Why 3 State Street Analysts Believe Q1 Print Is Not As Bad As It Looks — At First Glance

Shares of State Street Corp STT crashed on Monday after the company reported lower-than-expected revenues and earnings for its first quarter. 

Keefe, Bruyette & Woods On State Street

Analyst Michael Brown maintained an Outperform rating, while reducing the price target from $84 to $90.

“The combo of negative deposit results in 1Q and disappointing deposit/NII outlook drove shares down 9.2%,” Brown said in a note.

“Deposit trends were disappointing with negative mix shift — STT saw IB inflows and larger-than-expected NIB outflows — as well as higher IB deposit costs, driving an NII miss with run-rate implications,” the analyst stated.

He added that the momentum across State Street’s core businesses remains healthy and the company has “a strong pipeline of new business yet to be installed.”

RBC Capital Markets On State Street

Analyst Gerard Cassidy reaffirmed a Sector Perform rating and a price target of $80.

State Street past new business wins and better markets “have led to a more positive outlook for fee revenue growth in 2023,” Cassidy said. “Unfortunately, today's interest rate environment drove down STT's expected net interest income levels which outweighed the benefits of stronger fee revenue growth,” the analyst wrote.

State Street’s $4.5 billion share repurchase plan “appears to be placed on temporary hold due to uncertain conditions in the financial markets,” he added.

Check out other analyst stock ratings.

Credit Suisse On State Street

Analyst Susan Roth Katzke reiterated a Neutral rating, while lowering the price target from $84 to $80.

State Street’s earnings miss was “largely NII-driven, with the headwind of deposit outflow (noninterest bearing in particular) impacting the forward look,” Roth Katzke wrote in a note.

“The company had $112 billion in gross new servicing wins in 1Q23; $3.5 trillion in gross new business yet to be installed as of the quarter end; management spoke of an accelerated pace of new business installation into 2Q23 — this would be a supporting positive,” she added.

STT Price Action: Shares of State Street had risen by 2.55% to $74.53 at the time of publishing Tuesday.

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