State Street Corp.
) reported second-quarter 2014 operating earnings of $1.39 per
share, surpassing the Zacks Consensus Estimate of $1.26, driven
by increased non-interest income. Also, the reported figure was
up 12% from the prior-year quarter figure of $1.24.
State Street Corporation - Earnings Surprise
Better-than-expected results were mainly attributable to a
rise in fee income, partly offset by lower net interest income
and higher operating expenses. Moreover, improvement in asset
position acted as a tailwind.
After considering certain non-recurring items, net income
applicable to common shareholders was $602 million, up 5% year
Performance in Detail
Revenues on an operating basis came in at $2.68 billion, up 4%
from the prior-year quarter. Further, it beat the Zacks Consensus
Estimate of $2.60 billion.
Net interest revenue on an operating basis inched down 1% year
over year to $575 million. The fall was mainly due to lower
yields on earning assets, partly offset by lower interest
expense. Likewise, net interest margin was 1.12%, down 19 basis
points year over year.
Fee revenues came in at $2.1 billion, increasing 5% from the
prior-year quarter. The rise was attributable to an increase in
servicing fees, management fees, processing and other revenues as
well as securities finance fees, partially offset by lower total
trading services revenues.
On an operating basis, non-interest expenses climbed 4% from
the year-ago quarter to $1.82 billion. All the components
increased except other expenses.
Total assets under custody and administration were $28.4
trillion as of Jun 30, 2014, up 10% year over year. Moreover,
assets under management were $2.48 trillion, up 16% from the
Capital and Profitability Ratios
State Street's capital and profitability ratios improved.
Under Basel III final rule (Advanced approach), the estimated
Tier 1 common ratio was 12.8% as of Jun 30, 2014, up from 10.9%
as of Jun 30, 2013.
Return on common equity (on an operating basis) came in at
11.9%, up from 11.3% in the year-ago quarter.
During the reported quarter, State Street repurchased shares
for $410 million at an average price of $65.02 per share. This
was part of the company's buyback plan authorizing purchase of up
to $1.7 billion worth of stock through the first quarter of
We anticipate State Street's restructuring programs, along
with stable core servicing and investment management franchises,
to help offset its financial weakness. Moreover, enhanced capital
deployment initiatives reinforce the company's priority to
enhance shareholders' value. However, a low interest rate
environment, increased expenses and a persistent fall in net
interest revenue are expected to drag State Street's top line in
the quarters ahead.
Currently, State Street carries a Zacks Rank # 3 (Hold).
Performance of Other Major Regional Banks
) surpassed the Zacks Consensus Estimate. Both Comerica and
KeyCorp benefited primarily from lower expenses and a decline in
provision for loan and lease losses.
SunTrust Banks, Inc.
) outpaced the Zacks Consensus Estimate, driven by growth in
revenues and lower provision for loan losses. However, rising
operating expenses acted as a dampener.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
COMERICA INC (CMA): Free Stock Analysis Report
SUNTRUST BKS (STI): Free Stock Analysis Report
KEYCORP NEW (KEY): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
To read this article on Zacks.com click here.