Investment Servicing segment
State Street (STT) carries out its activities through two segments:
- Investment Servicing
- Investment Management
Its Investment Servicing segment had revenues of $2.5 billion in the first quarter, an increase of 12% YoY (year-over-year). Total fee revenues are a component of the segment’s total revenues. Fee revenues consist of securities finance revenues, servicing fee revenues, trading services and processing fees, and other revenues.
The segment’s servicing fees are primarily impacted by the performance of the global equity markets, which are affected by economic issues such as inflation and interest rates. However, moving forward, its servicing fee revenues are expected to increase, mainly due to new asset servicing commitments.
Trading services revenues amid volatility
Investment Servicing’s revenue for trading services depends primarily on trading activities, which depend mainly on fluctuations in the equity markets. In the first quarter, the equity markets saw significant volatility, mainly due to global tensions over possible trade wars and concerns over interest rates.
However, volatility is expected to decline in the second quarter, which could lead to a decline in trading services revenues. Global tensions and uncertainty over macroeconomic variables are the primary reasons for volatile equity markets.
On May 17, State Street’s market capitalization was $37.1 billion. Its peers (XLF) T.Rowe Price Group (TROW), Invesco (IVZ), and Franklin Resources (BEN) had market capitalizations of $29.2 billion, $11.8 billion, and $18.5 billion, respectively.