State Street Corp (STT)

This 'pig' may still be able to find a few truffles. STT mints money in a downward rate environment on their securites lending business. What drives sec lending? Bearish sentiment for one: this encourages borrowers to short stocks held by long term institutional holders that have their securities custodied at STT. These borrowers get paid a reduced rebate rate in a low Fed Rate environment which means thicker gravy for STT. This is just one aspect of STT's varied business in addition to their much publicized(sp?) asset management segment. People seem to forget STT's primary business is selling picks and shovels: they hold and service or 'custody' assets held by other institutions. Sure, in a volatile market custody revenues may be hit, but as long as firms are out there trading and trying to make a buck, STT will be right there selling them picks and shovels (i.e., custody services) in pure Levi Strauss fashion. Also, Soverign Wealth Funds are awash in assets and you can bet STT has been racking up a lot of frequent flier miles.

Regarding the 7-8% pop on the announcment of major problems in STT's fixed income department: tough to read, but the market may well have been astute enough to recognize the competency of a resolute CEO who will excise any potential malignancy with extreme prejudice and put entire divisions on notice that performance is weighed on a risk-adjusted basis; not to mention earnings and revenues topped forecasts exclusive of the charge. Question: How were client investment mandates violated under a competent CEO? Answer: The CEO no doubt asked himself the same question and you can bet it won't be happening again.

The big issue is the potential for STT's SIV liabilities to make an appearance on the balance sheet. STT has huge exposure to these vehicles and if they are unable to fund themselves through short term commercial paper issuance STT is mandated to provide funding via its own balance sheet. Truly a frightening but nevertheless relatively far-fetched proposition as most financial firms will enable a line of credit to add liquidity to struggling funds. If such a line is enabled expect a knee-jerk SledgeHammer of the Gods type smack-down that has short sellers salivating but could provide a steady entry point.

If you plan on investing in STT you had better have your time-frame nailed down tight. This ship might list a bit in the near future, but expect a slow and steady ride as it rights itself from any trouble and returns to its conservative New England upbringing, leaving a steady trail of cash in its wake.

This company primarily provides index products. I particularly like their ETF business. With 401k plans allowing ETFs, there is going to be a ton of money being put into ETFs. This means a massive increase in creation and redemption fees, trading fees, as well as management fees.

ETF's is an extremely low overhead business. You essentially partner with an index provider that provides you the basket, and you determine the exact ratios to replicate the index. Split the revenues with the index provider which does most of the heavy lifting, you make money from creation/redemptions/custody fees. Awesome business.

State Street Corporation is a financial holding company headquartered in Boston, Massachusetts, and through its subsidiaries, provides a full range of products and services for institutional investors worldwide

The recent quarter has been positive with net interest margin rising by 12 basis points and also the revenue increase 10% year on year. The bank hasn’t had any charge off in the recent years or set aside loss reserves. The bank had controlled its expenses well, which were down by 6% over the previous quarter. It gets less than 1/5th of its income from the traditional banking avenues and is not affected by the credit exposure or interest rate fluctuations. However the securities lending business would profit from reduction of overnight rates. Loan’s form 8% of the assets and are towards processing customers to facilitate trade which are backed by collateral.

Geographically the bank derives 41% of its income outside US and has greatly increased the European presence with the acquisition of Deutsche Bank custody services. The management expects future growth opportunities to be in the area of operations outsourcing, alternative investment services, equity execution and quantitative active services. The fortune of the bank is highly leveraged on the capital market operations and derives 2% income growth for every 10% increase in Standard and Poor’s 500. The bank is going on the right track with increased custody flows, generating new business, appreciation of global equity markets, improved efficiency and is all set for a bull run.

Its already done well. But look for more of the same. STT has no credit issues, benefits from lower rates. It also gnerates a sizeable percentage of its business (approximately 40%) generated from international sources. It makes a lot of its money from foreign exchange as well as money manager outsourcing. Most outsourcing is occuring in interntional markets where STT has a dominant position. While BK merged with MEL, it got bigger in the US.

SIVs need to be dealt with and until they are this stock has more risk than I'd like. IF it deals with that problem, it is a buy. May be somewhat premature to mark it as a buy now.

This company knows how to make money. With 30 consecutive years of growth in operating earnings per share I'm not going to bet against them. It might take a while but this stock will be back in the 50 to 60 range where it belongs. Probably sooner than later.

Good overall company that is not a retail bank.

I work at STT!

Stt got destroyed only playing this one to gain some points hopefully, but as with most financial companies there has to be an honest bottom somewhere

unfairly being driven down by the selling of financials related to the mortgage problems.

Recently pummeled. Taking advantage of a bottom hopefully.

STT has a too high valuation compared to its assets under management [AuM]. It is also losing AuM quicker by maintaining huge unprofitable positions, such as more than one billion dollars in C/Citigroup. Losing Aum bodes wells for less earnings.

Yep, time to buy...

50% one day downer is no good for long term

Revnues are up

This stock should be between 85.00 to 95.00 per share and the possibility of split

a good diversfield bank holding bank

Excluding the 19 biggest banks that underwent the stress test, banks with nonperforming loans above 5% had combined deposits of $193 billion, according to Bloomberg data.

too big of bounce.

One of the banks that overreached for return, it would be a goner without our money.