3 US financial stocks with earnings growth in 1Q20; STT, NTRS & BNY

Let us now discuss these three businesses:

State Street Corporation (NYSE:STT)

State Street Corporation is based in Boston, Massachusetts, USA. Its business operations are classified into two categories: Investment Management & Investment Services. Investment management provides a range of investment strategies to clients, including ETFs, multi asset, alternatives, ESG. Investment Services provides solutions to investment management businesses.

Earlier this month, State Street report added Water Island Capital’s first ETF to its ETF servicing client list. The Company will be providing a range of services to the client, including transfer agency, fund accounting, basket creation, settlement, custody.

During last two years, the Company was collaborating with the client to launch their first product and there was a dedicated team for the client. It was also noted that Water Island has been a client of the firm for over ten years. STT has been providing ETF services for more than twenty-five years now and is a leader in the US ETF servicing market.

In April, STT announced an alliance with the technology solution provider – Virtus from FIS, which seeks to provide technology solutions to US and European clients for Collateralized Loan Obligation and Collateralized Debt Obligation.

In April, the Company reported first quarter earnings for the period ended 31 March 2020. During the unprecedented period, it maintained business reliance with continuity plans and protected health and safety of employees. 1Q20 EPS was up 37% over the previous corresponding period (pcp).

Source: State Street Website

Assets under Custody/Administration were lower by 2% at $31.9 trillion – this was due to earlier announced client transitions and lower equity markets, which was offset by higher levels of fixed income markets. Investment Management AUM of the company was lower by 4% at $2.7 trillion as a result of equity market movements, which was offset by net inflows.

During the quarter, the Company onboarded assets of $171 billion in the investment servicing business with $1.1 trillion in the pipeline. Net inflows in the investment management business were $39 billion.

Fee revenues for the period were up by 6% over the pcp. Net interest income was lower by 1% against 1Q19 majorly due to lower market rates but offset by strong deposit balances, among other factors. However, net interest income was up by 4% sequentially. Further, the company incurred provisions of $36 million related to credit losses, driven by COVID-19 impacts perceived by the business.

STT last traded at $54.41, down by 0.56% from the previous close on 15 May 2020.

Northern Trust Corporation (NASDAQ:NTRS)

Northern Trust Corporation is based in Chicago, Illinois, USA. It is a provider of asset serving, wealth management and investment management services. NTRS serves to institutional as well as retail clients. The corporation has offices in Canada, Europe, Asia-Pacific and Middle-East.

Last week, NTRS committed $100 million in funding to niche financial institutions. Under the Federal Paycheck Protection Program, the low-cost funding will assist CFDIs in providing advances to non-profit organisations and small businesses. Funds are allocated to a number of organisation, including Self-Help Fund, Grow America Fund, immito, Black Business Investment Fund, People Fund etc.

Earlier this month, the Company transitioned its flagship Online Report Center as a cloud-based platform. The cloud-based version has a new interface, which allows global clients to access a range of information.

At the American Financial Technology Awards, the new design of the reporting platform was recognised with an award by Waters Technology magazine. It was said that the tool is used in over 50 countries by more than 80k investment managers and institutional clients. Some of the new features include:

• Event-based and time-based reports.
• Secure email notifications and attachments.
• Enhanced interactive reporting and scheduling.

Source: NTRS 1Q Presentation

In April, the Company reported 1Q20 results for the period ended 31 March 2020. It reported $1.55 diluted earning per share, up by 5% over 1Q19, down by 9% sequentially. Net income for the period was $360.6 million as against $347.1 million in 1Q19 and $371.1 million in previous quarter.

NTRS last traded at $71.13, down by 1.56% from the previous close on 15 May 2020.

The Bank of New York Mellon Corporation (NYSE:BK)

Headquartered in New York, USA, The Bank of New York Mellon Corporation is engaged in the business of investment management and investment services. Besides, it has other segment that deals in a range of services, including corporate and bank-owned life insurance, derivatives and other trading activity, leasing portfolio, and corporate treasury activities.

In the first quarter ended 31 March 2020, the Company recorded net income of $944 million. Its diluted earnings per share of $1.05 increased by 12% against 1Q19, but it was lower by 31% sequentially.

Source: BNY 1Q Presentation

Total revenue increased by 5% to $4.1 billion, of which fee revenues were up by 10% and net interest revenue down by 3%, all compared to the pcp. Net interest revenue was down due to lower interest rates and hedging activities. Due to deterioration in the economic environment, the company incurred a provision of $169 million related to credit losses.

Provision for credit losses amounted to $169 million majorly indicating the economic environment.

Noninterest expense for the period was $2.71 billion, increased slightly compared to the pcp mainly due to investments in technology and higher pension expenses. BNY’s assets under custody/administration increased by 2% to $35.2 trillion backed by higher client inflows, which was offset by market movements.

Its assets under management were $1.8 trillion, down by 2% due to stronger USD. During the period, the Company bought back 21.7 million common shares and paid $282 million in dividends. BNY’s Common Equity Tier 1 capital ratio was 11.3% at the end of the period. It has paid a quarterly dividend of $0.31 per share on 11 May 2020.

BK last traded at $32.06, down by 1.17% from the previous close on 15 May 2020.

(All currencies are in United States Dollar unless or otherwise stated)