Shares of financial services company State Street (NYSE:STT) declined Monday after it was downgraded by three Wall Street firms, JPMorgan, UBS, and KBW. The downgrades followed disappointing second quarter results.
JPMorgan downgraded the stock from "neutral" to "underperform" with a price target of $71.
JPM analysts said, "given the lack of visibility and weak trend in revenues and high expense growth resulting in a much lower earnings run rate, we are lowering earnings estimates sharply and downgrading State Street to Underweight relative to peers."
UBS downgraded the stock from "buy" to "neutral" with a price target of $72.
UBS analysts said, "We are downgrading STT to Neutral and lowering our 2024 estimates by 15% due to incremental pressure on its servicing business, beyond the loss of the BLK mandate. This situation reminds us of the pricing pressure of 5 years ago and may be driven by the expense pressure faced by their core active traditional asset manager customer base (ie durable). During STT's previous struggle with these issues, its multiple experienced a compression of over 6 turns, resulting in underperformance compared to peers by 31% between 1Q18 and 2Q19."
KBW downgraded the stock from "outperform" to "market perform" with a price target of $73.
"STT delivered a relatively soft but overall fine second-quarter result. However, a number of negative developments from the call culminated in significant pressure on estimates and the stock fell over 12% as a result," said KBW analysts.
They added, "Estimates came down as STT faces pressure on 1) fees due to fee compression and the BLK transition — despite the equity market tailwind, and (2) NII due to the double whammy of high deposit betas and non-interest bearing deposit runoff. With less visibility and confidence in STT's fundamental outlook, and modest upside to our lowered price target, we are downgrading STT to Market Perform."
After falling 12% shortly after reporting second quarter results, shares of State Street declined another 2.25% following the downgrades.