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Category: State Street Corporation (STT)
Date: 20 January 2021 Stock price of State Street: $78.40 We take a look at the 4th quarter 2020 earnings report of State Street (STT) a financial holding company organized in 1969 under the laws of the Commonwealth of Massachusetts. The group operate in more than 100 geographic markets worldwide, including the U.S., Canada, Europe, the Middle East and Asia. Revenues for the quarter came in at $2.9 billion and they reported net income of $537 million.
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Ron O'Hanley, Chairman and Chief Executive Officer - 2020 was a challenging year for our clients, employees and our communities globally. I am proud of our employees worldwide who continued to put our clients first and deliver strong results for our shareholders despite the difficult operating environment "
More About State Street Corp
State Street Corporation, referred to as the Parent Company, is a financial holding company organized in 1969 under the laws of the Commonwealth of Massachusetts. Our executive offices are located at One Lincoln Street, Boston, Massachusetts. The Parent Company is a source of financial and managerial strength to our subsidiaries. Through our subsidiaries, including our principal banking subsidiary, State Street Bank and Trust Company, referred to as State Street Bank, we provide a broad range of financial products and services to institutional investors worldwide, with $34.36 trillion of AUC/A and $3.12 trillion of AUM as of December 31, 2019. As of December 31, 2019, we had consolidated total assets of $245.61 billion, consolidated total deposits of $181.87 billion, consolidated total shareholders' equity of $24.43 billion and over 39,000 employees. We operate in more than 100 geographic markets worldwide, including the U.S., Canada, Europe, the Middle East and Asia
We conduct our business primarily through State Street Bank, which traces its beginnings to the founding of the Union Bank in 1792. State Street Bank's current charter was authorized by a special Act of the Massachusetts Legislature in 1891, and its present name was adopted in 1960. State Street Bank operates as a specialized bank, referred to as a trust or custody bank, that services and manages assets on behalf of its institutional clients. Our clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.
We conduct our business primarily through State Street Bank, which traces its beginnings to the founding of the Union Bank in 1792. State Street Bank's current charter was authorized by a special Act of the Massachusetts Legislature in 1891, and its present name was adopted in 1960. State Street Bank operates as a specialized bank, referred to as a trust or custody bank, that services and manages assets on behalf of its institutional clients. Our clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.
Overview of State Street Corp's 4th quarter 2020 earnings report
4Q20 HIGHLIGHTS (all comparisons are to 4Q19, unless otherwise noted)
AUC/A and AUM
New business
Revenue
Expenses and efficiencies
AUC/A and AUM
- Investment Servicing AUC/A as of quarter-end increased 13% to $38.8 trillion, primarily due to higher period-end market levels, net new business installations, and client flows.
- Investment Management AUM as of quarter-end increased 11% to $3.5 trillion, mainly reflecting higher period-end market levels and net inflows from ETFs and cash, partially offset by institutional net outflows.
New business
- Investment Servicing mandates announced in 4Q20 totaled $205 billion, with quarter-end servicing assets remaining to be installed in future periods of $436 billion.
- Servicing business wins totaled $787 billion in 2020, with an increasing proportion incorporating State Street AlphaSM .
- Three new State Street Alpha platform wins in 4Q20
- Charles River Development (CRD) achieved annual recurring revenue (ARR)(b) of $223 million in 4Q20, up 17% year-on-year.
Revenue
- Fee revenue increased 2%, largely due to strong FX trading revenue, and improved Servicing and Management fees, partially offset by a decline in Securities finance and Software and processing fees.
- Servicing fees increased 1%, Management fees increased 3%, FX trading services increased 25%, Securities finance decreased (21)%, and Software and processing fees decreased (7)% primarily reflecting the timing of on-premise CRD revenues.
- Net interest income (NII) decreased (22)%, primarily due to lower market rates, partially offset by growth in deposits, the investment portfolio and loan balances, and episodic market-related benefits.
- Compared to 3Q20, NII increased 4%, or was flat excluding a true-up in 3Q20(c) .
Expenses and efficiencies
- Total expenses were down (5)%, primarily reflecting lower notable items. Excluding notable items, Total expenses were flat(d), driven by business investments, offset by ongoing expense management initiatives.
- Increased productivity while making controlled investments to support our client needs, operations, and technology innovation.
- Company-wide productivity and efficiency efforts reduced FY2020 Total expenses by (1.5)% compared to FY2019, excluding notables items(d)
State Street Corp management commentary 4th quarter 2020 earnings report
Ron O'Hanley, Chairman and Chief Executive Officer: "2020 was a challenging year for our clients, employees and our communities globally. I am proud of our employees worldwide who continued to put our clients first and deliver strong results for our shareholders despite the difficult operating environment. While record low interest rates created a significant headwind in 2020, State Street delivered fee revenue growth and expense reduction that contributed to positive operating leverage and solid EPS growth." O'Hanley added: "While State Street rose to the challenges in 2020, we are laser focused on fee revenue growth and expense management to continue to make progress in 2021 towards our medium-term targets. We are confident in the trajectory of our business and will continue to drive innovation, automation and productivity to achieve these goals. As we look ahead in 2021, as a result of our strong, elevated capital position, we have announced a number of capital actions that will take place in the first-quarter and are expected to benefit our shareholders in the year ahead."
State Street (STT) stock price chart over the last 5 years
The image below shows the stock price history of State Street (STT) over the last 5 years. And its been an ok time for State Street stockholders with the stock increasing by 36.8% over the last 5 years. Not exactly shooting the lights out but a positive return at least.
The stock of State Street is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of State Street stock is very positive at this point in time.
The stock of State Street is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of State Street stock is very positive at this point in time.
Latest stock valuation of State Street Corp
So what is State Street (STT) stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for BrightView at $204.80 a stock.
We therefore believe the stock of State Street (STT) is overvalud at its current price of $272
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $204.80, thus a good entry point into State Street (STT) would be at $184.30 or below.
We expect the stock of State Street (STT) to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
We therefore believe the stock of State Street (STT) is overvalud at its current price of $272
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $204.80, thus a good entry point into State Street (STT) would be at $184.30 or below.
We expect the stock of State Street (STT) to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
Next earnings release of State Street Corp
It is expected that State Street Corp will release their 1st quarter 2021 earnings report in mid April 2021