Is State Street Stock Fairly Priced?

STT: State Street logo
State Street

State Street’s stock (NYSE: STT) has lost 17% YTD, as compared to the 19% decline in the S&P500 over the same period. Further, the stock is currently trading at $77 per share, which is 6% below its fair value of $83 – Trefis’ estimate for State Street’s valuationThe custody banking giant outpaced the earnings consensus in the third quarter of 2022, but revenues missed expectations. Its total revenues marginally decreased to $2.96 billion – 1% below the year-ago level, despite a 36% increase in the net interest income because of improvement in interest rates. It was due to an 8% drop in the total fee income, primarily driven by a 12% decline in investment servicing and a 10% decrease in management fees. The fee income was reduced due to lower average market levels and the negative impact of currency translation. Notably, the Assets under Custody & Administration (AuC/A) and Assets under Management (AuM) were $35.7 trillion (down 18% y-o-y) and $3.3 trillion (down 15%) respectively at quarter-end. Overall, the adjusted net income was declined by 3% y-o-y to $669 million.

The bank’s top line marginally grew to $8.99 billion in the first nine months of 2022. It was primarily due to a 23% rise in NII because of an improvement in interest rates and loan growth, almost offset by a 3% decline in total fee revenues. Altogether, the adjusted net income increased by 3% y-o-y to $1.96 billion.

Moving forward, we expect the net interest income to continue to drive growth in Q4. All in all, State Street’s revenues are estimated to remain around $12 billion in FY2022. Additionally, STT’s adjusted net income margin is likely to see a slight drop in the year, leading to an adjusted net income of $2.46 billion and an annual GAAP EPS of $6.94. This coupled with a P/E multiple of just below 12x will lead to a valuation of $83.

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 Returns Dec 2022
MTD [1]
YTD [1]
Total [2]
 STT Return -3% -17% 0%
 S&P 500 Return -6% -19% 72%
 Trefis Multi-Strategy Portfolio -6% -22% 212%
Relevant Articles
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  2. State Street Stock Increased 9% In One Week, What’s Next?
  3. State Street Stock To Edge Past The Consensus In Q3?
  4. What To Expect From State Street Stock?
  5. State Street Stock To Top The Consensus In Q2?
  6. Is State Street Stock Attractive At The Current Levels?

[1] Month-to-date and year-to-date as of 12/27/2022
[2] Cumulative total returns since the end of 2016

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