State Street's Q2 Earnings Top as Fee Income Rises Y/Y, Stock Down

Core Insights - State Street's (STT) second-quarter 2025 adjusted earnings per share (EPS) reached $2.53, exceeding the Zacks Consensus Estimate of $2.36 and reflecting a 17.7% increase from the prior-year quarter [1][10] - The company's total revenues for the quarter amounted to $3.45 billion, marking an 8.1% year-over-year increase and surpassing the Zacks Consensus Estimate of $3.38 billion [4][10] - Despite positive revenue growth, shares of STT fell approximately 3.8% in pre-market trading due to rising expenses and provisions, as well as a decline in net interest income (NII) [2][10] Financial Performance - Total fee revenues increased by 6.8% year over year to $2.72 billion, contributing to the overall revenue growth [5][10] - NII was reported at $735 million, showing a slight decline year over year, attributed to lower average short-end rates and a shift in deposit mix [4][10] - Non-interest expenses rose by 11.5% to $2.53 billion, driven by increases across most components, while adjusted expenses (excluding one-time costs) increased by 6.3% to $2.41 billion [6][10] Asset Management - As of June 30, 2025, total assets under custody and administration (AUC/A) reached $49 trillion, up 10.6% year over year, driven by higher equity market levels and client flows [8] - Assets under management (AUM) increased to $5.12 trillion, reflecting a 17.1% year-over-year growth, primarily due to higher market levels and net inflows [8] Capital Management - The company repurchased shares worth $300 million during the reported quarter [9] - The Common Equity Tier 1 ratio stood at 10.7% as of June 30, 2025, down from 11.2% in the same period of 2024 [7] Market Outlook - The company is expected to benefit from relatively higher interest rates, strategic buyouts, and rising AUM, although concerns remain regarding persistently rising expenses and concentrated fee-based revenues [11]