State Street(STT) ZACKS·2025-01-14 17:40Earnings Announcement and Expectations - State Street (STT) is scheduled to announce Q4 and full-year 2024 results on Jan 17, with expected year-over-year growth in revenues and earnings [1] - The company has a strong earnings surprise history, beating the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 10.63% [3] - The Zacks Consensus Estimate for Q4 earnings is $2.42 per share, revised upward by 3% over the past seven days, implying an 18.6% rise from the year-ago quarter [3] - The consensus estimate for Q4 sales is $3.32 billion, suggesting 9.2% year-over-year growth [3] Net Interest Income (NII) and Lending Activities - The Federal Reserve reduced interest rates by 100 basis points since September 2024, positively impacting STT's NII by alleviating funding cost pressure [4] - The yield curve steepened and then normalized during Q4, aiding NII through asset repricing [4] - The Zacks Consensus Estimate for average interest-earning assets is $265.7 billion, a 1.4% fall from the previous quarter [5] - Lending activities improved in Q4, supporting NII to some extent [5] - The Zacks Consensus Estimate for NII (FTE basis) is $734.5 million, indicating a sequential rise of 1.6% [6] Fee Revenues and Market Impact - Higher volatility and volume in FX markets likely boosted STT's FX trading services income, with the dollar strengthening after the presidential election and interest rate cuts [7] - The consensus estimate for FX trading services income is $359.9 million, suggesting a 3.8% fall from the last quarter [7] - The consensus estimate for management fees is $530.9 million, implying a marginal sequential increase [8] - The Zacks Consensus Estimate for servicing fees is $1.28 billion, indicating marginal growth [8] - The consensus estimate for software and processing fees suggests a 12.8% increase to $234.6 million [8] - The Zacks Consensus Estimate for securities finance revenues is $110.1 million, suggesting a 5.1% decline [9] - The Zacks Consensus Estimate for total fee revenues is $2.6 billion, indicating a 1.5% decline from the prior quarter [9] Expenses and Operational Efficiency - Higher information systems and communication expenses, inflationary pressure, and strategic buyouts are expected to have increased operating expenses in Q4 [10] - Management's efforts to streamline the business model to enhance operating efficiency are expected to have increased expenses [11] - Total adjusted non-interest expenses are anticipated to be $2.31 billion [11] 2024 Outlook - Management expects to achieve $350-$400 million of servicing fee sales in 2024 [12] - Total fee revenues are anticipated to be at or slightly above the higher end of the 4-5% range, driven by a solid start to the year and higher average market levels [12] - Servicing fees and management fees are projected to increase due to steady business momentum and higher market levels [12] - NII is estimated to grow 4-5%, supported by management actions [13] - The average deposit balance is expected to remain at the Q2 2024 level in the second half of the year [13] - Adjusted expenses are anticipated to rise roughly 3.5% due to projected revenue-related costs [13] - Common equity tier 1 and Tier 1 leverage ratios are expected to be 10-11% and 5.25-5.75%, respectively [13] Earnings Model and Other Bank Stocks - The likelihood of State Street beating the Zacks Consensus Estimate is high due to a positive Earnings ESP of +0.67% and a Zacks Rank 3 (Hold) [14][15] - First Horizon Corporation (FHN) has an Earnings ESP of +3.18% and a Zacks Rank 2 (Buy), with Q4 and full-year 2024 results expected on Jan 16 [16] - Regions Financial Corporation (RF) has an Earnings ESP of +0.61% and a Zacks Rank 3, with Q4 and full-year 2024 earnings expected on Jan 17 [17]