Earnings Announcement and Expectations - State Street (STT) is scheduled to announce Q4 and full-year 2024 results on Jan 17, with expected year-over-year growth in revenues and earnings [1] - The company has a strong earnings surprise history, beating the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 10.63% [3] - The Zacks Consensus Estimate for Q4 earnings is $2.42 per share, revised upward by 3% over the past seven days, implying an 18.6% rise from the year-ago quarter [3] - The consensus estimate for Q4 sales is $3.32 billion, suggesting 9.2% year-over-year growth [3] Net Interest Income (NII) and Lending Activities - The Federal Reserve reduced interest rates by 100 basis points since September 2024, positively impacting STT's NII by alleviating funding cost pressure [4] - The yield curve steepened and then normalized during Q4, aiding NII through asset repricing [4] - The Zacks Consensus Estimate for average interest-earning assets is $265.7 billion, a 1.4% fall from the previous quarter [5] - Lending activities improved in Q4, supporting NII to some extent [5] - The Zacks Consensus Estimate for NII (FTE basis) is $734.5 million, indicating a sequential rise of 1.6% [6] Fee Revenues and Market Impact - Higher volatility and volume in FX markets likely boosted STT's FX trading services income, with the dollar strengthening after the presidential election and interest rate cuts [7] - The consensus estimate for FX trading services income is $359.9 million, suggesting a 3.8% fall from the last quarter [7] - The consensus estimate for management fees is $530.9 million, implying a marginal sequential increase [8] - The Zacks Consensus Estimate for servicing fees is $1.28 billion, indicating marginal growth [8] - The consensus estimate for software and processing fees suggests a 12.8% increase to $234.6 million [8] - The Zacks Consensus Estimate for securities finance revenues is $110.1 million, suggesting a 5.1% decline [9] - The Zacks Consensus Estimate for total fee revenues is $2.6 billion, indicating a 1.5% decline from the prior quarter [9] Expenses and Operational Efficiency - Higher information systems and communication expenses, inflationary pressure, and strategic buyouts are expected to have increased operating expenses in Q4 [10] - Management's efforts to streamline the business model to enhance operating efficiency are expected to have increased expenses [11] - Total adjusted non-interest expenses are anticipated to be $2.31 billion [11] 2024 Outlook - Management expects to achieve $350-$400 million of servicing fee sales in 2024 [12] - Total fee revenues are anticipated to be at or slightly above the higher end of the 4-5% range, driven by a solid start to the year and higher average market levels [12] - Servicing fees and management fees are projected to increase due to steady business momentum and higher market levels [12] - NII is estimated to grow 4-5%, supported by management actions [13] - The average deposit balance is expected to remain at the Q2 2024 level in the second half of the year [13] - Adjusted expenses are anticipated to rise roughly 3.5% due to projected revenue-related costs [13] - Common equity tier 1 and Tier 1 leverage ratios are expected to be 10-11% and 5.25-5.75%, respectively [13] Earnings Model and Other Bank Stocks - The likelihood of State Street beating the Zacks Consensus Estimate is high due to a positive Earnings ESP of +0.67% and a Zacks Rank 3 (Hold) [14][15] - First Horizon Corporation (FHN) has an Earnings ESP of +3.18% and a Zacks Rank 2 (Buy), with Q4 and full-year 2024 results expected on Jan 16 [16] - Regions Financial Corporation (RF) has an Earnings ESP of +0.61% and a Zacks Rank 3, with Q4 and full-year 2024 earnings expected on Jan 17 [17]

Core Viewpoint - Analysts project that State Street Corporation (STT) will report quarterly earnings of $2.42 per share, an 18.6% increase year over year, with revenues expected to reach $3.31 billion, an 8.7% increase from the same quarter last year [1]. Earnings Projections - The consensus EPS estimate for the quarter has been adjusted upward by 2.4% over the past 30 days, indicating a reassessment by covering analysts [2]. - Revisions to earnings projections are critical for predicting investor behavior and are strongly linked to short-term stock price performance [3]. Key Financial Metrics - Analysts expect the 'Basel III Advanced Approaches - Tier 1 Leverage Ratio' to be 5.3%, down from 5.5% in the same quarter last year [5]. - The 'Average balance - Total interest-earning assets' is projected to be $265.70 billion, up from $232.23 billion year over year [5]. - The 'Basel III Standardized Approach - Tier 1 capital ratio' is estimated at 13.4%, unchanged from the previous year [6]. - 'Assets under Management (AUM)' are expected to reach $4,785.94 billion, compared to $4,128 billion a year ago [6]. - The 'Basel III Standardized Approach - Total capital ratio' is forecasted at 14.4%, down from 15.2% in the same quarter last year [7]. - 'Assets under Custody and/or Administration (AUC/A)' are projected to be $40,312.27 billion, compared to $41,810 billion last year [7]. Revenue Estimates - 'Net Interest Income' is expected to be $734.49 million, up from $678 million year over year [8]. - 'Total fee revenue' is projected at $2.58 billion, compared to $2.37 billion in the same quarter last year [8]. - 'Net Interest Income - fully taxable-equivalent basis' is estimated at $735.50 million, compared to $679 million last year [9]. - 'Software and processing fees' are expected to reach $234.64 million, slightly down from $237 million year over year [9]. - 'Other fee revenue' is projected at $50.98 million, up from $33 million last year [10]. - 'Management fees' are expected to be $530.90 million, compared to $479 million in the same quarter last year [10]. Market Performance - Shares of State Street have decreased by 6.3% over the past month, compared to a 3.5% decline in the Zacks S&P 500 composite [11].

Earnings Performance - State Street Corporation (STT) has consistently beaten earnings estimates, with an average surprise of 7.81% over the past two quarters [1] - For the last reported quarter, the company posted earnings of $2.26 per share, surpassing the Zacks Consensus Estimate of $2.08 per share by 8.65% [2] - In the previous quarter, State Street reported earnings of $2.15 per share, exceeding the estimate of $2.01 per share by 6.97% [2] Earnings ESP and Zacks Rank - State Street currently has a positive Earnings ESP of +1.14%, indicating analysts' bullish outlook on the company's earnings prospects [6] - The combination of a positive Earnings ESP and a Zacks Rank 3 (Hold) suggests a high likelihood of another earnings beat in the upcoming report [6] - Stocks with a positive Earnings ESP and a Zacks Rank 3 or better have a nearly 70% chance of producing a positive earnings surprise [4] Earnings Estimate Trends - State Street's earnings estimates have been trending higher, partly due to its history of earnings surprises [3] - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the former reflecting the latest analyst revisions before an earnings release [5] Upcoming Earnings Report - State Street's next earnings report is expected to be released on January 17, 2025 [6]

Performance Overview - State Street's stock (STT) has risen by about 29% year-to-date, outperforming peers like BNY which is up 57% [1] - The company surpassed street estimates in Q3 2024 with earnings of $2 26 per share and revenue growth of 22% YoY to $3 26 billion [1] - Fee revenues increased by 16% YoY to $2 62 billion, while average assets under management grew by 29% YoY to $4 73 trillion [1] - Assets under custody surged by 17% to $46 7 trillion, and net interest income rose by 16% driven by higher investment securities yields and loan growth [1] Margins and Cost Efficiency - Pre-tax margins improved to 28 4%, up almost 940 basis points compared to last year [2] - The company benefits from operating leverage due to its high fixed-cost structure, with revenues growing faster than total costs [2] - State Street has been streamlining operations to cut costs while focusing on higher-margin businesses [2] Historical Stock Performance - STT stock returns were 31% in 2021, 14% in 2022, and 4% in 2023, showing volatility similar to the S&P 500 [3] Market and Macroeconomic Factors - The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 with less volatility [4] - Post-U S election, markets have been bullish with expectations of deregulation under the Trump administration, potentially lowering compliance costs for banks like STT [4] - Higher potential economic growth and tax cuts under Trump could benefit asset prices and custody banks [4] - The end of quantitative tightening by the U S Fed may improve liquidity, benefiting institutions and custody banks like State Street [4] Valuation - STT stock is valued at about $90 per share, slightly below the current market price [4]

Core Viewpoint - State Street Corporation reported strong Q3 2024 earnings, surpassing estimates and showing significant year-over-year growth in both earnings and revenues, driven by increased fee revenues and net interest income (NII) [2][4][10]. Financial Performance - Adjusted earnings per share for Q3 2024 were $2.26, exceeding the Zacks Consensus Estimate of $2.08, and reflecting a 17.1% increase from the prior year [2]. - Net income available to common shareholders reached $682 million, a 71.4% increase from the previous year, surpassing projections [3]. - Total revenues amounted to $3.34 billion, an 11.9% year-over-year increase, and exceeded the Zacks Consensus Estimate of $3.18 billion [4]. - NII was reported at $723 million, up 15.9% year over year, driven by higher investment securities yields and loan growth [4]. - Total fee revenues increased by 10.8% to $2.62 billion, also beating estimates [5]. Expense Management - Non-interest expenses rose to $2.31 billion, a 5.9% increase, attributed to higher costs across nearly all components [5]. - The provision for credit losses was $26 million, compared to no provision in the prior year [5]. - The company is implementing measures to improve operating efficiency, targeting additional productivity savings of nearly $500 million [12]. Asset Management - As of September 30, 2024, total assets under custody/administration (AUC/A) reached $46.76 trillion, a 16.8% increase year over year [7]. - Assets under management (AUM) were $4.73 trillion, up 28.9%, primarily due to higher market levels and net inflows [7]. Shareholder Returns - In the reported quarter, State Street repurchased shares worth $450 million [8]. Future Outlook - The company anticipates servicing fee sales of $350-$400 million in 2024, with total fee revenues expected to be at or slightly above the higher end of the 4-5% growth range [10]. - The average deposit balance is projected to remain stable in the second half of 2024 [11]. - CET1 and Tier 1 leverage ratios are expected to be between 10-11% and 5.25-5.75%, respectively [13]. Industry Context - State Street operates within the Zacks Banks - Major Regional industry, where peers like The Bank of New York Mellon Corporation have also reported positive earnings growth [17][18].

Core Viewpoint - State Street Corp (STT) is well-positioned for growth due to higher interest rates, efforts to enhance fee income, and strategic acquisitions, although rising expenses and concentrated fee-based revenues pose concerns [1]. Group 1: Growth Drivers - Higher interest rates are expected to aid net interest revenue, with net interest income (NII) projected to have a compound annual growth rate (CAGR) of 7.8% over the three years ending in 2023 [2]. - Net interest margin (NIM) expanded to 1.20% in 2023 from 1.03% in 2022, although high funding costs and lower non-interest-bearing deposit balances have pressured NII and NIM in early 2024 [3]. - The company’s investment portfolio repositioning is anticipated to support future NII and NIM growth, with an estimated CAGR of 2.8% over the next three years [3]. Group 2: Fee Income Enhancement - State Street is focused on improving fee income sources, with total fee revenues experiencing a four-year CAGR of 1% from 2019 to 2023, driven by increased client activity and market volatility [4]. - The company had $2.4 trillion of servicing assets to be installed at the end of Q3 2024, indicating potential for future fee revenue growth [5]. - Total fee revenues are projected to rise by 5.3% in the current year [5]. Group 3: Strategic Acquisitions - State Street has been expanding through strategic acquisitions, including a collaboration with Apollo to enhance access to private markets and a plan to acquire a 5% stake in Raiz Invest Limited [6]. - The acquisition of CF Global Trading in February aimed to expand outsourced trading capabilities, while full ownership of two joint ventures in India is part of operational optimization efforts [7]. - These acquisitions are expected to generate revenue and cost synergies, expanding the company's global footprint [7]. Group 4: Capital Distributions - The company increased its quarterly dividend by 10% to 76 cents per share after passing its 2024 stress test [8]. - A share buyback program worth up to $5 billion was authorized, with approximately $4.3 million remaining available for repurchase as of September 30, 2024 [9]. - State Street plans to distribute 80-90% of its earnings to shareholders this year, supported by a solid capital position [9]. Group 5: Market Performance - Year-to-date, STT shares have gained 25%, outperforming the industry’s rise of 21.7% [10].

Group 1: Momentum Investing Overview - Momentum investing involves following a stock's recent trend, with the aim of buying high and selling higher, capitalizing on established price movements [1] - The Zacks Momentum Style Score helps define momentum characteristics, with State Street Corporation (STT) currently holding a Momentum Style Score of B [2] Group 2: Zacks Rank and Performance - STT has a Zacks Rank of 1 (Strong Buy), indicating strong potential for outperformance in the market [3] - Stocks rated Zacks Rank 1 or 2 with Style Scores of A or B have historically outperformed the market over the following month [3] Group 3: Price Performance Metrics - STT shares have increased by 2.68% over the past week, outperforming the Zacks Banks - Major Regional industry, which rose by 0.33% [5] - Over the past month, STT's shares rose by 5.48%, compared to the industry's 4.51% [5] - In the last quarter, STT shares increased by 19%, and over the past year, they gained 37.25%, while the S&P 500 moved 7.29% and 32.85%, respectively [6] Group 4: Trading Volume Insights - STT's average 20-day trading volume is 2,224,492 shares, which serves as a price-to-volume baseline; rising stocks with above-average volume are generally bullish [7] Group 5: Earnings Estimates and Revisions - Over the past two months, 7 earnings estimates for STT have moved higher, with no downward revisions, boosting the consensus estimate from $8.14 to $8.38 [9] - For the next fiscal year, 7 estimates have also moved upwards without any downward revisions [9] Group 6: Conclusion - Given the positive momentum indicators and earnings outlook, STT is positioned as a 1 (Strong Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [9]

Financial Performance - Total revenue for Q3 2024 was $3,259 million, an increase of 21% compared to $2,691 million in Q3 2023[14]. - Net income for Q3 2024 reached $730 million, up 73% from $422 million in Q3 2023[14]. - Earnings per share (EPS) for Q3 2024 was $2.26, reflecting an 81% increase from $1.25 in Q3 2023[16]. - Total expenses increased by 6% in Q3 2024, amounting to $2,308 million compared to $2,180 million in Q3 2023[14]. - The pre-tax margin improved to 28.4% in Q3 2024, up from 19.0% in the same period of 2023[16]. - Return on average common equity was 12.0% in Q3 2024, significantly higher than 7.3% in Q3 2023[16]. - Total fee revenue for Q3 2024 was $2,616 million, an 11% increase from $2,361 million in Q3 2023[14]. - Net interest income (NII) rose by 16% to $723 million in Q3 2024, compared to $624 million in Q3 2023[14]. - The provision for credit losses was $26 million in Q3 2024, compared to no provision in Q3 2023[14]. - Cash dividends declared per common share increased by 10% to $0.76 in Q3 2024, up from $0.69 in Q3 2023[14]. Assets and Deposits - As of September 30, 2024, State Street Corporation reported total assets of $338.48 billion, total deposits of $247.43 billion, and total shareholders' equity of $25.83 billion[5]. - The company manages $46.76 trillion in assets under custody/administration (AUC/A) and $4.73 trillion in assets under management (AUM) as of the same date[5]. - AUC/A reached $46.76 trillion as of September 30, 2024, a 17% increase compared to September 30, 2023, driven by higher market levels and client flows[18]. - AUM totaled $4.7 trillion as of September 30, 2024, reflecting a 29% increase year-over-year due to higher market levels and net inflows[18]. - Total assets reached $338,481 million as of September 30, 2024, up from $297,258 million at the end of 2023, indicating a growth of 13.9%[132]. - Total deposits increased to $247,429 million, compared to $220,970 million in December 2023, marking a rise of 11.9%[132]. Business Segments - State Street's operations are divided into two main lines of business: Investment Servicing and Investment Management, which provide a broad range of financial products and services to institutional investors[5]. - Total revenue for the Investment Servicing line of business in Q3 2024 was $2,662 million, an 8% increase from $2,459 million in Q3 2023[56]. - Investment Management total revenue increased by 13% in Q3 2024 to $1,715 million from $1,534 million in Q3 2023[61]. - Management fees in Q3 2024 were $527 million, a 10% increase from $479 million in Q3 2023[58]. Competition and Market Conditions - State Street faces intense competition and significant pricing pressure, which could negatively impact profitability and financial results[9]. - The company’s financial performance is influenced by external factors such as geopolitical conditions, market volatility, and actions taken by central banks[11]. - The company emphasizes the importance of attracting and retaining skilled workforce members to support its business operations amid intense competition for talent[9]. Risk Management - The company’s risk management framework may not effectively identify or mitigate risks, potentially leading to financial losses[13]. - The company faces significant global operational risks due to disruptions in key economies, which could adversely impact its financial condition and results of operations[12]. - The company conducts annual stress tests under the Dodd-Frank Act to assess its capital and financial condition, with results available on its investor relations website[6]. - The company may incur losses due to unforeseen events such as natural disasters, pandemics, and geopolitical conflicts[13]. Capital and Funding - The company may need to raise additional capital or debt in the future, which may not be available or may be available only on unfavorable terms[13]. - The standardized CET1 capital ratio was 11.6% as of September 30, 2024, unchanged from December 31, 2023[18]. - The company declared common stock dividends of $0.76 per share in the third quarter of 2024, representing a 10% increase from $0.69 per share in the same period of 2023[18]. - The company returned a total of $674 million to shareholders in the form of common share repurchases and dividends in the third quarter of 2024[18]. Regulatory Environment - The evolving regulatory environment may influence the volume of securities lending activity and related revenue and profitability in future periods[37]. - The company is subject to a "capital floor" under the Dodd-Frank Act, ensuring that risk-based capital ratios are the lower of those calculated under advanced or standardized approaches[104]. - The company maintains a G-SIB designation, requiring an additional capital surcharge above minimum capital ratios set forth in Basel III[103]. Investment Securities - As of September 30, 2024, the total carrying value of available-for-sale securities was $56.85 billion, an increase from $44.53 billion as of December 31, 2023, representing a growth of approximately 27%[65]. - The total carrying value of held-to-maturity securities decreased to $49.48 billion as of September 30, 2024, down from $57.12 billion as of December 31, 2023, reflecting a decline of about 13%[65]. - Approximately 97% of the carrying value of the investment securities portfolio was rated "AA" or higher as of September 30, 2024, compared to 96% as of December 31, 2023[66]. Loans and Credit Losses - Total loans increased to $41.96 billion as of September 30, 2024, up from $36.63 billion as of December 31, 2023[75]. - The allowance for credit losses increased to $171 million as of September 30, 2024, compared to $134 million as of December 31, 2023, primarily due to provisions related to commercial real estate and leveraged loans[77]. - The provision for credit losses for the nine months ended September 30, 2024, was $69 million, compared to $35 million for the same period in 2023[77]. Shareholder Actions - The company repurchased $450 million of common stock in Q3 2024 and a total of $750 million during the nine months ended September 30, 2024, under its new $5.0 billion share repurchase program[122]. - The dividends declared on common stock for Q3 2024 were $0.76 per share, totaling $224 million, compared to $0.69 per share and $213 million in Q3 2023[124]. - For the nine months ended September 30, 2024, the total dividends declared on common stock were $2.14 per share, totaling $639 million, compared to $1.95 per share and $628 million in the same period of 2023[124].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: State Street Corporation (STT) - State Street Corporation currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy) [2] - The stock has shown a price increase of 9.56% over the past quarter and 36.51% over the last year, outperforming the S&P 500, which increased by 3.56% and 36.11% respectively [4] Price Performance - Over the past week, STT shares increased by 2.89%, while the Zacks Banks - Major Regional industry rose by 3.02% [3] - The monthly price change for STT is 5.92%, compared to the industry's 5.71% [3] Trading Volume - STT's average 20-day trading volume is 2,460,719 shares, indicating a bullish sign when combined with rising stock prices [4] Earnings Outlook - In the last two months, 5 earnings estimates for STT have been revised upwards, increasing the consensus estimate from $8.13 to $8.15 [5] - For the next fiscal year, 7 estimates have moved upwards with no downward revisions [5] Conclusion - Given the positive momentum indicators and earnings outlook, STT is positioned as a strong buy candidate for investors seeking short-term opportunities [6]

Financial Data and Key Metrics - Q3 2024 EPS reached a record high of $2 26, up from $1 25 in the year-ago period, reflecting a 17% YoY growth excluding notable items [10] - Q3 ROE was strong at 12%, with a return on tangible common equity exceeding 19% [19] - Fee revenue grew 7% YoY, while total revenue increased 9% YoY, driving margin expansion [10] - Net interest income (NII) increased 16% YoY to $723 million, supported by higher investment security yields and loan growth [25] - Capital return in Q3 totaled $670 million, including $450 million in share repurchases, with a total payout ratio of nearly 100% [29] Business Line Performance - **Investment Services**: AUC/A wins in Q3 totaled $466 billion, with $84 million in new servicing fee revenue, the highest quarter this year [12] - **Global Advisors**: Record quarterly net flows of $100 billion and AUM of $4 7 trillion, with positive flows in cash, ETFs, and institutional businesses [14] - **Markets**: FX trading revenue increased 15% YoY, and securities finance revenue grew 13% YoY, driven by higher client volumes [23] - **Software and Processing Fees**: Front-office software revenues increased 12% YoY, with software-enabled and professional services revenues up 21% [24] Market Performance - Global equity and fixed income markets saw notable gains, but investors faced risk-off events such as fears of a US recession and geopolitical tensions [9] - State Street expanded market share in key product areas and geographies, including institutional money market funds and ETFs in the US and EMEA regions [14] Strategic Direction and Industry Competition - State Street Alpha platform continues to be a competitive advantage, securing two new mandates in Q3 and deepening existing client relationships [12][13] - The company launched 20 new ETFs, including three actively-managed digital asset-focused ETFs, and announced a partnership with Apollo Global Management to expand access to private markets [14][15] - State Street is focused on innovation in digital assets, private markets, and fixed income solutions to meet evolving investor needs [22] Management Commentary on Operating Environment and Outlook - The operating environment in Q3 was dynamic, with market volatility driven by risk-off events, but markets stabilized due to dovish central bank actions and improved US economic data [9] - Management expects full-year fee revenue growth to be at or slightly above the high end of the 4%-5% range, with NII growth also revised upward to 4%-5% [31][32] - The company remains committed to delivering positive fee and total operating leverage for the full year, excluding notable items [33] Other Important Information - CFO Eric Aboaf announced his departure, with a formal search process underway for his replacement [16] - State Street achieved $125 million in productivity savings in Q3, with a year-to-date total of $350 million, on track to meet the $500 million target for 2024 [27] Q&A Session Summary Question: NII Guidance and Portfolio Repositioning - The $80 million loss from portfolio repositioning will reverse within the next five quarters, benefiting NII [36] - Repositioning focused on lower-coupon securities in the treasury and international sovereign space, with a payback period of approximately five quarters [36] Question: Succession Planning - The Board has a succession plan in place for CEO Ron O'Hanley, with ongoing discussions about leadership transitions [43] Question: Repo Activity and NII Outlook - Repo activity contributed 10%-12% of NII, with a 1 percentage point increase in Q3 due to higher client volumes [46] - NII is expected to stabilize and grow over the next few quarters, supported by lending, repo activity, and deposit engagement [58] Question: Profitability and Pre-Tax Margin Aspirations - State Street aims for 4%-5% revenue growth and a pre-tax margin target of 30% in the medium term, with these goals deeply embedded in the company's culture and incentives [54][55] Question: Deposit Behavior Post-Rate Cut - Deposit levels remained stable post-rate cut, with no significant changes in mix or pricing [78] Question: Servicing Fee Backlog - Approximately half of the servicing fee backlog is expected to be installed in Q4 and throughout next year, with AUC/A backlog installation projected over the next few years [80] Question: New Business Wins and Geographic Distribution - $380 billion of the $466 billion AUC/A wins in Q3 came from the Alpha platform, with significant wins from both US and non-US clients [85] Question: M&A Appetite - State Street views M&A as a tool to accelerate or implement strategy more efficiently, but the focus remains on organic growth and capital return to shareholders [88]