State Street Corporation (NYSE: STT) today announced its preliminary stress capital buffer (SCB) requirement, to be maintained at 2.5%, effective October 1, 2023, and the intention to increase its per share common stock dividend by 10% to $0.69 in the third quarter, subject to consideration and approval by its Board of Directors. It remains the Company’s intention to continue common share repurchases under its existing authorization for up to a total of $4.5 billion in 2023, subject to market conditions and other factors.
State Street’s well-positioned balance sheet and strong capital position were highly resilient under the severely adverse economic conditions of the 2023 CCAR exam. State Street’s calculated SCB under this year’s supervisory stress test was well below the 2.5% minimum, preliminarily resulting in a continued SCB at that floor, which maintains our common equity tier 1 (CET1) ratio requirement at 8%1.
“The latest CCAR results reinforce our strategy and confirm the resiliency and strength of our franchise, which enable us to support our clients and deliver for our shareholders,” said Chairman and Chief Executive Officer Ron O’Hanley. “As we continue to repurchase our stock this year, we are pleased to announce another planned increase to our quarterly common dividend, in line with our goal of returning meaningful capital to our shareholders,” O’Hanley added.
State Street’s Board of Directors will consider the common stock dividend at a regularly scheduled board meeting in the third quarter of 2023. State Street’s third quarter 2023 common stock and other stock dividends, including the declaration, timing and amount, remain subject to consideration and approval by State Street’s Board of Directors at the relevant times.
Stock purchases under State Street’s common share repurchase program may be made using various types of transactions, including open-market purchases, accelerated share repurchases or other transactions off the market, and may be made under Rule 10b5-1 trading programs. The timing and amount of any stock purchases and the type of transaction may not be ratable over the duration of the program, may vary from reporting period to reporting period and will depend on several factors, including State Street’s capital position and financial performance, investment opportunities, market conditions, the nature and timing of implementation of revisions to the Basel III framework and the amount of common stock issued as part of employee compensation programs. The common share repurchase program does not have specific price targets and may be suspended at any time.
The Company also announced today the results of its 2023 annual stress test, with its disclosure available on the Investor Relations section of its website at http://investors.statestreet.com.
Consistent with section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the results of State Street’s 2023 annual stress test released today are based on the supervisory severely adverse scenario and incorporate prescribed Dodd-Frank capital actions. State Street, like other institutions covered by the provisions of section 165 of the Dodd-Frank Act, is required to conduct company-run stress tests annually under its own methodology and to disclose summary results of those company-run stress tests under the severely adverse scenario.
This release follows the earlier announcement of the Federal Reserve’s supervisory stress test results for covered institutions, including State Street, based on its own methodology. Those results can be found at https://www.federalreserve.gov.
About State Street
State Street Corporation (NYSE: STT) is one of the world's leading providers of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $37.6 trillion in assets under custody and/or administration and $3.6 trillion* in assets under management as of March 31, 2023, State Street operates globally in more than 100 geographic markets and employs approximately 43,000 worldwide. For more information, visit State Street's website at www.statestreet.com.
*Assets under management as of March 31, 2023 includes approximately $59 billion of assets with respect to SPDR® products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.
Forward Looking Statements
This News Release contains forward-looking statements within the meaning of United States securities laws, including statements about our goals and expectations regarding in particular our plans to return capital to shareholders, including intentions for common stock dividends and share repurchases, as well as regarding our business, financial and capital condition, results of operations, the financial and market outlook and the business environment. Forward-looking statements are often, but not always, identified by such forward-looking terminology as “intend,” “plan,” “goal,” “will,” "outlook," “expect,” "aim," "outcome," "future," “strategy,” “trajectory,” "target," “guidance,” “objective,” “priority,” “forecast,” “believe,” “anticipate,” “estimate,” “seek,” “may,” and “trend,” or similar statements or variations of such terms. These statements are not guarantees of future performance, are inherently uncertain, are based on current assumptions that are difficult to predict and involve a number of risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed in those statements, and those statements should not be relied upon as representing our expectations or beliefs as of any time subsequent to the time this News Release is first issued.
Important factors that may affect future results and outcomes include, but are not limited to:
- We are subject to intense competition, which could negatively affect our profitability;
- We are subject to significant pricing pressure and variability in our financial results and our AUC/A and AUM;
- Our development and completion of new products and services, including State Street Digital and State Street AlphaSM, and the enhancement of our infrastructure required to meet increased regulatory and client expectations for resiliency and the systems and process re-engineering necessary to achieve improved productivity and reduced operating risk, may take an extended period to implement, involve costs and expose us to increased risk;
- Our business may be negatively affected by our failure to update and maintain our technology infrastructure;
- The COVID-19 pandemic continues to exacerbate certain risks and uncertainties for our business;
- Acquisitions, strategic alliances, joint ventures and divestitures, and the integration, retention and development of the benefits of our acquisitions, pose risks for our business;
- Competition for qualified members of our workforce is intense, and we may not be able to attract and retain the highly skilled people we need to support our business;
- We could be adversely affected by geopolitical, economic and market conditions, including, for example, as a result of the ongoing war in Ukraine, actions taken by central banks to address inflationary pressures, challenging conditions in global equity markets, and disruptions in fixed income markets such as those impacting the UK gilts in the fourth quarter of 2022;
- We have significant International operations, and disruptions in European and Asian economies could have an adverse effect on our consolidated results of operations or financial condition;
- Our investment securities portfolio, consolidated financial condition and consolidated results of operations could be adversely affected by changes in the financial markets;
- Our business activities expose us to interest rate risk;
- We assume significant credit risk to counterparties, who may also have substantial financial dependencies with other financial institutions, and these credit exposures and concentrations could expose us to financial loss;
- Our fee revenue represents a significant portion of our consolidated revenue and is subject to decline based on, among other factors, market conditions, competition, currency valuation and investment activities of our clients and their business mix;
- If we are unable to effectively manage our capital and liquidity, our consolidated financial condition, capital ratios, results of operations and business prospects could be adversely affected;
- We may need to raise additional capital or debt in the future, which may not be available to us or may only be available on unfavorable terms;
- If we experience a downgrade in our credit ratings, or an actual or perceived reduction in our financial strength, our borrowing and capital costs, liquidity and reputation could be adversely affected;
- Our business and capital-related activities, including common share repurchases, may be adversely affected by regulatory capital, credit (counterparty and otherwise) and liquidity standards and considerations;
- We face extensive and changing government regulation in the jurisdictions in which we operate, which may increase our costs and compliance risks;
- We are subject to enhanced external oversight as a result of the resolution of prior regulatory or governmental matters;
- Our businesses may be adversely affected by government enforcement and litigation;
- Any misappropriation of the confidential information we possess could have an adverse impact on our business and could subject us to regulatory actions, litigation and other adverse effects;
- Our calculations of risk exposures, total RWA and capital ratios depend on data inputs, formulae, models, correlations and assumptions that are subject to change, which could materially impact our risk exposures, our total RWA and our capital ratios from period to period;
- Changes in accounting standards may adversely affect our consolidated financial statements;
- Changes in tax laws, rules or regulations, challenges to our tax positions and changes in the composition of our pre-tax earnings may increase our effective tax rate;
- In addition to income tax, we are subject to audit or other examination, and litigation or other dispute resolution proceedings, with U.S. and non-U.S. tax authorities regarding non-income-based tax matters. Our interpretations or application of tax laws and regulations, including with respect to withholding, transfer, wage, use, stamp, service and other non-income taxes, could differ from that of the relevant governmental taxing authority, or we may experience timing or other compliance deficiencies in connection with our efforts to comply with applicable tax laws and regulations, which could result in the requirement to pay additional taxes, penalties and/or interest, which could be material;
- The transition away from LIBOR may result in additional unanticipated costs and increased risk exposure;
- Our control environment may be inadequate, fail or be circumvented, and operational risks could adversely affect our consolidated results of operations;
- Cost shifting to non-U.S. jurisdictions and outsourcing may expose us to increased operational risk, geopolitical risk and reputational harm and may not result in expected cost savings;
- Attacks or unauthorized access to our information technology systems or facilities, or those of the third parties with which we do business, or disruptions to our or their continuous operations, could result in significant costs, reputational damage and impacts on our business activities;
- Long-term contracts expose us to pricing and performance risk;
- Our businesses may be negatively affected by adverse publicity or other reputational harm;
- We may not be able to protect our intellectual property;
- The quantitative models we use to manage our business may contain errors that could result in material harm;
- Our reputation and business prospects may be damaged if our clients incur substantial losses or are restricted in redeeming their interests in investment pools that we sponsor or manage;
- The impacts of climate change, and regulatory responses to such risks, could adversely affect us; and
- We may incur losses as a result of unforeseen events including terrorist attacks, natural disasters, the emergence of a new pandemic or acts of embezzlement.
Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in our 2022 Annual Report on Form 10-K and our subsequent SEC filings. We encourage investors to read these filings, particularly the sections on risk factors, for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this News Release should not by relied on as representing our expectations or beliefs as of any time subsequent to the time this News Release is first issued, and we do not undertake efforts to revise those forward-looking statements to reflect events after that time.
1 8.0% CET1 requirement effective as of October 1, 2023 is comprised of the 4.5% minimum regulatory requirement, 2.5% SCB, and the current 1% G-SIB surcharge.
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Ilene Fiszel Bieler
+1 617 664-3477