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Fee Income to Aid State Street (STT) Q2 Earnings, NIR to Hurt
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State Street (STT - Free Report) is slated to announce second-quarter 2024 results on Jul 16 before the opening bell. The company’s revenues are expected to have increased year over year, while earnings are likely to have declined.
In the last reported quarter, STT’s earnings beat the Zacks Consensus Estimate. Results largely benefited from growth in fee revenues and lower provisions. However, higher expenses and lower net interest revenues (NIR) acted as headwinds.
State Street has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a surprise of 10.07%, on average.
The Zacks Consensus Estimate for State Street’s second-quarter earnings is pegged at $2.01 per share, which has been revised marginally lower over the past seven days. The figure implies a 7.4% decline from the year-ago quarter.
The consensus estimate of $3.15 billion for sales suggests 1.2% year-over-year growth.
Key Factors & Estimates for Q2
Net Interest Revenues: The Zacks Consensus Estimate for average interest-earning assets for the to-be-reported quarter is pegged at $250.5 billion, which implies a 1.5% fall from the previous quarter. Our estimate for the metric is pegged at $237.2 billion.
Lending activities continued at a decent pace in the second quarter, and the Federal Reserve kept the rates unchanged at a 23-year high of 5.25-5.5%. These factors are expected to have supported State Street’s NIR to some extent. However, higher funding costs weighed on NIR as interest rates remained high. Thus, NIR is likely to have been adversely impacted.
The Zacks Consensus Estimate for NIR (on a fully taxable-equivalent or FTE basis) of $695 million indicates a sequential fall of 3.1%. We project NIR on FTE basis of $683 million.
Management expects NIR to decline 2-5% sequentially, given the current deposit mix expectations.
Fee Revenues: Higher volatility and volume in foreign exchange (FX) markets are likely to have hurt State Street’s FX trading services income. The consensus estimate is pegged at $321.6 million, which indicates a 2.9% fall from the last quarter. Our estimate for the metric is pegged at $310.9 million.
The consensus estimate for management fees of $506.1 million implies an almost 1% decrease on a sequential basis. The Zacks Consensus Estimate for servicing fees of $1.26 billion indicates 2.8% growth. Our estimates for management fees and servicing fees are pegged at $478.7 billion and $1.29 billion, respectively.
The consensus estimate for securities finance revenues of $110.5 million suggests a 15.1% jump from the last quarter. Our estimates for the same is pegged at $118.8 million.
Also, the Zacks Consensus Estimate for software and processing fees suggests a 4.4% rise to $216.2 million. Our estimates for the same is pegged at $219.9 billion.
Overall, the Zacks Consensus Estimate for total fee revenues of $2.46 billion indicates 1.5% growth from the prior quarter. We project the metric to be $2.47 billion.
Management expects fee revenues to be up 1.5-2% from the prior quarter.
Expenses: Higher information systems and communication expenses, inflationary pressure and the company’s strategic buyouts and investments in franchises are expected to have led to a rise in operating expenses in the second quarter.
Management expects adjusted expenses to rise 2-2.5% sequentially. This excludes seasonal compensation expense of $162 million incurred in the first quarter and the FDIC special assessment charge of $130 million.
We anticipate total adjusted non-interest expenses to be $2.27 billion.
What the Zacks Model Reveals
Our model predicts an earnings beat for State Street this time around. This is because the company has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for State Street is +0.47%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Major Banks Worth a Look
Here are a couple of other major bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time:
The Earnings ESP for JPMorgan (JPM - Free Report) is +0.57% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2024 results on Jul 12.
Over the past seven days, the Zacks Consensus Estimate for JPM’s quarterly earnings has moved marginally north to $4.19.
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Fee Income to Aid State Street (STT) Q2 Earnings, NIR to Hurt
State Street (STT - Free Report) is slated to announce second-quarter 2024 results on Jul 16 before the opening bell. The company’s revenues are expected to have increased year over year, while earnings are likely to have declined.
In the last reported quarter, STT’s earnings beat the Zacks Consensus Estimate. Results largely benefited from growth in fee revenues and lower provisions. However, higher expenses and lower net interest revenues (NIR) acted as headwinds.
State Street has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a surprise of 10.07%, on average.
State Street Corporation Price and EPS Surprise
State Street Corporation price-eps-surprise | State Street Corporation Quote
The Zacks Consensus Estimate for State Street’s second-quarter earnings is pegged at $2.01 per share, which has been revised marginally lower over the past seven days. The figure implies a 7.4% decline from the year-ago quarter.
The consensus estimate of $3.15 billion for sales suggests 1.2% year-over-year growth.
Key Factors & Estimates for Q2
Net Interest Revenues: The Zacks Consensus Estimate for average interest-earning assets for the to-be-reported quarter is pegged at $250.5 billion, which implies a 1.5% fall from the previous quarter. Our estimate for the metric is pegged at $237.2 billion.
Lending activities continued at a decent pace in the second quarter, and the Federal Reserve kept the rates unchanged at a 23-year high of 5.25-5.5%. These factors are expected to have supported State Street’s NIR to some extent. However, higher funding costs weighed on NIR as interest rates remained high. Thus, NIR is likely to have been adversely impacted.
The Zacks Consensus Estimate for NIR (on a fully taxable-equivalent or FTE basis) of $695 million indicates a sequential fall of 3.1%. We project NIR on FTE basis of $683 million.
Management expects NIR to decline 2-5% sequentially, given the current deposit mix expectations.
Fee Revenues: Higher volatility and volume in foreign exchange (FX) markets are likely to have hurt State Street’s FX trading services income. The consensus estimate is pegged at $321.6 million, which indicates a 2.9% fall from the last quarter. Our estimate for the metric is pegged at $310.9 million.
The consensus estimate for management fees of $506.1 million implies an almost 1% decrease on a sequential basis. The Zacks Consensus Estimate for servicing fees of $1.26 billion indicates 2.8% growth. Our estimates for management fees and servicing fees are pegged at $478.7 billion and $1.29 billion, respectively.
The consensus estimate for securities finance revenues of $110.5 million suggests a 15.1% jump from the last quarter. Our estimates for the same is pegged at $118.8 million.
Also, the Zacks Consensus Estimate for software and processing fees suggests a 4.4% rise to $216.2 million. Our estimates for the same is pegged at $219.9 billion.
Overall, the Zacks Consensus Estimate for total fee revenues of $2.46 billion indicates 1.5% growth from the prior quarter. We project the metric to be $2.47 billion.
Management expects fee revenues to be up 1.5-2% from the prior quarter.
Expenses: Higher information systems and communication expenses, inflationary pressure and the company’s strategic buyouts and investments in franchises are expected to have led to a rise in operating expenses in the second quarter.
Management expects adjusted expenses to rise 2-2.5% sequentially. This excludes seasonal compensation expense of $162 million incurred in the first quarter and the FDIC special assessment charge of $130 million.
We anticipate total adjusted non-interest expenses to be $2.27 billion.
What the Zacks Model Reveals
Our model predicts an earnings beat for State Street this time around. This is because the company has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for State Street is +0.47%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Major Banks Worth a Look
Here are a couple of other major bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time:
The Earnings ESP for JPMorgan (JPM - Free Report) is +0.57% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2024 results on Jul 12.
Over the past seven days, the Zacks Consensus Estimate for JPM’s quarterly earnings has moved marginally north to $4.19.
M&T Bank (MTB - Free Report) is scheduled to release second-quarter 2024 earnings on Jul 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.31%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MTB’s quarterly earnings estimates have been revised marginally lower to $3.53 over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.