Markets

State Street (STT) Q2 Earnings Beat on Fee Income Growth

State Street’s STT second-quarter 2020 adjusted earnings of $1.88 per share comfortably outpaced the Zacks Consensus Estimate of $1.63. Also, the figure was 29.7% higher than the prior-year level.

The results reflect new investment servicing wins of $162 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 $662 million, up 23.3% from the year-ago quarter.

Revenues Up, Expenses Down

Total revenues were $2.93 billion, increasing 2.2% year over year. Also, the top line beat the Zacks Consensus Estimate of $2.87 billion.

Net interest revenues declined 8.8% from the year-ago quarter to $559 million. The fall was mainly due to lower market rates, partially offset by a solid deposit balance and participation in the Money Market Mutual Fund Liquidity Facility program.

Net interest margin decreased 54 basis points year over year to 0.93%.

Total fee revenues grew 5.2% from the prior-year quarter to $2.38 billion. This rise was mainly driven by higher foreign exchange trading services (up 26%), and software and processing fees (up 45.8%).

Non-interest expenses were $2.08 billion, down 3.3% from a year ago. The decline was attributed to the company’s cost-savings efforts. Excluding notable items, adjusted expenses decreased 3.4% from the prior-year period to $2.07 billion.

Provision for credit losses was $52 million, up significantly from $1 million in the prior year quarter.

As of Jun 30, 2020, total assets under custody and administration were $33.5 trillion, up 2.3% year over year. Also, assets under management were $3.1 trillion, up 4.7% from the prior-year figure.

Strong Capital and Profitability Ratios

Under Basel III (Standardized approach), estimated Tier 1 common ratio was 12.3% as of Jun 30, 2020 compared with 11.5% in the corresponding period of 2019.

Return on common equity came in at 12.1% compared with 10.1% in the year-ago quarter.

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 and EPS Surprise

State Street Corporation price-consensus-eps-surprise-chart | State Street Corporation Quote

State Street currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Major Regional Banks

Bank of New York Mellon Corporation BK — currently carrying a Zacks Rank #3 (Hold) — reported second-quarter 2020 earnings per share of $1.01, surpassing the Zacks Consensus Estimate of 94 cents. The figure was on par with the prior-year level.

Zacks #3 Ranked U.S. Bancorp’s USB second-quarter 2020 earnings per share of 41 cents surpassed the Zacks Consensus Estimate of 34 cents. However, the bottom line compares unfavorably with $1.09 reported in the prior-year quarter.

Zacks #3 Ranked Truist Financial’s TFC second-quarter 2020 adjusted earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 64 cents. The results excluded restructuring charges and BB&T-SunTrust Banks merger-related charges, incremental operating expenses related to the merger, securities gains, as well as losses from the early extinguishment of long-term debt.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>


Click to get this free report

U.S. Bancorp (USB): Free Stock Analysis Report

The Bank of New York Mellon Corporation (BK): Free Stock Analysis Report

State Street Corporation (STT): Free Stock Analysis Report

Truist Financial Corporation (TFC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More