STATE STREET CORPORATION 
At the same time, DBRS Morningstar confirmed the ratings of its primary banking subsidiary,
KEY RATING CONSIDERATIONS
State Street's ratings and Stable trend reflect the Company's track record of stable, predictable and favorable results, as well as its low risk, strong balance sheet. State Street typically performs well in times of stress, as evidenced by its recent results, and even benefits from a deposit flight to quality, augmenting an already very liquid balance sheet.
Consistent with all trust banks, the ratings also consider the operational and reputational risks associated with the important role State Street plays in the global financial markets that are growing increasingly complex. Fee pressures within the Company's businesses, lower interest rates and State Street's planned acquisition of
RATING DRIVERS
Given State Street's very high rating level, a ratings upgrade is unlikely. Conversely, sustained negative operating leverage, missteps in managing operational and/or reputational risk that negatively impacts franchise strength, or the inability to consistently win new business would result in a ratings downgrade.
RATING RATIONALE
Franchise Combined
State Street's formidable franchise includes dominant or top-tier global positions in highly defensible businesses that generate a considerable amount of stable and recurring fee-based revenues. The Company is the second largest custodian in the world, or largest including the pending
Earnings Combined
State Street reported a 10.8% return on equity in 9M21, up modestly from 10.6% in the prior year period. Total revenue increased 2% versus 9M20, with strong growth in servicing and management fees more than offsetting lower net interest revenue on lower rates. Meanwhile, noninterest expenses were essentially flat compared to the prior year period. As a result, the Company was able to generate positive operating leverage even in a difficult interest rate environment. Meanwhile, assets under custody and/or administration (AUC/A) grew 18% from a year ago to
Risk Combined
We view State Street's risk profile as very strong, considering that its balance sheet is generally less risky than most financial institutions, but recognize the significant operational and reputational risks the Company faces given its important role in global financial markets. Credit risk remains very low, as the Company's loan portfolio represents just 10% of total assets and is still the smallest of the trust banks. While State Street does have a riskier
Funding and Liquidity Combined
We consider the Company's funding profile to be very strong, as deposits generated by the asset servicing and corporate trust operations provide a substantial and stable source of funds. Period-end deposits were up 31% from 3Q20 primarily due to high levels of liquidity in the system, but average balances declined 5% linked-quarter, as State Street continues to actively reduce excess deposits on its balance sheet. Meanwhile, the Company had
Capitalization Combined
Consistent since inception, the Company remained a top performer in the
Further details on the Scorecard Indicators and
ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Notes:
All figures are in
The principal methodology is the Global Methodology for
Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (
The primary sources of information used for this rating include Company Documents and
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com/388499
Tel. +1 212 806-3277
Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
19-Nov-21 Long-Term Issuer Rating Confirmed AA (high) Stb US
19-Nov-21 Short-Term Issuer Rating Confirmed R-1 (high) Stb US
19-Nov-21 Long-Term Deposits Confirmed AA (high) Stb US
19-Nov-21 Long-Term Senior Debt Confirmed AA (high) Stb US
19-Nov-21 Short-Term Instruments Confirmed R-1 (high) Stb US
19-Nov-21 Subordinated Debt Confirmed AA Stb US
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
19-Nov-21 Long-Term Issuer Rating Confirmed AA Stb US
19-Nov-21 Short-Term Issuer Rating Confirmed R-1 (middle) Stb US
19-Nov-21 Long-Term Senior Debt Confirmed AA Stb US
19-Nov-21 Short-Term Instruments Confirmed R-1 (middle) Stb US
19-Nov-21 Junior Subordinated Debt Confirmed AA (low) Stb US
19-Nov-21 Subordinated Debt Confirmed AA (low) Stb US
19-Nov-21 Preferred Shares Confirmed A Stb US
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