What Drove State Street’s Total Revenues in 4Q17?
STT’s YoY total revenue rise
State Street (STT) generated total revenues of $2.85 billion in 4Q17, compared with $2.53 billion in 4Q16, which represented a 12.5% YoY (year-over-year) rise, primarily driven by a rise in the company’s net interest income. State Street saw a rise in servicing fees, from $1.3 billion in 4Q16 to $1.4 billion in 4Q17, likely due to the weaker US dollar and favorable momentum across global equity markets.
However, new businesses also contributed to this rise, and the rise was negatively impacted by hedge fund outflows.
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State Street’s management fees rose from $361 million in 4Q16 to $418 million in 4Q17, which represented a 15.8% YoY rise. This rise was mainly helped by ETF (exchange-traded fund) inflows and positive momentum in global equity markets.
Trading services revenues
State Street’s trading services revenues consist of two components, both of which declined in 4Q17 on a YoY basis. The company generated total trading services revenues of $248 million in 4Q17, compared with $293 million in 4Q16.
This decline was primarily due to lower foreign exchange volatility. The company also exited some businesses in 2017, which negatively impacted revenues.
STT’s net interest income and market cap
State Street’s net interest income rose from $603 million in 3Q17 to $616 million in 4Q17, primarily driven by investments in higher interest-earning assets and rate increases from the Federal Reserve.
Notably, State Street’s market capitalization stood at $41.6 billion at the end of 4Q17. By comparison, peers (XLF) SEI Investments (SEIC), Invesco Limited (IVZ), and PNC Financial Services (PNC) have market caps of ~$12.1 billion, ~$15.3 billion, and ~$74.1 billion, respectively.