State Street Q4 Adj Profit Misses View, But Revenues Top

(RTTNews) - Custodian bank State Street Corp. (STT) reported Friday a profit for the fourth quarter that grew 16 percent from last year, reflecting fee revenue growth. Adjusted earnings per share missed analysts' expectations, while and quarterly revenues topped their estimates.

"Our fourth quarter and full-year results reflect the strength of the core business and our continued focus on our key priorities to deliver value for our clients and shareholders," Chairman, President and CEO Joseph Hooley said in a statement.

Boston, Massachusetts-based State Street reported net income available to common shareholders of $545 million or $1.22 per share for the fourth quarter, higher than $468 million or $1.00 per share in the prior-year quarter, and also higher than $531 million or $1.17 per share in the third quarter.

Results for the latest quarter include an income tax benefit of $0.16 per share associated with the completion of a multi-year data enhancement process related to its deferred income tax accounts. It also reflects a $0.06 per share provision associated with previously disclosed litigation and non-U.S. regulatory matters.

On an operating basis, net income for the quarter was $514 million or $1.15 per share, compared to $521 million or $1.11 per share in the year-ago quarter.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $1.19 per share for the quarter. Analysts' estimates typically exclude special items.

State Street's total revenues for the quarter edged up 0.6 percent to $2.46 billion from $2.45 billion in the previous year. On an operating basis, revenues grew 2.6 percent to $2.53 billion from $2.46 billion in the same quarter last year, and topped sixteen Wall Street analysts' consensus estimate of $2.50 billion.

On an operating basis, total fee revenue for the quarter grew 4.9 percent to $1.93 billion, while net interest revenue edged down 0.7 percent to $596 million from last year, primarily due to lower yields on earning assets. Net interest margin declined to 1.30 percent from last year's 1.36 percent.

Total assets under custody and administration as at the end of the fourth quarter was $27.43 trillion, up 12.5 percent from $24.37 trillion at the end of the year-ago quarter. Assets under management also increased 12.4 percent to $2.35 trillion from $2.09 trillion last year.

Return on average common shareholders' equity was 10.9 percent, up from 9.3 percent in the year-ago quarter.

The company also said the latest quarter reflected a negative operating leverage of 4 basis points compared to the year-ago quarter.

For fiscal 2013, the company reported net income available to common shareholders of $4.62 per share, higher than $4.20 per share in the prior year. On an operating-basis, net income was $4.54 per share, compared to $3.95 per share in the year ago. Analysts expected the company to report earnings of $4.58 per share for fiscal 2013.

Total revenue for the full year grew 2.4 percent to $9.88 billion, and revenues, on an operating basis, increased 3.3 percent to $10.05 billion from the previous year. Street was looking for full-year 2013 revenues of $10.03 billion.

Looking ahead, State Street said it expects revenue growth of 3 to 5 percent. Analysts are currently looking for full-year 2014 revenues of $10.47 billion.

"We purchased approximately 8.0 million shares of our common stock during the fourth quarter, and 24.7 million shares since April 1, 2013, under our current $2.1 billion common stock purchase program effective through March 2014. We recently submitted our 2014 capital plan to the Federal Reserve, and the return of capital through dividends and common stock repurchases remains a key priority," Hooley added.

STT closed Thursday's regular trading session at $72.76, down $1.80 on a volume of 2.61 million shares. In the past 52-week period, the stock has been trading in a range of $54.57 to $76.24.