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    STT
    Earnings call· Mar 2026(Q1 FY26)

    STATE STREET Q1 FY26 earnings call STT

    Apr 17, 2026 Source

    Executive summary

    State Street Corporation Q1 FY26 — Strong Revenue Growth and Profitability

    State Street delivered a strong first quarter, driven by broad-based revenue growth across its franchise, leading to record total revenue, fee revenue, and net interest income. The company achieved significant positive operating leverage and expanded its pretax margin, reflecting disciplined execution and strategic investments. While navigating notable items and a dip in its CET1 ratio, State Street remains focused on its digital asset strategy, alternatives, and wealth services, leveraging AI and operating model transformation for future growth.

    Highlights

    7

    • Reported EPS increased 22% YoY, and 39% YoY excluding notable items.

    • Total revenue reached a record $3.8 billion, up 16% YoY.

    • Fee revenue hit a record $3 billion, increasing 15% YoY.

    • Net interest income (NII) grew 17% YoY to $835 million.

    • Achieved over 600 basis points of positive operating leverage, marking the ninth consecutive quarter of YoY positive operating leverage (excluding notable items).

    • Assets under custody/administration (AUC/A) reached a record $54.5 trillion, up 17% YoY, and Assets under Management (AUM) increased 20% YoY to $5.6 trillion.

    • FX trading revenue increased 29% YoY to $435 million, driven by a 25% increase in client trading volumes.

    Concerns

    3

    • Notable items totaled $130 million pretax, or $0.35 per share after tax, reflecting repositioning charges and rescoping of a middle office client contract.

    • Standardized CET1 ratio decreased by approximately 100 basis points QoQ to 10.6%, primarily due to higher risk-weighted assets and U.S. dollar appreciation.

    • Expenses increased 9% YoY (excluding notable items), with currency translation accounting for approximately 2 percentage points of the increase.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year 2026 fee revenue growth
    7% to 9%
    high materiality
    High
    Full-year 2026 NII growth
    8% to 10%
    high materiality
    High
    Full-year 2026 expenses increase
    5% to 6%
    medium materiality
    High
    Full-year 2026 effective tax rate
    approximately 22%
    low materiality
    High
    Full-year 2026 total payout ratio
    roughly 80%
    medium materiality
    Medium
    Full-year 2026 servicing fee sales
    $350 million to $400 million
    medium materiality
    High
    Full-year 2026 Net Interest Margin (NIM)
    110 to 115 basis points
    high materiality
    Medium
    Full-year 2026 deposits
    $250 billion to $260 billion
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Investment Services
    Reflecting higher average market levels, currency translation benefits, and continued organic growth from net client asset activity, flows, and new business. Sales were well distributed across regions and strategic focus areas, including back office services and alternatives clients.
    AUC/A: $54.5 trillionAUC/A growth YoY: 17%Servicing fee sales: $56 millionAlpha mandate wins: 1
    		$1.4 billion11%——
    Investment Management
    Driven by higher average market levels and net inflows, particularly strong performance in index strategies, solutions (ETFs), fixed income, and the cash franchise. SPYM was the #1 asset gathering ETF globally with $27 billion of inflows.
    AUM: $5.6 trillionAUM growth YoY: 20%Net inflows: $49 millionETF net inflows: $25 billion
    		$724 million23%——
    Markets
    FX trading revenue reflected a strong increase in client trading volumes amid a dynamic market environment. Securities finance revenue was supported by growth in client lending balances.
    FX trading revenue: $435 millionFX trading revenue growth YoY: 29%Client trading volumes growth: 25%Securities finance revenue growth YoY: 2%
    		————
    Software Services
    Revenue growth driven primarily by higher professional services and software and data revenues, reflecting continued SaaS go-lives and platform adoption across the client base. Strong momentum reflected in ARR and revenue backlog.
    Annual recurring revenue (ARR) growth YoY: 12%Revenue backlog growth: 11%
    		—7%——

    Operational metrics

    31
    Total revenue growth
    16%YoY
    Q1 FY26

    Total revenue increased to a record $3.8 billion.

    Fee revenue growth
    15%YoY
    Q1 FY26

    Fee revenue reached a record $3 billion.

    Net interest income (NII) growth
    17%YoY
    Q1 FY26

    NII increased to $835 million.

    Expenses growth (excl. notable items)
    9%YoY
    Q1 FY26

    Expenses were $2.7 billion, excluding notable items.

    Pretax margin expansion
    400
    Q1 FY26

    Significant improvement in profitability.

    Return on Tangible Common Equity (ROTCE)
    20%up 4 percentage points
    Q1 FY26

    Reflects improved profitability.

    Operating leverage (excl. notable items)
    >600
    Q1 FY26

    Ninth consecutive quarter of year-over-year positive operating leverage.

    Currency translation impact on expenses
    2
    Q1 FY26

    Headwind to expenses.

    Revenue-related costs impact on expenses
    5
    Q1 FY26

    Component of expense increase.

    Strategic investments and run-the-bank expenses (net of productivity)
    2
    Q1 FY26

    Remaining balance of expense increase after revenue-related costs and currency impact.

    Productivity savings
    4%
    Q1 FY26

    Net productivity delivered in Q1.

    Net interest margin (NIM)
    116up 16 bps
    Q1 FY26

    Expansion primarily reflected improvements in funding mix and investment portfolio repricing.

    Average interest-earning assets growth
    1%
    Q1 FY26

    Growth driven by higher client deposits, partially offset by reduction in short-term wholesale funding.

    Common shares repurchased
    $400 million
    Q1 FY26

    Part of capital return strategy.

    Common stock dividends declared
    $233 million
    Q1 FY26

    Part of capital return strategy.

    Total capital return
    $633 million
    Q1 FY26

    Combined share repurchases and dividends.

    Payout ratio
    90%
    Q1 FY26

    Reflects capital return relative to earnings.

    Standardized CET1 ratio
    10.6%down 100 bps QoQ
    Q1 FY26

    Decrease primarily due to higher risk-weighted assets and USD appreciation.

    MDFI loan portfolio (BDC lending)
    $1.6 billion
    Q1 FY26

    Highly collateralized and diversified, representing 4% of total loans.

    Charge-offs
    COVID commercial loan
    Q1 FY26

    Specific charge-off from a high-margin contract, not systemic.

    Headcount change
    down 2%YoY
    Q1 FY26

    Reflects ongoing efficiency efforts and strategic investments.

    Assets under custody/administration (AUC/A) growth
    17%YoY
    Q1 FY26

    AUC/A reached a record $54.5 trillion.

    Assets under Management (AUM) growth
    20%YoY
    Q1 FY26

    AUM increased to $5.6 trillion.

    FX trading revenue growth
    29%YoY
    Q1 FY26

    FX trading revenue was $435 million.

    Client trading volumes growth
    25%
    Q1 FY26

    Reached a new record level.

    Securities finance revenue growth
    2%YoY
    Q1 FY26

    Supported by growth in client lending balances.

    Software Services revenue growth
    7%YoY
    Q1 FY26

    Driven by professional services and software/data revenues.

    Annual recurring revenue (ARR) growth
    12%YoY
    Q1 FY26

    Reflects software business momentum.

    Revenue backlog growth
    11%
    Q1 FY26

    Reflects software business momentum.

    Servicing fee sales
    $56 million
    Q1 FY26

    Well distributed across regions and strategic focus areas.

    Alpha mandate wins
    1
    Q1 FY26

    Highlighting continued client engagement with the integrated front-to-back platform.

    Industry KPIs

    2
    MetricValueDetails
    AUM$5.6 trillionUSD
    Fundraising inflows$49 millionUSD

    Product announcements

    3
    ProductTypeDetails
    Digital Asset Platformlaunch
    State Street Galaxy Onchain liquidity sweep fundlaunch
    New products and solutionslaunch

    Deals & partnerships

    5
    State Street BridgewaterETF partnership$1 billion

    The State Street Bridgewater all-weather ETF surpassed $1 billion in assets under management during the quarter.

    Apollo Global ManagementETF partnership$800 million

    An investment-grade public and private credit ETF developed in partnership with Apollo Global Management reached a new high watermark during Q1 with AUM of over $800 million.

    Apex Financial Solutionsstrategic partnership

    State Street is leveraging Charles River's capabilities alongside its strategic partnership with Apex Financial Solutions to build a differentiated, fully digital and globally scalable wealth custody and clearing solution.

    DTCCindustry initiative

    State Street is deeply engaged in DTCC's tokenization efforts as part of broader digital asset-related industry initiatives.

    [penalties]industry initiative

    State Street is deeply engaged in [penalties] work to create an ecosystem of Central Bank connected blockchain-based payment systems.

    Risks & headwinds

    5
    Geopolitical and macroeconomic uncertaintyQ1 FY26

    Iran War, divided views on AI impacts, rising concerns on credit quality in certain parts of the financial system.

    Mitigation: Firmly focused on serving as an essential long-term partner to clients, executing strategy with distinctive capabilities, deep operational strengths, and a conservatively positioned balance sheet.

    Notable items impacting profitabilityQ1 FY26

    $130 million pretax, or $0.35 per share after tax

    Mitigation: Reflected repositioning charges and the rescoping of a middle office client contract; these are idiosyncratic and not systemic.

    CET1 ratio decreaseQ1 FY26

    down approximately 100 basis points from prior quarter to 10.6%

    Mitigation: Primarily reflects higher risk-weighted assets associated with normalization in the markets business, USD appreciation, and equity market appreciation. Operating range remains 10-11%, with Q1 being an active quarter-end.

    Currency translation as an expense headwindQ1 FY26

    approximately 2 percentage points of expense increase

    Mitigation: Factored into expense guidance, with the majority of expense increase being revenue-related.

    COVID commercial loan charge-offQ1 FY26

    Specific charge-off

    Mitigation: The company took the opportunity to exit the name, which was substantially reserved for, resulting in no significant P&L impact and not extending to other portfolios.

    Q&A highlights

    6

    How does the strong NIM expansion reconcile with only 1% growth in average interest-earning assets, and how does this dynamic factor into the updated NII guidance?

    NIM progress is primarily driven by improvements in funding mix, specifically growth in deposits allowing for the reduction of higher-cost short-term wholesale funding. Interest-earning asset growth is less of a driver for NII in 2026, with NIM expansion being the main contributor to the updated guidance.

    “interest-earning assets will be less of the story. It wasn't -- it was -- 1Q was driven almost entirely by net interest margin. I think that's a similar story for our guide for 2026, that range that you articulated that we talked about earlier is almost entirely driven by net interest margin as well.”

    asked by Glenn Schorr · answered by John Woods

    3 min read6 chapters

    Detailed Narrative

    01

    Digital Asset Strategy and Tokenization

    State Street is actively building market infrastructure to bridge traditional and digital finance, executing a comprehensive product roadmap that includes tokenization of assets, funds, and cash for institutional investors. These capabilities aim to drive greater efficiency, enhance liquidity, and support new growth avenues. The company is well advanced with clients to support tokenized fund strategies this year and is engaged in industry initiatives like DTCC's tokenization efforts and Central Bank connected blockchain-based payment systems. This strategy is expected to generate both retention of existing client activity and new revenue opportunities, particularly from tokenized money market funds and providing on-ramp/off-ramp infrastructure.

    02

    Alternatives and Wealth Services Growth

    The company sees compelling long-term growth potential in alternatives, including private markets and hedge funds, leveraging its leadership in investment servicing and management. In Wealth Services, State Street is investing in Charles River capabilities and a strategic partnership with Apex Financial Solutions to build a differentiated, fully digital, and globally scalable wealth custody and clearing solution. This initiative aims to serve wealth advisors and self-directed wealth platforms, unlocking new growth avenues by leveraging existing strengths.

    03

    Investment Management and ETF Performance

    State Street Investment Management demonstrated strong innovation and scaled franchises, particularly in ETFs. SPYM, their low-cost U.S. S&P 500 ETF, was the #1 asset gathering ETF globally in Q1, with $27 billion of inflows. SPY continues to be a key institutional liquidity benchmark, with nearly $4 trillion of notional value traded. The company also launched 57 new products and solutions, including the State Street Bridgewater all-weather ETF which surpassed $1 billion in AUM, and an investment-grade credit ETF with Apollo Global Management exceeding $800 million in AUM.

    04

    Operating Model Transformation and AI Integration

    State Street is undergoing a significant operating model transformation to strengthen sustainable growth and shareholder value. This includes scaling AI-enabled capabilities, embedding agile ways of working, and modernizing technology. The company has a centralized AI hub supporting over 200 AI use cases, with 70 already live, and is developing an agentic platform and AI foundry. These efforts are expected to drive productivity gains in technology development, accelerate new projects, and enhance operational efficiency, with tangible business impact anticipated in the second half of 2026.

    05

    MDFI Loan Portfolio and Credit Quality

    The company provided additional disclosure on its non-depository financial institutions (NDFI) loan portfolio, emphasizing its disciplined, client-focused nature, primarily supporting Investment Services clients. This highly collateralized and diversified portfolio has performed resiliently across cycles. The majority of the NDFI book is in high-quality areas like subscription finance and AAA CLO books, which have never experienced losses. BDC lending, representing $1.6 billion, is senior secured with substantial subordination (80%) and diversified structural protections, expected to be a low to mid-single-digit growth area.

    06

    Basel III Endgame Implications

    State Street views the proposed Basel III Endgame approach constructively, anticipating a benefit in credit risk RWA that is expected to exceed the additional RWA required for operational risk. The company is studying the proposals to determine the full magnitude of the impact but generally sees it as favorable, delivering on expectations for a more targeted view of credit risk RWA.

    AI-generated summary of the company’s earnings call. Not investment advice.