolio), and additional financial information are
available on State Street's website, at http://investors.statestreet.com/
under “Investor Relations--Investor News & Events" and under the title
“Events and Presentations.”
State Street intends to publish updates to its public disclosure
regarding regulatory capital, as required by the Basel III final rule,
on a quarterly basis on its website at http://investors.statestreet.com/,
under "Filings & Reports." Those updates will be published each quarter,
during the period beginning after State Street's public announcement of
its quarterly results of operations and ending on or prior to the due
date under applicable bank regulatory requirements (i.e., ordinarily,
ending no later than 60 days following year-end or 45 days following
each other quarter-end, as applicable). For the fourth-quarter of 2016,
State Street expects to publish its updates during the period beginning
today and ending on or about February 16, 2017.
State Street Corporation (NYSE: STT) is the world's leading provider of
financial services to institutional investors including investment
servicing, investment management and investment research and trading.
With $29 trillion in assets under custody and administration and $2
trillion* in assets under management as of December 31, 2016, State
Street operates globally in more than 100 geographic markets and employs
33,783 worldwide. For more information, visit State Street's website at www.statestreet.com.
* Assets under management include the assets of the SPDR®
Gold ETF (approximately $31 billion as of December 31, 2016), for which
State Street Global Markets, LLC, an affiliate of SSgA, serves as the
distribution agent.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning
of United States securities laws, including statements about our goals
and expectations regarding our business, financial and capital
condition, results of operations, strategies, the financial and market
outlook, dividend and stock purchase programs, governmental and
regulatory initiatives and developments, and the business environment.
Forward-looking statements are often, but not always, identified by such
forward-looking terminology as “outlook,” “expect,” "priority,"
“objective,” “intend,” “plan,” “forecast,” “believe,” “anticipate,”
“estimate,” “seek,” “may,” “will,” “trend,” “target,” “strategy” and
“goal,” or similar statements or variations of such terms. These
statements are not guarantees of future performance, are inherently
uncertain, are based on current assumptions that are difficult to
predict and involve a number of risks and uncertainties. Therefore,
actual outcomes and results may differ materially from what is expressed
in those statements, and those statements should not be relied upon as
representing our expectations or beliefs as of any date subsequent to
January 25, 2017.
Important factors that may affect future results and outcomes include,
but are not limited to:
-
the financial strength and continuing viability of the counterparties
with which we or our clients do business and to which we have
investment, credit or financial exposure, including, for example, the
direct and indirect effects on counterparties of the sovereign-debt
risks in the U.S., Europe and other regions;
-
increases in the volatility of, or declines in the level of, our net
interest revenue, changes in the composition or valuation of the
assets recorded in our consolidated statement of condition (and our
ability to measure the fair value of investment securities) and the
possibility that we may change the manner in which we fund those
assets;
-
the liquidity of the U.S. and international securities markets,
particularly the markets for fixed-income securities and inter-bank
credits, and the liquidity requirements of our clients;
-
the level and volatility of interest rates, the valuation of the U.S.
dollar relative to other currencies in which we record revenue or
accrue expenses and the performance and volatility of securities,
credit, currency and other markets in the U.S. and internationally;
-
the credit quality, credit-agency ratings and fair values of the
securities in our investment securities portfolio, a deterioration or
downgrade of which could lead to other-than-temporary impairment of
the respective securities and the recognition of an impairment loss in
our consolidated statement of income;
-
our ability to attract deposits and other low-cost, short-term
funding, our ability to manage levels of such deposits and the
relative portion of our deposits that are determined to be operational
under regulatory guidelines and our ability to deploy deposits in a
profitable manner consistent with our liquidity needs, regulatory
requirements and risk profile;
-
the manner and timing with which the Federal Reserve and other U.S.
and foreign regulators implement changes to the regulatory framework
applicable to our operations, including implementation of the
Dodd-Frank Act, the Basel III final rule and European legislation
(such as the Alternative Investment Fund Managers Directive,
Undertakings for Collective Investment in Transferable Securities
Directives and Markets in Financial Instruments Directive II); among
other consequences, these regulatory changes impact the levels of
regulatory capital we must maintain, acceptable levels of credit
exposure to third parties, margin requirements applicable to
derivatives, and restrictions on banking and financial activities. In
addition, our regulatory posture and related expenses have been and
will continue to be affected by changes in regulatory expectations for
global systemically important financial institutions applicable to,
among other things, risk management, liquidity and capital planning,
resolution planning, and compliance programs, and changes in
governmental enforcement approaches to perceived failures to comply
with regulatory or legal obligations;
-
we may not successfully implement our plans to have a credible
resolution plan by July 2017, or that plan may not be considered to be
sufficient by the Federal Reserve and the FDIC, due to a number of
factors, including, but not limited to challenges we may experience in
interpreting and addressing regulatory expectations, failure to
implement remediation in a timely manner, the complexities of
development of a comprehensive plan to resolve a global custodial bank
and related costs and dependencies. If we fail to meet regulatory
expectations to the satisfaction of the Federal Reserve and the FDIC
in our resolution plan submission to be filed on July 1, 2017 or in
any future submission, we could be subject to more stringent capital,
leverage or liquidity requirements, or restrictions on our growth,
activities or operations;
-
adverse changes in the regulatory ratios that we are required or will
be required to meet, whether arising under the Dodd-Frank Act or the
Basel III final rule, or due to changes in regulatory positions,
practices or regulations in jurisdictions in which we engage in
banking activities, including changes in internal or external data,
formulae, models, assumptions or other advanced systems used in the
calculation of our capital ratios that cause changes in those ratios
as they are measured from period to period;
-
increasing requirements to obtain the prior approval or non-objection
of the Federal Reserve or our other U.S. and non-U.S. regulators for
the use, allocation or distribution of our capital or other specific
capital actions or corporate activities, including, without
limitation, acquisitions, dividends and stock purchases, without which
our growth plans, distributions to shareholders, share repurchase
programs or other capital or corporate initiatives may be restricted;
-
changes in law or regulation, or the enforcement of law or regulation,
that may adversely affect our business activities or those of our
clients or our counterparties, and the products or services that we
sell, including additional or increased taxes or assessments thereon,
capital adequacy requirements, margin requirements and changes that
expose us to risks related to the adequacy of our controls or
compliance programs;
-
economic or financial market disruptions in the U.S. or
internationally, including that which may result from recessions or
political instability, for example, the U.K.'s referendum to exit from
the European Union may continue to disrupt financial markets or
economic growth in Europe or similarly, financial markets may react
sharply or abruptly to actions taken by the new Presidential
Administration in the United States;
-
our ability to develop and execute State Street Beacon, our multi-year
transformation program to digitize our business, deliver significant
value and innovation for our clients and lower expenses across the
organization, any failure of which, in whole or in part, may among
other things, reduce our competitive position, diminish the
cost-effectiveness of our systems and processes or provide an
insufficient return on our associated investment;
-
our ability to promote a strong culture of risk management, operating
controls, compliance oversight, ethical behavior and governance that
meets our expectations and those of our clients and our regulators,
and the financial, regulatory, reputation and other consequences of
our failure to meet such expectations;
-
the results of our review of our billing practices, including
additional amounts we may be required to reimburse clients, as well as
potential consequences of such review, including damage to our client
relationships and adverse actions by governmental authorities;
-
the results of, and costs associated with, governmental or regulatory
inquiries and investigations, litigation and similar claims, disputes
or civil or criminal proceedings, including, without limitation, that
a resolution of the SEC's previously disclosed investigation
concerning six EMEA-based (Europe, Middle-East and Africa) clients
that were overcharged for transition management services in 2010 and
2011, on the previously disclosed terms agreed upon in principle with
the SEC Staff or otherwise, is not final and is subject to completion
of negotiations with the SEC Staff, followed by review and
consideration by the SEC, and the terms of any such settlement,
including, without limitation, the amount of the related penalty,
remain subject to change;
-
due to the large pools of assets controlled by our institutional
clients, we are subject to the risk of potentially significant
variability in our assets under custody and administration and assets
under management, and correspondingly in our fee revenue and results
of operations, in the event of the loss or gain of any one client or
the re-balancing or re-investment of a significant portion of any one
or more clients’ assets into lower- or higher-fee asset classes, and
we are subject to significant pressure to reduce the fees we charge
for our services as a result of the considerable market influence
exerted by those clients and other competitive forces;
-
the potential for losses arising from our investments in sponsored
investment funds;
-
the possibility that our clients will incur substantial losses in
investment pools for which we act as agent, and the possibility of
significant reductions in the liquidity or valuation of assets
underlying those pools;
-
our ability to anticipate and manage the level and timing of
redemptions and withdrawals from our collateral pools and other
collective investment products;
-
the credit agency ratings of our debt and depositary obligations and
investor and client perceptions of our financial strength;
-
adverse publicity, whether specific to State Street or regarding other
industry participants or industry-wide factors, or other reputational
harm;
-
our ability to control operational risks, data security breach risks
and outsourcing risks, our ability to protect our intellectual
property rights, the possibility of errors in the quantitative models
we use to manage our business and the possibility that our controls
will prove insufficient, fail or be circumvented;
-
our ability to expand our use of technology to enhance the efficiency,
accuracy and reliability of our operations and our dependencies on
information technology and our ability to control related risks,
including cyber-crime and other threats to our information technology
infrastructure and systems (including those of our third-party service
providers) and their effective operation both independently and with
external systems, and complexities and costs of protecting the
security of such systems and data;
-
our ability to grow revenue, manage expenses, attract and retain
highly skilled people and raise the capital necessary to achieve our
business goals and comply with regulatory requirements and
expectations;
-
changes or potential changes to the competitive environment, including
changes due to regulatory and technological changes, the effects of
industry consolidation and perceptions of State Street as a suitable
service provider or counterparty;
-
changes or potential changes in the amount of compensation we receive
from clients for our services, and the mix of services provided by us
that clients choose;
-
our ability to complete acquisitions, joint ventures and divestitures,
including the ability to obtain regulatory approvals, the ability to
arrange financing as required and the ability to satisfy closing
conditions;
-
the risks that our acquired businesses and joint ventures will not
achieve their anticipated financial and operational benefits or will
not be integrated successfully, or that the integration will take
longer than anticipated, that expected synergies will not be achieved
or unexpected negative synergies or liabilities will be experienced,
that client and deposit retention goals will not be met, that other
regulatory or operational challenges will be experienced, and that
disruptions from the transaction will harm our relationships with our
clients, our employees or regulators;
-
our ability to recognize emerging needs of our clients and to develop
products that are responsive to such trends and profitable to us, the
performance of and demand for the products and services we offer, and
the potential for new products and services to impose additional costs
on us and expose us to increased operational risk;
-
changes in accounting standards and practices; and
-
changes in tax legislation and in the interpretation of existing tax
laws by U.S. and non-U.S. tax authorities that affect the amount of
taxes due.
Other important factors that could cause actual results to differ
materially from those indicated by any forward-looking statements are
set forth in our 2015 Annual Report on Form 10-K and our subsequent SEC
filings. We encourage investors to read these filings, particularly the
sections on risk factors, for additional information with respect to any
forward-looking statements and prior to making any investment decision.
The forward-looking statements contained in this news release should not
by relied on as representing our expectations or beliefs as of any time
subsequent to the time this news release is first issued, and we do not
undertake efforts to revise those forward-looking statements to reflect
events after that time.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170125005382/en/
State Street Corporation
Investor Contact:
Anthony Ostler, +1
617-664-3477
or
Media Contact:
Hannah Grove, +1
617-664-3377
Source: State Street Corporation