State Street's Q1 Earnings Top as Fee Income Rises Y/Y, Stock Down

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]