State Street Corp (NYSE:STT) Q3 2019 Earnings Conference Call Transcript

Oct 18, 2019 • 10:00 am ET

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State Street Corp (NYSE:STT) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Ilene Fiszel Bieler

Good morning, and thank you all for joining us. On our call today, our CEO, Ron O'Hanley will speak first. Then Eric Aboaf, our CFO, will take you through our third quarter 2019 earnings slide presentation, which is available for download in the Investor Relations section of our website investors.statestreet.com. Afterwards, we'll be happy to take questions. [Operator Instructions]

Before we get started, I would like to remind you that today's presentation will include results presented on a basis that excludes or adjusts one or more items from GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP or regulatory measure are available in the appendix to our slide presentation.

In addition, today's presentation will contain forward-looking statements. Actual results may differ materially from these statements due to a variety of important factors, such as those factors referenced in our discussion today and in our SEC filings, including the risk factors in our Form 10-K. Our forward-looking statements speak only as of today, and we disclaim any obligation to update them, even if our views change.

Now, let me turn it over to Ron.

Executive
Ronald P. O'Hanley

Thanks, Ilene, and good morning, everyone.

Turning to Slide 3, we announced our third quarter financial results this morning, reporting EPS and ROE of $1.42 and 9.7% respectively. Before I go into more detail about our results, I would like to discuss what we are seeing in the macro environment. As one of the world's largest investment service providers, we have a unique window into global capital flows. Despite an accommodative monetary policy supporting US equities and global fixed-income assets, a significant amount of cash remains on the sidelines. Notwithstanding that, both industry and client flows have improved in recent quarters relative to 2018.

Relative to the year-ago period, State Street's total revenue fell 3%, reflecting lower interest rates, weaker international average equity market levels, and challenging industry conditions, including price compression, partially offset by the positive contribution of Charles River. When compared to the second quarter however, total revenue increased 1%, driven by higher servicing fees, stronger net interest income, and better foreign exchange revenue. We are encouraged by the direction of our servicing fee revenue and believe that our efforts to improve revenue performance are having the intended impact. We are making progress. We are not yet where I would like to see us as a business, and reigniting servicing fee growth remains a priority.

Assets under custody and administration increased slightly quarter-on-quarter to $32.9 trillion, and we are pleased with the level of new wins during the quarter of $1 trillion, while assets yet to be installed increased to $1.2 trillion. At Global Advisors, we also had a good quarter. Assets under management increased by 1% quarter-on-quarter to just under $3 trillion, supported by higher period-end market levels and relatively strong ETF and cash inflows. I'm particularly pleased by the third quarter of consecutive net inflows. We are making good progress across the enterprise, but we are not yet hitting our full