State Street Corporation is a financial holding company. State Street provides a range of products and services for institutional investors worldwide. They operate in two lines of business: Investment Management and Investment Servicing. Services include: custody, daily pricing, record keeping and administration, shareholder services, foreign exchange, brokerage, securities finance, deposit and short-term investment facilities, loan and lease financing, investment manager and hedge fund manager operations outsourcing, performance, risk and compliance analytics, investment research and investment management, including passive and active United States and non-United States equity and fixed-income strategies. As of year-end 2009 they held $18.79 trillion in assets under custody and administration and $1.91 trillion in assets under management. STT has operations in 25 nations around the world.

After posting all-time record earnings of $4.30 /share in 2008 State Street saw EPS drop to $3.46 (excluding non-recurring items) in 2009. They have fully repaid the TARP funding through share issuance and internally generated funds. After all was said and done, book value finished 2009 at its highest level ever and earnings per share (ex. non-recurring items) were the second best on record.

Here are the per share numbers from continuing operations (ex one-time charges) as reported by Value Line:

The dividend cut from $0.24 to $0.01 (quarterly) came as a result of the fiscal crisis of 2008- 2009. I would expect that this rate will be rapidly increased in the reasonable future.

At today’s quote of $44.60 /share State Street is now offered at < 12.9x last year’s somewhat depressed earnings and < 10.4x the consensus view of $4.30 for 2010. Value Line rates STT’s financial strength as ‘B++’ and puts them in the 85^th percentile for ‘earnings predictability’ (with 100^th being best). Standard and Poors assigns STT an ‘ A-‘ quality ranking while maintaining their highest, five-star rating on State Street.

 STT’s normalized price to book value ratio had run from 2.27x to > 4x in the nine years from 2000 through 2008. Today’s 1.52x book value level is substantially lower than typical for this high-quality stock.  Year-end 2010 book value is expected to exceed $33/share and a rebound to even 2x that figure would lead to a share price of $66.

Similarly, a reversion to a more normal P/E of even 15x would bring me to a 12-month target price of $64.50 based on the $4.30 /share expected EPS for 2010. Standard and Poors now carries a (slightly more conservative) 1-year target price of $62. Even that would bring a 39% gain from this morning’s price.

Read more…

State Street is one of the largest trust banks worldwide, combining banking, asset servicing, and asset-management operations. They also offer foreign exchange, cash management, credit, and electronic trading, helping customers negotiate complex global financial markets. State Street Global Advisors, its asset management arm, is the world’s largest institutional money manager and a leading provider of ETFs.

State Street [NYSE:STT - $43.75] is down today due to President Obama’s decision to tax large (successful) banks even further in an effort to recoup TARP funds wasted on failed institutions. While this is a negative factor the drop in STT’s share price seems to more than reflect the recent news.

STT is the largest institutional money manager with around $18 trillion in assets under custody and administration plus close to $2 billion in assets under management. They operate in 26 countries around the globe. About 70% of all revenues come from fees rather than typical banking activities.

Here are State Street’s per share numbers from continuing operations (excluding non-recurring items) as reported by Value Line:

* 2009 figures includes Zacks estimates for Q4

In order to repay TARP funds State Street issued new shares and cut the dividend rate to one cent/share quarterly. Despite the dilutive effect of the newly issued shares Zacks sees 2009 – 2010 EPS as $4.09 and $4.36 respectively.

Even after a major write-off on their portfolio holdings last year SST’s book value is near all-time record levels. If earnings estimates are on the mark 2010 could show the highest EPS ever. Custodial fees are based on the value of assets under management and the recovering market values around the world bode well for higher fee –based income going forward.

State Street announced their $2.5 billion (cash) purchase of Italy’s Intesa Sanpaolo Security Services business which will add about $501 billion in AUM to State Street’s European operations.

Read more…

Read more…