Processing Bank Reports Results

State Street (STT) has moved slightly lower since reporting results on Friday.

Earnings per share (EPS) of $1.45 vs. $1.42 in the prior year were slightly better than expected, as was the 2% gain in fee revenues to $2.3 billion. However, the stock is struggling slightly after reporting results. The 26% decline in net interest income to $478 million was worse than expected and likely represents a low baseline for future quarters.

However, I believe that the negative-with-interest income will be more than offset by fee price stabilization, the company’s ability to work more closely with its clients and new business wins. STT is forecasting a 2.5% to 3% increase in fee revenues this year, and combined with lower expenses, EPS should increase to $6.50 this year from $6.17 last year. I believe that the market does not fully appreciate State Street’s earnings power. Buy the stock under $70. My target is $80.