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State Street Corporation SWOT & PESTLE Analysis

ID : 52487153| Nov 2018| 15 pages

COMPANY PROFILE -State Street Corporation

Business Sector :Financial Services

Operating Geography :United States, North America

About State Street Corporation :

State Street Corporation is a financial services and bank holding company. It is headquartered at One Lincoln Street in Boston and operating in 17 countries and more than 100 geographic markets. This financial holding organization’s Investment Servicing business line offers a wide spectrum of products and services, which include custody, product- and participant-level accounting; daily pricing and administration; master trust and master custody; record-keeping; foreign exchange, brokerage, and other trading services; securities finance; deposit and short-term investment facilities; loan and lease financing; investment manager and alternative investment manager operations outsourcing; and performance, risk, and compliance analytics. With 225 years of operation, State Street Corp is the 2nd oldest bank in continuous operations in United States and it is operating from year 1792. This company is one of the largest asset management companies in the world, with a value worth of $33.12 trillion under custody and administration and $2.78 trillion under management. It is ranked 271st on the Fortune 500 list. The company is also on the list of the banks that are too big to fail published by the Financial Stability Board.
State Street Corporation’s USP or unique selling point lies in being the world's leading providers of financial services to institutional investors including investment servicing, investment management and investment research and trading. The mission statement of State Street Global Advisors reads “we believe investing responsibly enables economic prosperity and social progress. We are driven by a desire to help our clients, and those who rely on them, achieve a better future.”

State Street Corporation Revenue :


$11.2 billion – FY ending 31st Dec 2017 (y-o-y growth 9%)
$10.2 billion – FY ending 31st Dec 2016

Competitive Analysis of State Street Corporation

SWOT
PESTLE
The SWOT analysis of State Street Corporation is presented below:
Strengths
Weaknesses
1. Strong market position with very good brand image
2. Very strong capital position
3. Superb Performance in New Markets
4. Unique and innovative products
1. Global presence is very limited
2. Limited market share growth
3. Lack of R&D
Opportunities
Threats
1. Exploring emerging markets
2. Opportunities for online business development
3. Acquisition of other firms to increase global presence
1. Tough competition
2. Dependent upon the regulatory changes
3. Cyber Security
SWOT & PESTLE (combined)
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Detailed SWOT Analysis of State Street Corporation

 

Strength

1. Strong market position with very good brand image: State Street Corp operates in over 100 geographic markets globally, including the U.S., Canada, Europe, the Middle East and Asia. It has been operating for 225 years in the United States and has, thus, portrayed a strong leadership in the market through its shares and financial position. Founded in the late 18th century, as the Union Bank and located on State Street in Boston, the company began to carve out a niche for itself, as a key cog in the rapidly expanding shipping and maritime industries, justifying its clipper ship logo. Two and a quarter centuries down the line, State Street (STT) is the largest custodian banks in the U.S., with over $32 trillion in assets under custody. Additionally, STT holds over $2.7 trillion in assets under management, including the highly popular SPDRs platform of exchange traded funds (ETFs).
This financial holding company is responsible for managing over 10% of the globe’s assets. The company is growing effectively through the services at a rate of 11.48%. Moreover, that total revenue increased 9% to $11.2 billion for the year. The company is holding such a strong position due to consumer recognition of the brand and the development of its brand image.

2. Very strong capital position and steady growth: State Street has maintained a strong capital position and a high-quality balance sheet, which allowed them to deliver strong capital returns to shareholders in 2017. This supported the performance of their common stock, which generated a total shareholder return of 28% for the year. The Cash Flows increased from $1314 in 2016 to $2107 in 2017. On a GAAP basis, their 2017 diluted earnings per common share were $5.24, up 5% compared with $4.97 in 2016. Total revenue increased 9% to $11.2 billion for the year, while fee revenue rose 10% to $8.9 billion, while net interest income rose 11% to $2.3 billion. Their 2017 GAAP-basis return on average common shareholders’ equity was 10.6%, compared with 10.5% in 2016. State Street’s investment securities portfolio represented approximately 41% of their total assets as of December 31, 2017. The gross interest income linked to the investment portfolio comprised 15% of their total gross revenue for FY 17 and has mapped to 30% of their total gross revenue in the fiscal years since 2007.
The company continues to generate solid gains in custody and management revenues, driven by the boom in the financial markets. Across the past ten years and five year periods, State Street has generated annual net revenue growth of 4.9% and 1.2%, respectively. Although revenues did slide in 2016 by 1.5%, by the end of the fiscal, revenues were $10.2 billion, with 80% derived from servicing, management and other fees. A large chunk of fee revenue comes from servicing fees, earned from the custody business. Servicing fees, which are produced from the custody business, have seen steady growth of 3% over the past five years. Assets under custody increased at a 6% CAGR over the past five years, and are up another 12% in 2017.

3. Prowess for acquisitions and entry into new markets: State Street Corp. has built expertise at entering new markets and creating success stories out of them. The expansion has helped the organization to build new revenue streams and diversify the economic cycle risk in the markets it operates in. Past acquisitions have earned State Street goodwill and other significant intangible assets in their consolidated statement of condition. For instance, this American custodian bank recorded goodwill and intangible assets of $453 million associated with their acquisition of GE Asset Management in 2016. Post the acquisition of CRD (Charles River Development) State Street positioned itself as the leading provider of investment software and launched the industry’s first-of-it-kind front-to-back office servicing solution

4. Unique and innovative products: The Company created the first exchange-traded fund (ETF), the SPDR S&P 500 Trust ETF, in 1993 and is now one of the largest ETF providers worldwide. State Street Global Services handles assets from many classes, including exchange-traded funds, equities, fixed income assets, derivatives, real estate, and private equity. State Street has two lines of business: Investment Servicing and Investment Management. The company provides outsourcing operations activities which are worth US$10.2 trillion of middle-office assets and it administers 40% of the assets in the US mutual fund market.
In order to help clients gain deeper cognizance of non-financial risks in their portfolio, Global Exchange launched ESGXSM, an analytics tool designed to identify and highlight probable sources of environmental, social and governance (ESG) risk that may be missed by conventional financial analysis. State Street has aggressively positioned itself as the digital leader in financial services to help clients successfully sail through challenges in this rapidly transforming industry. Other initiatives taken up by the company are Beacon Project, collaboration of Data Analytics and Digital Innovation, etc.

Weakness

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Opportunity

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Threat

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TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
References used in State Street Corporation Analysis Report

1. Annual report: https://www.ssga.com/content/ssga/pages/en/articles/market-commentary/2017/has-european-political-risk-been-priced-in/_jcr_content/topicDetail_par/download/file.res/Has-European-Political-Risk-Been-Priced-In.pdf

2. Environmental sustainability- http://www.statestreet.com/values/environmental-sustainability.html

3. Brexit impact on US multinationals-https://mazarsledger.com/brexit-and-its-potential-impact-on-u-s-multinationals/

4. Blockchain in financial serviceshttps://www.pwc.com/us/en/industries/financial-services/research-institute/top-issues/blockchain.html

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State Street Corporation SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

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State Street Corporation SWOT & PESTLE Analysis
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