State Street Corp (NYSE:STT) Q4 2019 Earnings Conference Call - Final Transcript

Jan 17, 2020 • 10:00 am ET

Previous

State Street Corp (NYSE:STT) Q4 2019 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Presentation
Executive
Ronald P. O'Hanley

funds remain negative, albeit less so than 2018. We experienced three interest rate cuts and lower long end rates, which impacted NII, as well as low market volatility for much of the year, which in turn impacted our markets businesses.

Our full-year 2019 results also reflected the impact from the still elevated level of industry servicing the pricing pressure, which moderated for us in the second half of the year. As a result of these headwinds, it was clear that we needed to take aggressive management actions to stabilize revenues and reduce expenses, while keeping client satisfaction at the center of all we do. I am pleased with the progress we made and how that translated into results, particularly in the second half of the year.

Assets under custody and administration increased 4% quarter-over-quarter to a record $30.4 trillion. We saw a strong level of new wins during the quarter totaling $294 billion, which took our total wins in 2019 to just over $1.8 trillion, within touching distance of our record amount of wins in 2018. Assets yet to be installed stood at $1.2 trillion at quarter end. At Global Advisors, assets under management increased 6% quarter-over-quarter to a record $3.1 trillion, supported by higher period end market levels and strong U.S. and European net flows to our Spider range of ETFs. During 2019 Global Advisors recorded over $100 billion in total net inflows, driven by strong ETF, institutional and cash net flows relative to 2018.

Relative to the year-ago period, fourth quarter total revenue increased 1%, reflecting improved servicing and management fees, driven by stronger equity markets, partially offset by lower NII and markets revenues. On a sequential and year-over-year basis, fourth quarter total fee revenue increased 5% and 2%, respectively. Full-year 2019, total revenue decreased 3% year-over-year as a result of lower fee revenue and NII, partially offset by the positive contribution of Charles River development.

We are pleased that we were able to begin to grow servicing fee revenue again with our focus on client service. Servicing fees increased 3% during the second half of 2019, relative to the first half of the year. During 2019, we implemented a number of client initiatives to drive better service quality and deepen relationships. This included the completion of our senior executive client coverage model for our largest clients. We also implemented a new client on-boarding process that has enabled us to scale rapidly and take on large tranches of business while also meeting client service requirements. Further, we implemented changes to better manage client pricing decisions through the establishment of an executive deal review committee. We know that there is more for us to do. And as we begin 2020, reigniting total revenue growth remains a core strategic priority for all of us. We believe that building out our front-to-back Alpha platform strategy provides an attractive value proposition for our clients.

During 2019, we undertook significant actions to improve our operational efficiency and reduce expenses. This time last year,