Truist Financial (NYSE:TFC) versus State Street (NYSE:STT) Critical Review

State Street (NYSE:STT) and Truist Financial (NYSE:TFC) are both large-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, profitability, valuation, institutional ownership, earnings, risk and dividends.

Risk and Volatility

State Street has a beta of 1.45, indicating that its stock price is 45% more volatile than the S&P 500. Comparatively, Truist Financial has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for State Street and Truist Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
State Street	1	4	7	0	2.50
Truist Financial	0	6	10	2	2.78

State Street presently has a consensus price target of $112.00, indicating a potential downside of 0.89%. Truist Financial has a consensus price target of $48.65, indicating a potential upside of 6.59%. Given Truist Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Truist Financial is more favorable than State Street.

Dividends

State Street pays an annual dividend of $3.04 per share and has a dividend yield of 2.7%. Truist Financial pays an annual dividend of $2.08 per share and has a dividend yield of 4.6%. State Street pays out 34.0% of its earnings in the form of a dividend. Truist Financial pays out 56.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. State Street has raised its dividend for 13 consecutive years.

Insider and Institutional Ownership

87.4% of State Street shares are held by institutional investors. Comparatively, 71.3% of Truist Financial shares are held by institutional investors. 0.3% of State Street shares are held by insiders. Comparatively, 0.1% of Truist Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares State Street and Truist Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
State Street	$22.13 billion	1.46	$2.69 billion	$8.93	12.66
Truist Financial	$24.25 billion	2.46	$4.82 billion	$3.67	12.44

Truist Financial has higher revenue and earnings than State Street. Truist Financial is trading at a lower price-to-earnings ratio than State Street, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares State Street and Truist Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
State Street	12.59%	12.96%	0.83%
Truist Financial	16.82%	8.69%	0.95%

Summary

Truist Financial beats State Street on 10 of the 18 factors compared between the two stocks.

About State Street

State Street Corporation, through its subsidiaries, provides a range of financial products and services to institutional investors worldwide. The company offers investment servicing products and services, including custody, accounting, regulatory reporting, investor, and performance and analytics; middle office products, such as IBOR, transaction management, loans, cash, derivatives and collateral, record keeping, and client reporting and investment analytics; finance leasing; foreign exchange, and brokerage and other trading services; securities finance and enhanced custody products; deposit and short-term investment facilities; investment manager and alternative investment manager operations outsourcing; performance, risk, and compliance analytics; and financial data management to support institutional investors. It also engages in the provision of portfolio management and risk analytics, as well as trading and post-trade settlement services with integrated compliance and managed data. In addition, the company offers investment management strategies and products, such as core and enhanced indexing, multi-asset strategies, active quantitative and fundamental active capabilities, and alternative investment strategies. Further, it provides services and solutions, including environmental, social, and governance investing; defined benefit and defined contribution; and global fiduciary solutions, as well as exchange-traded funds under the SPDR ETF brand. The company provides its products and services to mutual funds, collective investment funds, UCITS, hedge funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments, and investment managers. State Street Corporation was founded in 1792 and is headquartered in Boston, Massachusetts.

About Truist Financial

Truist Financial Corporation, a financial services company, provides banking and trust services in the Southeastern and Mid-Atlantic United States. The company operates through three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings.Its deposit products include noninterest-bearing checking, interest-bearing checking, savings, and money market deposit accounts, as well as certificates of deposit and individual retirement accounts. The company also provides funding; asset management; automobile lending; credit card lending; consumer finance; home equity and mortgage lending; other direct retail lending; insurance; investment brokerage; mobile/online banking; payment solutions; point-of-sale lending; retail and small business deposit products; small business lending; and wealth management/private banking services. In addition, it offers asset based lending, investment banking and capital market, institutional trust, insurance premium finance, derivatives, commercial lending, international banking, leasing, merchant, commercial deposit and treasury, floor plan, mortgage warehouse lending, real estate lending, and supply chain financing services. Further, the company provides insurance brokerage, retail and wholesale brokerage, securities underwriting and market making, loan syndication, and investment management and advisory services. The company was formerly known as BB&T Corporation and changed its name to Truist Financial Corporation in December 2019. Truist Financial Corporation was founded in 1872 and is headquartered in Charlotte, North Carolina.