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State Street in 1H17: Total Revenues, Total Expenses, and More

PART:
1 2 3 4 5 6
Part 5
State Street in 1H17: Total Revenues, Total Expenses, and More PART 5 OF 6

A Look at State Street’s Valuations

Lower valuations

Wall Street analysts gave a one-year price target of $98.00 per share on State Street Corporation (STT), representing an increase of ~3.4% from its current price. State Street’s Investment Servicing division witnessed an increase in its total fee revenues in 1H17 compared to 1H16. 

In 1H17, its Investment Servicing division generated total fee revenues of ~$3.6 billion compared to ~$3.4 billion in 1H16, which represents an increase of 5%. This rise in total fee revenues occurred on the back of growth in client volumes and strong global equity markets.

A Look at State Street’s Valuations

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However, the company’s Investment Servicing division witnessed an increase in its service revenues from ~$2.5 billion in 1H16 to ~$2.6 billion in 1H17, reflecting a rise of 6%. This increase also contributed to the increase in the division’s total fee revenues.

State Street Corporation has a one-year forward price-to-book ratio of ~1.8x and its competitors’ average one-year forward price-to-book ratio stood at ~1.9x, which implies State Street’s discounted valuations.

The one-year forward price-to-book ratios of State Street’s competitors follow:

  • Bank of New York Mellon (BK): ~1.3x
  • Northern Trust Corporation (NTRS): ~2.1x
  • BlackRock (BLK): ~2.2x

State Street’s Investment Servicing division witnessed a marginal rise of 3% in its total expenses in 1H17 compared to 1H16. In 1H16, the company’s Investment Servicing division incurred total expenses of ~$3.3 billion and in 1H17, the division reported total expenses of ~$3.4 billion. 

This rise in total expenses was mainly due to regulatory initiatives adopted by the company and higher incentive compensation. However, expenses incurred by the new business also contributed to the rise in the division’s total expenses.

Price-to-earnings ratios

State Street Corporation (STT) has a price-to-earnings ratio of ~17.5x on a trailing-12-month (or TTM) basis. Its peers (XLF) have the following price-to-earnings ratio on a TTM basis:

  • Northern Trust Corporation (NTRS): ~20.3x
  • Bank of New York Mellon (BK): 15.5x
  • BlackRock (BLK): 21.0x

In the final article of this series, let’s see what analysts have to say about State Street Corporation.

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