Key Takeaways STT is expected to benefit from modest NII growth due to high rates and portfolio repositioning. Fee income gains are driven by AUM growth, new servicing wins and innovative digital offerings. Strategic buyouts and global partnerships expand STT's reach, but rising costs remain a concern.State Street Corp (STT) remains well-positioned for growth on the back of relatively higher interest rates, efforts to improve fee income, strategic acquisitions, and a solid balance sheet. However, a rising ...

Financial Data and Key Metrics Changes - Full year fee and total revenue increased by 79% from 2023, with notable items excluded, fee revenue, net interest income, and total revenue each increased by 6% year over year in 2024 [13][14] - Earnings per share (EPS) was $8.21 compared to $5.58 in 2023, with a year-over-year EPS growth of 13% excluding notable items [14] - Pre-tax margin expanded by more than 100 basis points, and return on average tangible common equity was 19% [14] Business Line Data and Key Metrics Changes - Investment Services generated strong assets under custody and administration (AUCA) wins of over $2.3 trillion in 2024, with significant year-over-year increases in new servicing fee revenue wins [14][15] - State Street Alpha solution accounted for approximately 50% of the new AUCA wins, with seven new Alpha mandates achieved [15] - Investment Management franchise achieved record levels of management fees, generating $146 billion of net new assets in 2024 [17] Market Data and Key Metrics Changes - Despite lower average FX volatility in 2024, FX trading services generated double-digit revenue growth supported by strong client volumes [18] - The cash business generated $32 billion of inflows, while the institutional business also had positive inflows driven by U.S. defined contributions [17] Company Strategy and Development Direction - The company focused on driving revenue growth, improving sales performance, and enhancing its operating model, which led to strong financial performance and business momentum [12] - Strategic investments in capabilities and client value proposition have positioned the company to compete better and win [12][22] - The company aims to return about 80% of earnings to shareholders in 2025, subject to market conditions [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the rapidly evolving operating environment and emphasized the importance of creating better outcomes for investors [11] - The company expressed strong conviction in its strategy and ability to serve clients well, despite current operating environment challenges [22] Other Important Information - The State Street Foundation invested nearly $22 million in 2024, focusing on education and workforce readiness initiatives [20] - The company announced the appointment of John F. Woods as the new Chief Financial Officer, expected to join in late August [21] Q&A Session Summary Question: Experience in the level of trust between first line managers and their teams - The board regularly reviews employee engagement scores, which include trust metrics, and has seen year-on-year improvement in these scores [48][50] Question: Why has State Street rebranded its ESG committee instead of eliminating it? - The company clarified that it does not have an ESG committee at either the board or management level, focusing instead on attracting and retaining talent through various management committees [53]

Financial Performance - Total revenue for Q1 2025 was $3,284 million, a 5% increase compared to $3,138 million in Q1 2024[39]. - Total fee revenue increased by 6% to $2,570 million in Q1 2025, driven by higher management fees and servicing fees[49]. - Net income available to common shareholders rose 43% to $597 million in Q1 2025, compared to $418 million in Q1 2024[39]. - Earnings per share (EPS) increased by 49% to $2.04 in Q1 2025, primarily due to higher total revenue and lower total expenses[41]. - Total expenses decreased by 3% to $2,450 million in Q1 2025, reflecting the absence of a prior-year notable item[39]. - Return on average common equity improved to 10.6% in Q1 2025, up from 7.7% in Q1 2024[41]. Assets and Management - As of March 31, 2025, State Street Corporation reported total assets of $372.69 billion and total deposits of $272.06 billion[12]. - The company manages $46.73 trillion in assets under custody/administration (AUC/A) and $4.67 trillion in assets under management (AUM) as of March 31, 2025[11]. - Total assets under custody and/or administration (AUC/A) reached $46.733 trillion as of March 31, 2025, up from $46.557 trillion as of December 31, 2024[73]. - Assets under management (AUM) increased by 9% to $4.67 trillion as of March 31, 2025[49]. - Total fixed-income AUM increased to $633 billion as of March 31, 2025, from $616 billion as of December 31, 2024[82]. Revenue Sources - Servicing fee revenue increased by 4% in Q1 2025 compared to Q1 2024, driven by higher average market levels and client activity, with approximately 47% of total servicing fees generated outside the United States[55]. - Management fee revenue increased by 10% in Q1 2025 compared to Q1 2024, primarily due to higher average market levels and net inflows from prior periods[76]. - Foreign exchange trading services revenue increased by 9% in Q1 2025 compared to Q1 2024, driven by higher client volumes[89]. - Securities finance revenue rose by 19% in Q1 2025 compared to Q1 2024, mainly due to higher client lending balances[93]. - Software and processing fees revenue increased by 9% in Q1 2025 compared to Q1 2024, primarily due to higher front office software and data revenue[96]. Capital and Liquidity - The CET1 capital ratio rose to 11.0% as of March 31, 2025, from 10.9% as of December 31, 2024, while the Tier 1 leverage ratio increased to 5.5% from 5.2%[56]. - The company expects its CET1 capital ratio and Tier 1 leverage ratio to remain within target ranges of 10-11% and 5.25-5.75%, respectively[56]. - The average daily Liquidity Coverage Ratio (LCR) for the Parent Company was 106% for the quarter ended March 31, 2025, compared to 107% for the quarter ended December 31, 2024[194]. - The average High-Quality Liquid Assets (HQLA) for the Parent Company was $148.04 billion for the quarter ended March 31, 2025, up from $142.34 billion for the quarter ended December 31, 2024[195]. - The company maintained an NSFR above the 100% minimum requirement as of March 31, 2025[196]. Employee and Operational Metrics - Consolidated total shareholders' equity stood at $26.69 billion, with approximately 53,000 employees[12]. - The number of employees increased by 15% to 52,711 as of March 31, 2025, compared to 45,871 in the same period of 2024[130]. - Compensation and employee benefits increased by 1% to $1,262 million in Q1 2025, primarily due to higher performance-based incentives[129]. - Information systems and communications expenses rose by 15% to $497 million in Q1 2025, driven by higher technology investments[131]. Risk and Competition - The company faces intense competition, which could negatively impact profitability and lead to significant pricing pressure[29]. - The company is subject to various risks, including financial market risks, operational risks, and compliance and regulatory risks[30][31]. - Management's expectations regarding business growth and financial condition are influenced by geopolitical and economic factors[26]. Credit Quality and Provisions - The provision for credit losses was $12 million in Q1 2025, down from $27 million in Q1 2024, indicating improved credit quality[45]. - Provision for credit losses decreased by 56% to $12 million in Q1 2025 from $27 million in Q1 2024[141]. - The allowance for credit losses increased to $186 million as of March 31, 2025, compared to $146 million as of March 31, 2024, reflecting a year-over-year increase of 27.4%[178]. - The charge-offs for the first quarter of 2025 were $9 million, primarily related to leveraged loans[179]. Investment Portfolio - As of March 31, 2025, the total carrying value of available-for-sale securities increased to $67.444 billion from $58.895 billion as of December 31, 2024, representing a growth of approximately 14.5%[153]. - The total carrying value of held-to-maturity securities decreased to $45.505 billion as of March 31, 2025, down from $47.727 billion as of December 31, 2024, reflecting a decline of about 4.6%[153]. - Approximately 97% of the carrying value of the investment securities portfolio was rated "AA" or higher as of both March 31, 2025, and December 31, 2024[156]. - The investment portfolio's asset class composition as of March 31, 2025, included 34% U.S. Agency Mortgage-backed securities and 28% U.S. Treasuries[157].

1 NYSE: STT April 17, 2025 All comparisons are to corresponding prior year period unless otherwise noted | Investment Servicing | | | | | | --- | --- | --- | --- | --- | | and AUC/A yet to be installed of $3.1T1 | • | AUC/A of $46.7T at quarter-end; AUC/A wins of $182B | | | | primarily related to back office wins2 | • | New servicing fee revenue wins of | $55M | new State Street Alpha® mandate1 | | • | Reported 1 | Business | | | | • | Prior investments provide ability to proactively address client needs w ...

Core Viewpoint - State Street's first-quarter 2025 earnings exceeded expectations, driven by growth in fee revenues and lower provisions, despite challenges from higher adjusted expenses and lower net interest income [1][2][4]. Financial Performance - Earnings per share were $2.04, surpassing the Zacks Consensus Estimate of $1.98, and increased by 20.7% year over year [1] - Net income available to common shareholders was $644 million, up 39.1% from the previous year, exceeding projections of $569.9 million [3] - Total revenues reached $3.28 billion, a 4.7% increase year over year, but fell short of the Zacks Consensus Estimate of $3.30 billion [4] - Net interest income (NII) was $714 million, a slight decline year over year, attributed to lower average short-end rates and a shift in deposit mix [4] - The net interest margin (NIM) contracted by 13 basis points to 1%, below the expected 1.09% [5] Revenue Breakdown - Total fee revenues increased by 6.1% year over year to $2.66 billion, driven by growth in nearly all components except other fee revenue [5] - Non-interest expenses were $2.45 billion, down 2.5% from the prior year, primarily due to the absence of notable items from the previous year [6] - Provision for credit losses was $12 million, down 55.6%, significantly lower than the projected $27.1 million [6] Asset Management - As of March 31, 2025, total assets under custody and administration (AUC/A) were $46.73 trillion, up 6.4% year over year, although slightly below the projected $46.86 trillion [8] - Assets under management (AUM) reached $4.67 trillion, an 8.5% increase year over year, driven by higher market levels and net inflows, but also below the estimate of $4.82 trillion [8] Shareholder Actions - In the reported quarter, State Street repurchased shares worth $100 million [9] Strategic Outlook - The company is expected to benefit from relatively higher interest rates, strategic buyouts, and rising AUM, although concerns remain regarding rising expenses and concentrated fee-based revenues [10]

Financial Data and Key Metrics Changes - In Q1 2025, fee revenue increased by 6% year over year, while total revenue rose by 5% [11] - The pre-tax margin reached 30% excluding seasonal expenses, with EPS at $2.04 compared to $1.37 in Q1 last year, marking a 21% growth year over year [12][27] - Year over year, expenses increased by just 3%, contributing to strong fee and total operating leverage [21][42] Business Line Data and Key Metrics Changes - New asset servicing AUCA wins totaled $182 billion in Q1, with new servicing fee revenue wins of $55 million [12][31] - Management fees increased by 10% year over year, despite net outflows driven by an anticipated client transition [15][34] - FX trading revenue grew by 9% year over year, while securities finance revenues increased by 19% [37] Market Data and Key Metrics Changes - Period end AUCA and AUM increased by 6% and 9% year over year, respectively, reflecting higher market levels and positive flows [28] - Daily average global equity market levels were roughly flat, while daily average FX volatility declined slightly [29] Company Strategy and Development Direction - The company is focused on creating better outcomes for investors and enhancing its investment services, markets, software, and asset management capabilities [9][10] - Strategic progress in investment management is emphasized, particularly in low-cost ETFs, with a record AUM of $256 billion in low-cost ETFs [16][18] - The company aims for $350-400 million in new servicing fee revenue wins for the year, while being mindful of market variability [14][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledges notable uncertainty in the operating environment, including trade policy, taxes, and interest rates [8][24] - Despite challenges, the company expresses confidence in its strategy and ability to deliver solid financial returns [25] - The company is prepared for various scenarios and is focused on maintaining expense discipline while investing in client capabilities [22][45] Other Important Information - The company returned $320 million to shareholders through common share repurchases and dividends [20][46] - The search for a permanent CFO is advanced, with an announcement expected soon [23] Q&A Session Summary Question: How does the company view the current market volatility? - Management highlighted that the current environment presents both challenges and opportunities, emphasizing their strong capital position to support clients [19][20] Question: What are the expectations for new servicing fee revenue wins? - The company maintains its target of $350-400 million in new servicing fee revenue wins for the year, despite potential market variability [14][34]

Core Insights - State Street Corporation (STT) reported revenue of $3.28 billion for the quarter ended March 2025, reflecting a year-over-year increase of 4.7% [1] - Earnings per share (EPS) for the quarter was $2.04, up from $1.69 in the same quarter last year, indicating a positive trend in profitability [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $3.3 billion, resulting in a revenue surprise of -0.57%, while the EPS exceeded the consensus estimate of $1.98 by 3.03% [1] Financial Metrics - The Tier 1 Leverage Ratio under Basel III Advanced Approaches was reported at 5.5%, matching the average estimate from four analysts [4] - The Net Interest Margin (FTE) was 1%, slightly below the average estimate of 1.1% from four analysts [4] - Total interest-earning assets averaged $289.52 billion, surpassing the three-analyst average estimate of $274.35 billion [4] - The Tier 1 Capital Ratio under Basel III Standardized Approach was 13.8%, exceeding the average estimate of 13.6% from three analysts [4] - Assets under Management (AUM) totaled $4,665 billion, falling short of the average estimate of $4,713.9 billion from three analysts [4] - The Total Capital Ratio under Basel III Standardized Approach was reported at 15.3%, above the average estimate of 14.6% from two analysts [4] - Assets under Custody and/or Administration (AUC/A) reached $46,733 billion, significantly higher than the average estimate of $39,950.61 billion from two analysts [4] - Net Interest Income was $714 million, slightly below the average estimate of $730.68 million from four analysts [4] - Total fee revenue was $2.57 billion, marginally below the average estimate of $2.58 billion from four analysts [4] - Software and processing fees were reported at $225 million, slightly above the average estimate of $221.52 million from three analysts [4] - Other fee revenue was $32 million, significantly lower than the average estimate of $62.76 million from three analysts [4] Stock Performance - Over the past month, shares of State Street have returned -11.7%, compared to a -6.3% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Earnings Performance - State Street Corporation (STT) reported quarterly earnings of $2.04 per share, exceeding the Zacks Consensus Estimate of $1.98 per share, and up from $1.69 per share a year ago, representing an earnings surprise of 3.03% [1] - The company posted revenues of $3.28 billion for the quarter ended March 2025, which was below the Zacks Consensus Estimate by 0.57%, but an increase from $3.14 billion year-over-year [2] Stock Performance and Outlook - State Street shares have declined approximately 18.9% since the beginning of the year, compared to a decline of 10.3% for the S&P 500 [3] - The company's earnings outlook is mixed, with a current Zacks Rank of 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $2.39 on revenues of $3.34 billion, and for the current fiscal year, it is $9.37 on revenues of $13.34 billion [7] - The Zacks Industry Rank for Banks - Major Regional is in the top 36% of over 250 Zacks industries, suggesting a favorable outlook for the industry [8]

Revenue and Income - Total revenue for 2024 reached $13,000 million, a 8.8% increase from $11,945 million in 2023[4] - Net income available to common shareholders for 2024 was $2,483 million, compared to $1,821 million in 2023, reflecting a 36.4% increase[4] - Total revenue for Q1 2025 was $3,284 million, reflecting a 4.7% increase year-over-year, but a 3.8% decline sequentially from Q4 2024[42] - Net income available to common shareholders for Q1 2025 was $597 million, down from $728 million in Q4 2024[37] - Net income on a GAAP basis for Q1 2025 was $644 million, reflecting a 39.1% increase year-over-year but a 17.8% decline from the previous quarter[45] - The net income excluding notable items for Q1 2025 was $644 million, a 14.6% increase year-over-year, but a 21.8% decrease from Q4 2024[45] Assets and Management - Assets under custody and/or administration increased to $46.56 trillion in 2024, up from $41.81 trillion in 2023, marking a 11.7% growth[4] - Total assets increased to $337,291 million in Q1 2025, reflecting a 3.1% increase from Q4 2024 and a 13.0% increase year-over-year[8] - Total assets increased to $372.693 billion, reflecting a 10.3% year-over-year growth and a 5.5% increase from the previous quarter[11] - Total assets under custody and/or administration reached $46.733 billion in 1Q25, marking a 6.4% increase year-over-year[26] - Assets under management totaled $4,665 billion in Q1 2025, a decrease of 1.1% from Q4 2024 but an increase of 8.5% year-over-year[8] Earnings and Margins - The diluted earnings per common share for 2024 was $8.21, up from $5.58 in 2023, representing a 47.5% increase[4] - Basic earnings per share for Q1 2025 were $2.07, down 17.2% from Q4 2024 but up 50.0% from Q1 2024[8] - The pre-tax margin on a GAAP basis for Q1 2025 was 25.0%, a 5.9 percentage point increase from Q1 2024, but a 3.1 percentage point decrease from Q4 2024[47] - Return on average common equity for 2024 was 11.1%, consistent with the previous year[4] - Return on average common equity on a GAAP basis for Q1 2025 was 10.6%, an increase of 2.9 percentage points year-over-year, but a decrease of 2.1 percentage points from Q4 2024[47] Expenses - The total expenses for Q1 2025 were $2,450 million, a slight increase of 0.4% from $2,440 million in Q4 2024[6] - Total expenses for Q1 2025 amounted to $2,450 million, showing a 2.5% decrease compared to Q1 2024 and a slight increase of 0.4% from Q4 2024[42] - Compensation and employee benefits in Q1 2025 were $1,262 million, a 4.1% increase from $1,212 million in Q4 2024[51] Credit Losses and Provisions - The provision for credit losses in 1Q25 was $12 million, a significant decrease of 55.6% from $27 million in 1Q24[6] - The allowance for credit losses on loans rose to $176 million, a 30.4% increase year-over-year[11] - The total provision for credit losses in 1Q25 was $12 million, consistent with the previous quarter[24] - The total charge-offs for credit losses were $9 million in 1Q25, a decrease of 71.0% compared to the previous year[24] Deposits and Loans - Total deposits reached $243,036 million in Q1 2025, marking a 2.5% increase from Q4 2024 and an 11.0% increase from Q1 2024[8] - Total deposits reached $272.056 billion, an 8.0% increase year-over-year and a 3.9% rise from the previous quarter[11] - Loans, net increased to $44.509 billion, showing a 15.6% growth compared to Q1 2024[11] Investment and Securities - The average balance sheet for investment securities in 2024 was $104,784 million, down from $105,765 million in 2023[4] - Total investment securities amounted to $110.070 billion in Q1 2025, reflecting an average rate of 3.51%[17] - The fair value of mortgage-backed securities in the available-for-sale portfolio was $8.5 billion, with a net unrealized pre-tax MTM loss of $62 million[21] Capital and Ratios - Common equity tier 1 capital increased from $13,167 million in 1Q24 to $14,362 million in 1Q25, reflecting a growth of 9.1%[34] - The total risk-weighted assets rose from $112,161 million in 1Q24 to $130,208 million in 1Q25, an increase of 16.1%[34] - The common equity tier 1 risk-based capital ratio improved from 11.7% in 1Q24 to 12.5% in 1Q25[34] - The Tier 1 leverage ratio remained stable at 5.5% in 1Q25, consistent with the previous quarter[34] Fee Revenue - Total fee revenue for 1Q25 was $2,570 million, a 6.1% increase compared to $2,422 million in 1Q24[6] - Total fee revenue increased by 6.1% from 2,570 million in 1Q24 to 2,688 million in 1Q25, while it decreased by 3.5% compared to 4Q24[32] - Management fees for Investment Management increased by 10.2% from 510 million in 1Q24 to 562 million in 1Q25[32]

Core Insights - Analysts project State Street Corporation (STT) will report quarterly earnings of $1.98 per share, a 17.2% increase year over year, with revenues expected to reach $3.3 billion, up 5.2% from the same quarter last year [1] Earnings Estimates - The consensus EPS estimate has been revised downward by 2.8% over the past 30 days, indicating a collective reassessment by analysts [2] - Changes in earnings estimates are crucial for predicting investor reactions, with empirical studies showing a strong correlation between earnings estimate revisions and short-term stock performance [3] Key Financial Metrics - Analysts forecast the 'Basel III Advanced Approaches - Tier 1 Leverage Ratio' to be 5.5%, up from 5.4% a year ago [5] - The 'Average balance - Total interest-earning assets' is expected to reach $274.35 billion, compared to $254.33 billion in the same quarter last year [5] - The 'Basel III Standardized Approach - Tier 1 capital ratio' is estimated at 13.6%, down from 13.8% year over year [6] - 'Assets under Management (AUM)' is projected to be $4,713.90 billion, an increase from $4,336 billion a year ago [6] - The 'Assets under Custody and/or Administration (AUC/A)' is expected to reach $39,950.61 billion, down from $43,912 billion in the same quarter last year [7] Revenue Projections - 'Total fee revenue' is projected at $2.57 billion, compared to $2.42 billion in the same quarter last year [8] - 'Net Interest Income' is expected to be $729.81 million, up from $716 million year over year [7] - 'Software and processing fees' are estimated at $220.93 million, compared to $207 million a year ago [9] - 'Management fees' are projected to be $549.66 million, an increase from $510 million year over year [9] Stock Performance - State Street shares have decreased by 8.5% in the past month, while the Zacks S&P 500 composite has declined by 3.6% [11]