State Street Corporation Announces Issuance of Preferred Stock

Rhea-AI Summary

State Street (NYSE: STT) has successfully issued $850 million of depositary shares, each representing a 1/100th ownership interest in a share of its 6.700% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series J. The offering, which closed today, aligns with State Street's ongoing inclusion, diversity, and equity efforts, featuring veteran-owned and minority-owned investment banks as co-managers.

Key details of the Series J Preferred Stock include:

• Quarterly dividend payments starting December 15, 2024
• Fixed rate of 6.700% per annum until September 15, 2029
• Five-year reset periods thereafter based on U.S. Treasury rate plus 2.628% spread
• Redemption options available from September 15, 2029, subject to regulatory approval

Positive

• Successful issuance of $850 million in preferred stock
• Engagement with diverse investment banks aligns with inclusion efforts
• Attractive initial fixed dividend rate of 6.700% per annum
• Flexible redemption options available from September 15, 2029

Negative

• Potential dilution of existing shareholders' equity
• Increased dividend obligations may impact future cash flows
• Non-cumulative nature of dividends may pose risk for investors

Insights

Financial Analyst

State Street's issuance of $850 million in preferred stock is a significant move that warrants attention. The 6.700% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series J, offers a compelling dividend rate in the current market environment.

The structure of this offering is particularly noteworthy. The initial fixed rate of 6.700% until September 2029, followed by a floating rate tied to the five-year U.S. Treasury rate plus a 2.628% spread, provides a balance between current income and future flexibility. This approach allows State Street to manage its capital costs effectively in varying interest rate environments.

From an investor's perspective, the non-cumulative nature of the dividends is a key consideration. While this feature benefits State Street by providing flexibility in capital management, it introduces an element of risk for investors, as missed dividend payments won't accumulate.

The $100,000 liquidation preference per share, with depositary shares representing 1/100th ownership, makes this offering accessible to a broader range of institutional investors. This structure can potentially increase liquidity and demand for the securities.

State Street's inclusion of veteran-owned and minority-owned investment banks in the underwriting syndicate aligns with growing ESG considerations in the financial sector. This approach may positively impact the company's reputation and appeal to socially conscious investors.

Overall, this preferred stock issuance strengthens State Street's capital position, potentially improving its regulatory capital ratios. However, investors should weigh the attractive yield against the non-cumulative nature of dividends and the potential for redemption after September 2029.

Market Research Analyst

State Street's latest preferred stock issuance reflects broader market trends and strategic positioning within the financial sector. The 6.700% initial dividend rate is competitive in the current yield-hungry environment, potentially attracting investors seeking stable income streams.

The timing of this issuance is intriguing. With ongoing economic uncertainties and potential interest rate changes on the horizon, State Street's decision to lock in this rate now could be seen as a proactive move. The reset feature after five years provides a hedge against future interest rate fluctuations, balancing the company's long-term financing needs with market dynamics.

The inclusion of diverse underwriters - Academy Securities, Inc. and Siebert Williams Shank & Co., - alongside industry giants Goldman Sachs and UBS, signals a growing trend in the financial sector towards more inclusive business practices. This approach not only aligns with ESG principles but also potentially broadens the investor base and enhances market perception.

From a market perspective, the $850 million size of the offering is substantial, indicating strong investor appetite for high-quality financial sector securities. This successful issuance may pave the way for similar offerings from other financial institutions, potentially impacting the broader preferred stock market.

Investors should note the regulatory capital treatment aspect. The ability to redeem the stock in the event of a regulatory capital treatment event provides State Street with important flexibility in navigating evolving financial regulations, a important consideration in the ever-changing landscape of banking oversight.

BOSTON--(BUSINESS WIRE)-- State Street Corporation (“State Street”) (NYSE: STT) announced today that it has issued $850 million of depositary shares, each representing a 1/100^th ownership interest in a share of its 6.700% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series J (the “Series J Preferred Stock”), with a liquidation preference of $100,000 per share.

The offering, which closed today, was structured in keeping with State Street’s ongoing inclusion, diversity, and equity efforts, with Academy Securities, Inc., a veteran-owned and MBE-certified investment bank, and Siebert Williams Shank & Co., LLC, a minority and women owned investment bank, each acting as co-managers on the transaction, representing State Street’s thirteenth consecutive offering engagement with similarly designated firms. The underwriting syndicate also included Goldman Sachs & Co. LLC and UBS Securities LLC each acting as joint book-running managers.

Dividends on the Series J Preferred Stock will be payable on the liquidation preference amount, on a non-cumulative basis, quarterly in arrears on the 15^th day of March, June, September and December of each year, commencing on December 15, 2024. Dividends will accrue (i) from the date of issuance to, but excluding, September 15, 2029 at a fixed rate of 6.700% per annum and (ii) from and including September 15, 2029, for each five-year reset period, at a rate per annum equal to the five-year U.S. Treasury rate as of the most recent reset dividend determination date, plus a spread of 2.628%. Dividend payments on the Series J Preferred Stock will only be payable when, as and if declared by State Street’s board of directors, or any duly authorized committee of its board of directors. State Street may redeem the Series J Preferred Stock (i) in whole or in part on any dividend payment date on or after September 15, 2029, subject to regulatory approval, and (ii) in whole but not in part within 90 days following the occurrence of a regulatory capital treatment event.

About State Street Corporation

State Street Corporation (NYSE: STT) is one of the world's leading providers of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $44.3 trillion in assets under custody and/or administration and $4.4 trillion* in assets under management as of June 30, 2024, State Street operates globally in more than 100 geographic markets and employs approximately 53,000 worldwide. For more information, visit State Street's website at www.statestreet.com.

*Assets under management as of June 30, 2024 includes approximately $69 billion of assets with respect to SPDR® products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240724586025/en/

Media Contact:

Carolyn Cichon

+1 617 664 8672

Investor Contact:

Elizabeth Lynn

+1 617 664 3477

Source: State Street Corporation

FAQ

What is the size and type of State Street's (STT) recent preferred stock issuance?

State Street (NYSE: STT) issued $850 million of depositary shares, each representing a 1/100th ownership interest in a share of its 6.700% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series J.

When will dividends on State Street's (STT) Series J Preferred Stock begin and at what rate?

Dividends will begin on December 15, 2024, with an initial fixed rate of 6.700% per annum until September 15, 2029. After that, the rate will reset every five years based on the U.S. Treasury rate plus a 2.628% spread.

How does State Street's (STT) Series J Preferred Stock issuance support diversity efforts?

The offering included veteran-owned and minority-owned investment banks as co-managers, representing State Street's thirteenth consecutive offering engagement with similarly designated firms, aligning with their inclusion, diversity, and equity efforts.

When can State Street (STT) redeem the Series J Preferred Stock?

State Street can redeem the Series J Preferred Stock in whole or in part on any dividend payment date on or after September 15, 2029, subject to regulatory approval, or in whole within 90 days following a regulatory capital treatment event.