state streetof (STT – Free Report) Fourth-quarter 2022 adjusted earnings of $2.07 per share beat the Sachs Consensus estimate of $2.00. The bottom line was 3.5% higher than last year’s level. Estimated adjusted earnings were $1.78 per share.
STT shares posted a better-than-expected quarterly performance, rising almost 4% in pre-market trading. The company’s new share buyback program this year also cheered up investors.
Results reflect new investment service acquisitions (totaling $3.6 trillion of future service assets introduced), higher net interest income (NIR), slightly lower expenses and higher net interest margin. I’m here. Declining fee income, lower asset balances and higher provisions have had some impact on STT’s results.
After accounting for non-recurring items, net income available to common stockholders was $696 million, or $1.91 per share, compared with $662 million, or $1.78 per share, in the year-ago quarter. We had estimated net income (GAAP basis) available to common stockholders of $648.1 million.
Adjusted earnings per share for 2022 were $7.44, above consensus expectations of $7.35, but down slightly year-over-year. Estimated adjusted earnings were $7.13 per share. Net income available to common shareholders increased 3.4% to his $2.66 billion.
Increase income and reduce expenses
Total revenue for the quarter was $3.16 billion, up 3.3% year-over-year. The top line also surpassed his $3.06 billion, the Zacks consensus estimate. The estimate for this indicator was $2.97 billion.
Total revenue for 2022 increased 1% year over year to $12.15. The top line also exceeded the Zachs consensus estimate of $12.06 billion. The estimate for this indicator was $11.97 billion.
NIR was $791 million, up 63.4% year-on-year. The increase was primarily due to higher global interest rates and higher loan balances. Net Interest Margin (NIM) increased 56 basis points year-on-year to 1.29%. The NIR and NIM estimates were $709.2 million and 1.19%, respectively.
Total fee income decreased 5.9% to $2.36 billion. This is due to a reduction in service fees and administrative expenses. Total fee income was expected to be $2.23 billion.
Noninterest expense was $2.26 billion, down 3.2%. This was largely offset by continued business investment and wage increases, but reflected savings from continued productivity and optimization and currency translation gains. The estimate for this metric was $2.15 billion. Excluding non-recurring items, expenses decreased slightly to $2.2 billion.
Reported loan loss reserves for the quarter were $10 million, compared with reserve gains of $7 million in the prior-year quarter.
The Common Equity Tier 1 ratio was 13.6% as of December 31, 2022, compared to 14.3% for the same period in 2021.
Decrease in asset balance
As of December 31, 2022, total assets under custody and administration (AUC/A) were $36.7 trillion, down 15.9% year-over-year. The decline was driven by lower equity and fixed income market levels, previously disclosed customer migration and unfavorable currency translation, partially offset by the introduction of net new business.
Assets under management (AUM) decreased 15.9% to $3.5 trillion. This reflected lower equity and bond market levels, net institutional outflows and unfavorable currency translation, partially offset by net ETF inflows.
Share Buyback Update
During the reported quarter, State Street repurchased $1.5 billion worth of stock.
The company also announced new approvals to buy back up to $4.5 billion worth of shares in 2023.
Continued cost increases from the company’s strategic acquisitions and franchise investments may hit earnings to some extent. The difficult business environment is also a major concern. That said, rising interest rates and solid business service acquisitions are expected to continue to support State Street’s financials.
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Other bank performance
Bank of New York Mellon Corporationof (BKMore – Free Report) Fourth-quarter 2022 adjusted earnings of $1.30 per share, beating Sachs consensus forecast of $1.22. Revenues reflect an increase of 25% from the prior year period. The estimated profit was $1.09.
The performance was supported by growth in net interest income. However, asset balances decreased and were negative. Higher expenses and lower fee income have hit BK’s performance to some extent.
Northern Trust Corporationof (NTRS – Free report) Adjusted earnings per share for the fourth quarter of 2022 were $1.65, below Sachs’ consensus forecast of $1.81. Also, revenue was down 14% year-over-year.
Results were adversely affected by a higher expense base, worsening credit quality, lower fee income and lower capital adequacy ratios. Still, higher net interest income (NII) due to rising interest rates has been a tailwind for the NTRS.