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State Street Stock Rises on New Assets, Performance

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Stock recovery

State Street (STT) stock has risen 10.0% over the past quarter. That came on the back of two quarters of improved operating performance as the broad market rose, the fund attracted new assets, and flows increased toward its ETFs. The company has also brought in new funds for asset servicing.

For 3Q16, the company beat analyst estimates of $1.25 for EPS (earnings per share) and posted $1.35.

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Stiff competition

State Street is facing stiff competition from BlackRock (BLK) and Vanguard for attracting new funds toward ETFs. The company is competing in cost as well as market share.

State Street reported net income of $507.0 million in 3Q16, a fall of 13.3% from 2Q16 and 5.9% from 3Q15. Reported revenues were $2.6 billion, a 1.8% rise from 2Q16 and a 0.20% rise from 3Q15.

Reported AUM (assets under management) rose to $2.4 trillion from $2.3 trillion in the previous quarter, mainly due to a rise in the S&P 500 (SPY) and ETF flows.

State Street recorded revenues of $10.0 billion in fiscal 2015. Let’s compare that to the revenues of its competitors:

  • BlackRock (BLK): $11.0 billion
  • JPMorgan Chase (JPM): $51.0 billion
  • Bank of New York Mellon (BK): $3.2 billion

Together, these companies form 1.8% of SPY.

Company overview

State Street manages $2.4 trillion in assets for sovereign wealth funds, governments, institutions, and retail clientele. Below are the company’s two business lines:

  • investment servicing: State Street performs core custody and related value-added functions such as providing institutional investors with payment, clearing, and settlement services.
  • investment management: State Street provides investment management, investment research, and investment advisory services through State Street Global Advisors.

In the following parts of this series, we’ll look at State Street’s performance, assets under management, asset servicing, strategic initiatives, balance sheet strength, dividends, and valuations.

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