State Street revenue drops but mood upbeat

State Street has reported a drop in total revenue in the first quarter of the year, but Joseph L Hooley, chairman and chief executive officer, remains characteristically upbeat.

“Our first quarter 2016 fee revenues reflect the challenging market environment experienced at the beginning of the year,” he said. “However, I am encouraged by the signs of stability in March and the strength of our pipeline across the firm.

“The first quarter included new asset servicing wins of $264 billion, with approximately $400 billion of servicing commitments remaining at quarter-end to be installed from current and prior periods. In addition, we had $13 billion in positive net flows in our asset management business. We also made progress on our strategy to invest in higher growth and return businesses. Our recent agreement to acquire GE Asset Management will extend our core investment management capabilities, including in the high growth outsourced CIO market.”

“Our results reflect our commitment to maintaining a strong focus on managing expenses, with first quarter operating-basis expenses flat compared to the same period a year ago and also flat excluding the seasonal impact of equity compensation for retirement-eligible employees and payroll taxes compared to the fourth quarter of 2015.”

“State Street Beacon, which is the next phase of our multi-year transformation programme to create cost efficiencies and to fully digitise our business to support the development of new solutions and capabilities for our clients, is contributing to our expense management efforts. We are on track to generate at least $100 million in annualised pre-tax net run-rate expense savings this year from this programme.”

Hooley concluded: “Returning capital to shareholders remains a top priority. We purchased approximately $325 million of our common stock in the first quarter of 2016. We expect our second quarter 2016 common stock repurchases to be up to $390 million.”