State Street Corp.’s stock fell 6% in premarket trades after the Boston-based financial giant missed consensus estimates for first-quarter profit and revenue on lower fee revenue, amid turmoil in the banking sector.
State Street
STT,
also booked a $29 million provision for credit losses for its $1 billion backstop contribution for First Republic Bank
FRC,
as part of a $30 billion deposit by the U.S.’s largest banks during the quarter. The move impacted its first-quarter earnings by 6 cents a share.
State Street said its first-quarter net income fell to $549 million, or $1.52 a share, from $604 million, or $1.57 a share, in the year-ago quarter.
First-quarter revenue rose slightly to $3.101 billion from $3.081 billion in the year-ago quarter.
State Street missed the Wall Street analyst forecasts for $1.64 a share for earnings and $3.126 billion in revenue, according to estimates compiled by FactSet.
State Street said it faced fee-revenue headwinds from “significantly lower average market levels.”
State Street’s servicing fees fell 11%, management fees dropped 12% and foreign-exchange trading services revenue dipped 5%, while securities finance revenue increased by 14%.
Looking ahead, State Street expects revenue growth in its second quarter.
State Street CEO Ron O’Hanley said the company’s first-quarter results “reflect the resiliency of our business model, notwithstanding continued interest rate increases and subsequent significant market movements, volatility and disruption within other parts of the banking industry.”
State Street provided $1 billion of liquidity to First Republic Bank which resulted in a $29 million provision, or 6 cents a share.
Consistent with the treatment of other cash placements under current expected credit losses, the effort a provision impact of $29 million provision, or6 cents per share impact, for the first quarter.
The company also booked an additional provision for credit losses of $15 million driven by credit portfolio rating changes.
A provision for credit losses, by its Investopedia definition, represents an estimate of potential losses that a bank faces in its portfolio. In the case of State Street, it’s already allowing for a loss of $29 million for its liquidity move with First Republic.
Prior to Monday’s move, State Street’s stock was up 3.2% in 2023, compared with a loss of 3.9% by the Financial Select Sector SPDR ETF
XLF,
and a 7.77% rise by the S&P 500
SPX,
Also read: JPMorgan Chase stock moves positive for the year after it blasts past earnings and revenue estimates
