What To Expect From State Street Stock?

+6.97%
Upside
77.06
Market
82.43
Trefis
STT: State Street logo
STT
State Street

State Street’s stock (NYSE: STT) has lost 32% YTD, as compared to the 23% decline in the S&P500 over the same period. Further, the stock is currently trading at $63 per share, which is 23% below its fair value of $82 – Trefis’ estimate for State Street’s valuationThe custody banking giant posted mixed results in the second quarter of 2022, with earnings outperforming the consensus but revenues missing the mark. It reported total revenues of $2.95 billion – down 3% y-o-y, driven by a 25% rise in net interest income (NII) and growth in foreign exchange trading services. The NII benefited from higher short and long-term interest rates and growth in loan balances. On the flip side, all the components of the total fee income, except foreign exchange trading services, witnessed negative growth, leading to a 6% y-o-y decrease to $2.37 billion. Further, the Assets under Custody & Administration (AuC/A) and Assets under Management (AuM) fell 10% and 11% y-o-y, respectively. Overall, the adjusted net income decreased 2% to $712 million.

The bank’s revenues grew 1% y-o-y to $6 billion in the first half of 2022. It was primarily due to a 17% rise in NII because of higher interest rates and loan growth. That said, the servicing fees decreased 4% y-o-y over the first two quarters. All in all, the adjusted net income increased 6% y-o-y to $1.3 billion.

The Federal Reserve has increased the benchmark interest rates five times in 2022. This has benefited the NII of the bank, which is likely to continue over the subsequent quarters. However, the servicing and management fee is likely to remain under pressure for some more time. Notably, the Q3 consensus estimates for revenues are $2.97 billion. We expect State Street’s revenues to remain around $12.12 billion in FY2022. Additionally, STT’s adjusted net income margin is likely to remain around 20%, leading to an adjusted net income of $2.42 billion and an annual GAAP EPS of $6.84. This coupled with a P/E multiple of 12x will lead to the valuation of $82.

Relevant Articles
  1. State Street Stock To Edge Past The Consensus In Q3?
  2. State Street Stock To Top The Consensus In Q2?
  3. Is State Street Stock Attractive At The Current Levels?
  4. What To Expect From State Street Stock?
  5. State Street Stock To Beat The Earnings Consensus In Q4?
  6. What To Expect From State Street Stock?

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 STT Return 4% -32% -19%
 S&P 500 Return 3% -23% 64%
 Trefis Multi-Strategy Portfolio 3% -24% 199%

[1] Month-to-date and year-to-date as of 10/4/2022
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates