On Sep 12, 2013, we reaffirmed our Neutral recommendation on
State Street Corporation
). This was based on the company's positive second-quarter 2013
earnings. However, we remain concerned about the persistent
pressure on net interest margin and escalating operating
On Jul 19, State Street reported second-quarter 2013 earnings
per share of $1.24, beating the Zacks Consensus Estimate by a
nickel. Results were driven by an improvement in fee income,
partially offset by higher operating expenses and a decrease in
net interest income. Further, the company's asset position and
capital ratios were robust.
The Zacks Consensus Estimate for 2013 advanced 1.1% to $4.61
per share over the last 60 days. Further, for 2014, the Zacks
Consensus Estimate increased 1.2% to $5.27 per share over the
same time period. State Street currently carries a Zacks Rank #3
State Street is a sound asset for yield-seeking investors. In
second-quarter 2013, the company hiked its dividend by 8.3%.
Further, we expect the company's restructuring programs, along
with its strong core servicing and investment management
franchises to aid in countering the sluggish economic recovery.
Moreover, State Street's acquisitions will benefit revenue growth
However, State Street's top-line growth is expected to be
sluggish in the coming quarters due to severe pressure on NIM. We
expect NIM to remain compressed on the assumption of an unchanged
yield curve and prepayment fees.
Moreover, higher operating expenses are a major concern for
State Street. Despite various restructuring efforts, it will
likely take some time for the company to reduce expenses and
boost overall profitability.
Other Stocks Worth Considering
Some better performing banks include
First Interstate Bancsystem Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
FIRSTBANK ALMA (FBMI): Free Stock Analysis
STATE ST CORP (STT): Free Stock Analysis
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