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International Equities, Strong Dollar Fuel State Street’s Revenue

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Higher fee revenues

State Street (STT) reported total revenues of $2.6 billion in 4Q15, down 2.7% from $2.7 billion in 4Q14. The company reported total fee revenues of $2.0 billion in 4Q15 versus $2.1 billion in 4Q14, down 2.7%. The decline in revenues was mostly due to the strong US dollar, continuing outflows from institutional investors, and lower management fees resulting from higher competition.

Servicing fees fell 1.5% to $1.3 billion in 4Q15. Management fees fell 5.7% to $282 million—mostly because of the stronger US dollar, net outflows, and lower international equity markets.

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Foreign exchange revenues fell 14.9% to $143 million in 4Q15 due to lower currency volatility and client-related volumes. Global equity markets, interest rates, and shifting portfolios impacted volatility for several currencies. Brokerage and other fees worth $104 million in 4Q15 fell 16.8% from 4Q14.

Net interest revenues

State Street’s net interest revenues fell 12.6% to $513 million in 4Q15 versus $587 million in 4Q14. The continued low interest rate environment negatively impacted the company’s net interest revenue and net interest margin. The decline was also due to lower deposit levels and continued repositioning of the company’s investment portfolio.

The company’s net interest margin—including balances held at the Federal Reserve and other central banks—stood at 101 basis points in 4Q15. It had been 95 basis points in 3Q15 and 104 basis points in 3Q14.

State Street posted earnings before interest, taxes, depreciation, and amortization or EBITDA of $3.6 billion for the last fiscal year. Let’s compare this result to its peers’ EBITDA.

  • JPMorgan Chase (JPM): $40.8 billion
  • Bank of New York Mellon (BK): $6.4 billion
  • BlackRock (BLK): $4.7 billion

Together, these companies form 1.7% of the SPDR S&P 500 ETF (SPY).

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