Here’s Why State Street’s Total Expenses Rose Marginally in 3Q17
Compensation and information systems
State Street (STT) had compensation expenses of $1.1 billion in 3Q17 compared to $1 billion in 3Q16, reflecting a marginal YoY (year-over-year) rise. The rise was mostly due to a weakness in the US dollar and a rise in expenses related to new business. The rise in incentives has also been a major contributor.
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State Street has reported revenue per share of $27.80 on a trailing 12-month (or TTM) basis. Peers (XLF) GAIN Capital Holdings (GCAP), the Bank of New York Mellon (BK), and JPMorgan Chase (JPM) have reported revenues per share of $6.99, $14.85, and $26.37, respectively, on a TTM basis.
State Street saw a rise in information systems and communication expenses, from $285 million in 3Q16 to $296 million in 3Q17. The rise came on the back of new business and a rise in infrastructure costs. Investments related to the company’s Beacon project also contributed to the rise.
Transaction processing and other components
State Street incurred transaction processing expenses of $215 million in 3Q17 compared to $200 million in 3Q16 reflecting a 7.5% YoY rise. That rise was due to increased volumes.
State Street also saw a rise in occupancy expenses, from $107 million in 3Q16 to $118 million in 3Q17, reflecting a 10.3% rise.
However, State Street managed to reduce its other expenses from $295 million in 3Q16 to $269 million in 3Q17, thus implying a fall of 8.8%. That YoY fall is mostly due to a decline in professional fees.