State Street's Q3 Earnings Top Estimates, Revenue Rise Y/Y

State Street Corporation’s STT third-quarter 2024 earnings of $2.26 per share surpassed the Zacks Consensus Estimate of $2.08. The bottom line also increased 80.8% from the prior-year quarter.

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Results have primarily been aided by growth in fee revenues and higher net interest revenues (NIR). Also, the company witnessed improvements in the total assets under custody and assets under management (AUM) balances. However, higher expenses have hurt the results to some extent.

Net income available to common shareholders was $682 million, up 71.4% from the year-ago quarter. Our projection for the metric was $620.5 million.

Revenues Improve, Expenses Rise

Total revenues of $3.34 billion increased 11.9% year over year. Also, the top line beat the Zacks Consensus Estimate of $3.18 billion.

NIR was $723 million, up 15.9% year over year. The rise was driven by higher investment securities yields and loan growth, partially offset by a deposit mix shift. Our estimate for the metric was $667.5 million.

The net interest margin contracted 5 basis points year over year to 1.07%.

Total fee revenues increased 10.8% year over year to $2.62 billion. We estimated the metric to be $2.51 billion.

Non-interest expenses were $2.31 billion, up 5.9% from the prior-year quarter. The rise was due to an increase in almost all cost components, except for the amortization of other intangible assets. Our estimate for the metric was $2.27 billion.

Provision for credit losses was $26 million compared with nil provision reported in the prior-year quarter.

The Common Equity Tier 1 ratio was 11.6% as of Sept. 30, 2024, compared with 11.0% in the corresponding period of 2023. The return on average common equity was 12.0% compared with 7.3% in the year-ago quarter.

Asset Balances Increase

As of Sept. 30, 2024, total assets under custody and administration were $46.76 trillion, up 16.8% year over year. The rise was driven by higher quarter-end equity market levels, net new business, and client flows. We had projected the metric to be $44.47 trillion.

AUM was $4.73 trillion, up 28.9% year over year, primarily driven by higher quarter-end market levels and net inflows. Our estimate for the metric was $4.49 trillion.

Share Repurchase Update

In the reported quarter, State Street repurchased shares worth $450 million.

Our Take

Persistently rising expenses and a tough operating backdrop are major concerns. Yet, higher interest rates and solid business servicing wins are expected to keep supporting STT’s financials.

State Street currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

The Bank of New York Mellon Corporation’s BK third-quarter 2024 adjusted earnings of $1.52 per share surpassed the Zacks Consensus Estimate of $1.41. Also, the bottom line reflects a rise of 19.7% from the prior-year quarter.

BK’s results have been primarily aided by a rise in fee revenues and net interest income (NII). The assets under custody and/or administration and AUM balances grew on a solid market rally. However, a rise in non-interest expenses and provisions hurt the results to some extent.

High interest rates and solid IB business performance drove JPMorgan’s JPM third-quarter 2024 earnings to $4.37 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.02.

Robust capital markets performance and a rise in NII majorly supported JPM’s quarterly performance. On the other hand, higher non-interest expenses and provisions and subdued mortgage banking performance were the headwinds.

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