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    STT
    Earnings call· Sep 2025(Q3 FY25)

    STATE STREET CORP STT

    Oct 17, 2025 Source

    Executive summary

    State Street Q3 FY25 — Record AUC/A and AUM, Strong Fee Growth, and Positive Operating Leverage

    State Street delivered a strong Q3 FY25, marked by record AUC/A and AUM, robust fee revenue growth, and its seventh consecutive quarter of positive operating leverage. Strategic investments in digital assets, wealth services, and AI are accelerating growth and driving innovation, despite a slight year-over-year decline in net interest income. The company is focused on converting its substantial servicing fee backlog and leveraging productivity gains to sustain long-term value creation.

    Highlights

    5

    • Earnings per share (EPS) of $2.78, increasing 23% year-over-year.

    • Total revenue increased 9% year-over-year, driving a pretax margin of 31% and return on tangible common equity (ROTCE) of 21%.

    • Record Assets Under Custody/Administration (AUC/A) of $51.7 trillion (up 10% YoY) and record Assets Under Management (AUM) of $5.4 trillion (up 15% YoY).

    • Servicing fee revenue backlog increased 40% year-over-year to $400 million.

    • Generated $125 million in productivity savings during the quarter, on track for $500 million full year target.

    Concerns

    3

    • Net interest income (NII) declined 1% year-over-year to $715 million, with net interest margin (NIM) decreasing 11 basis points to 96 basis points.

    • Full-year NII is now expected to be down slightly compared to last year's record performance.

    • Full-year expense growth outlook increased to approximately 4.5% (from 3-4%) due to continued investments and higher revenue-related costs.

    Guidance & targets

    7
    CategoryTargetConfidence
    Total fee revenue growth
    8.5% to 9% range
    high materiality
    High
    Full year Net Interest Income (NII)
    Down slightly
    high materiality
    Medium
    Full year expense growth
    Roughly 4.5%
    high materiality
    High
    Q4 FY25 Fee Revenue
    Flat to down slightly QoQ
    medium materiality
    Medium
    Q4 FY25 Net Interest Income (NII)
    Sequential increase
    medium materiality
    Medium
    Q4 FY25 Expenses
    Up slightly QoQ
    medium materiality
    Medium
    Total payout ratio
    Approximately 80%
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Investment Services
    Servicing fees increased primarily driven by higher average market levels, net new business, and the impact of currency translation. Focus on core back-office solutions and private markets for wins.
    AUC/A: $51.7 trillionAUC/A growth YoY: 10%Servicing fee revenue wins: ~$50 million (Q3)Servicing fee revenue wins YTD: ~$250 millionServicing fee revenue backlog: ~$400 millionServicing fee revenue backlog growth YoY: 40%Alpha mandates: 1 new win, 1 client live
    		—7%——
    Investment Management
    Management fees increased primarily driven by higher average market levels and net inflows. Solid momentum across ETFs, cash, and institutional index fixed income. Pretax margin up nearly 600 bps from the prior year quarter.
    AUM: $5.4 trillionAUM growth YoY: 15%Net inflows: $26 billionGold ETF AUM: ~$145 billion
    		$612 million16%—36%
    State Street Markets
    Delivered strong third quarter results with solid year-over-year growth in both FX trading services and securities finance. FX volatility was relatively muted, but client volumes increased. Securities finance benefited from increased assets on loan and specials activity.
    FX client volumes growth YoY: 11%
    		—FX trading revenue: 16% (ex. notables), Securities finance revenues: 19%——
    Software and Processing Fees (Charles River)
    Software and processing fees increased driven by higher on-premises renewals, growth in professional services, and continued expansion of software-enabled revenue as clients converted to the cloud-based SaaS platform.
    Annual recurring revenue (ARR): ~$400 millionARR growth YoY: 13%Front office revenue backlog growth YoY: 45%
    		—9% (Software and processing fees), 14% (Front office software and data revenue)——

    Operational metrics

    17
    Total revenue growth
    9%YoY
    Q3 FY25

    Strong financial performance.

    Pretax margin
    31%Up ~270 bps YoY
    Q3 FY25

    Expanded approximately 270 basis points year-over-year.

    Return on tangible common equity
    21%Up ~160 bps YoY
    Q3 FY25

    Approximately 160 basis points higher compared to the year-ago period.

    Total operating leverage
    >300 bpsYoY
    Q3 FY25

    Seventh consecutive quarter of positive total operating leverage, excluding notable items.

    Fee operating leverage
    >600 bpsYoY
    Q3 FY25

    Delivered substantial fee operating leverage, excluding notable items.

    Fee revenue growth
    Nearly 12%YoY
    Q3 FY25

    Broad-based fee revenue growth, excluding notable items.

    Total expenses growth
    Approximately 5%YoY
    Q3 FY25

    Prudently managed expense base while funding strategic initiatives.

    Compensation-related costs growth
    2%YoY
    Q3 FY25

    Primarily driven by higher salaries and benefits and currency translation, partially mitigated by headcount reduction.

    Information systems and communications expense growth
    12%YoY
    Q3 FY25

    Primarily due to ongoing investments in platform modernization, AI tools, data delivery, and client implementation activity.

    Productivity savings
    $125 millionYoY
    Q3 FY25

    On track to achieve full year savings target.

    Capital returned to shareholders
    Nearly $1.5 billion
    YTD FY25

    Through common share repurchases and dividends.

    Capital returned to shareholders
    $637 million
    Q3 FY25

    Consisting of $400 million in common share repurchases and $237 million in declared common stock dividends.

    Common share repurchases
    $400 million
    Q3 FY25

    Executed in Q3 FY25.

    Common stock dividends
    $237 million
    Q3 FY25

    Declared common stock dividends in Q3 FY25.

    Quarterly common stock dividend per share
    $0.84Up 11%
    Q3 FY25

    Increased by 11% in Q3 FY25.

    Investment portfolio cash flows reinvestment
    ~$5 billion
    Quarterly

    Maturing in the low 3s and reinvested in high 3s or low 4s.

    NII impact per Fed rate cut
    ~$2 million
    Per cut per quarter

    Near neutral with respect to the Fed.

    Industry KPIs

    5
    MetricValueDetails
    Cet1 ratio11.3%%
    Payout ratio79%%
    Pretax margin31%%
    Organic fee growth2%%
    Net interest income$715 millionUSD

    Product announcements

    6
    ProductTypeDetails
    Digital Asset Platformlaunch
    11 Select SPDR Premium Income ETFslaunch
    Broadened suite of actively managed target maturity ETFsexpansion
    PRSD (Actively Managed Short-Term Bond ETF)launch
    Euro-denominated AAA CLO UCITS ETFlaunch
    39 new products (Investment Management)launch

    Deals & partnerships

    4
    Apex Fintech SolutionsStrategic partnership and minority investment to leverage Apex's digital custody and clearing platform.

    Supports the long-term growth of Investment Servicing business and builds on existing foundation to deliver the industry's first truly global digital wealth custody solution.

    ApolloContinued partnership to expand access to private markets.

    Made further progress in expanding access to private markets with the launch of PRSD, an actively managed short-term bond ETF.

    BlackstonePartnership to build on successful track record.

    Launched the euro-denominated AAA CLO UCITS ETF.

    Van Lanschot Kempen Investment ManagementStrategic partnership to drive further innovation across investment offerings in Europe.

    Entered a strategic partnership in Europe to drive further innovation across respective investment offerings in this key strategic region.

    Risks & headwinds

    3
    Net interest income (NII) declineQ3 FY25 (actual), FY25 (guidance)

    Down 1% YoY to $715 million; NIM down 11 bps to 96 bps. Down 2% QoQ. Full year NII expected to be down slightly.

    Mitigation: Reinvestment of securities portfolio cash flows at higher yields, run-down of negative drag from terminated interest rate risk management hedges, client-driven loan growth, deposit mix improvement, expected sequential NII increase in Q4.

    Increased expense growthFY25

    Full year expense growth expected to be roughly 4.5% (up from prior 3-4% range).

    Mitigation: Reflects ongoing investments in technology and strategic initiatives, higher revenue-related costs. Productivity savings of $125 million in Q3, YTD $370 million, on track for $500 million full year target. Management aims to capture AI benefits for shareholders.

    Muted FX volatilityQ3 FY25

    FX volatility was relatively muted in Q3.

    Mitigation: Client volumes increased 11% YoY, strong growth across all trading venues. Management expects volatility to rise in Q4.

    What to watch in Q4 FY25

    5

    Servicing fee backlog installation pace

    Q4 FY25 and FY26
    Current$400 million backlog at 9/30
    TargetHalf installed by year-end FY25, significant portion of remainder by end of FY26

    Why it matters

    Timely conversion of backlog into revenue is crucial for organic servicing fee growth and overall fee revenue.

    This momentum is reflected in our third quarter servicing fee revenue backlog of approximately $400 million, up roughly 40% from the prior year. Installing our backlog remains a top priority as we focus on delivering consistent organic servicing fee growth in the quarters ahead. So $400 million in backlog at 9/30, a significant increase year-over-year. We see the installation outlook there to be quite attractive, as much as half of that being installed by the end of the year and a significant portion of the remainder being done by the end of 2026.

    Q&A highlights

    6

    What are John Woods' initial priorities and observations regarding State Street's financial management and strategic direction?

    Woods highlighted driving execution and profitability, optimizing the balance sheet, leveraging productivity opportunities (especially with AI), and focusing on strategic initiatives and geographic expansion. He noted positive NII and NIM trends for Q4 due to non-rate related tailwinds.

    “I think there are optimization opportunities on the balance sheet that I've been digging into in my early days here. So that's -- that will be nice to see as that plays out in the coming quarters. But the other couple of items I'd also hasten to add is there's an exceptional opportunity in the productivity space that this management team has been hard at for quite some time, but there is a lot ahead of us that we can accomplish together that's got a lot of tailwinds associated with it heading into 2026.”

    asked by Alex Blostein · answered by John Woods

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Priorities & Operating Leverage

    State Street achieved its seventh consecutive quarter of positive total operating leverage, excluding notable items, driven by 9% total revenue growth and disciplined execution. This reflects effective capitalization on a constructive market environment and ongoing operating model transformation, contributing to a pretax margin of 31% and a return on tangible common equity of 21%.

    02

    Digital Asset Platform & Wealth Services Expansion

    The company is strategically positioning itself as a bridge between traditional and digital finance, with a forthcoming launch of a digital asset platform enabling tokenization for institutional investors. A strategic partnership and minority investment in Apex Fintech Solutions will expand wealth services offerings, leveraging Apex's digital custody and clearing platform to deliver a globally scalable digital wealth custody solution.

    03

    Investment Management Growth & Innovation

    State Street Investment Management reported record quarterly management fee revenue and AUM of $5.4 trillion, up 15% year-over-year, supported by $26 billion in net inflows. Innovation includes launching 11 select SPDR premium income ETFs and broadening actively managed target maturity ETFs. Partnerships with Apollo and Blackstone are expanding access to private markets through new products like the PRSD short-term bond ETF and a euro-denominated AAA CLO UCITS ETF.

    04

    Market Franchise Strength and Recognition

    State Street Markets delivered strong year-over-year revenue growth in both securities finance (19%) and FX trading services (16% excluding notables), with client volumes up 11%. The firm received 8 category wins in Euromoney Magazine's 2025 FX Awards, doubling its 2024 achievements, underscoring its integrated value proposition and efforts to deepen client relationships and provide best-in-class solutions.

    05

    Productivity & Technology Investment Balance

    The company generated $125 million in productivity savings in Q3, on track for $500 million for the full year. These savings create capacity for strategic investments in growth areas like wealth services, Alpha, private markets, AI tools, and platform modernization. Management emphasized that these efforts enable continued investment while maintaining strong operating leverage and driving profitability.

    06

    NII and Balance Sheet Dynamics

    Net interest income (NII) was down 1% year-over-year and 2% quarter-over-quarter, primarily due to lower average short-end rates and deposit mix shift. However, management expects NII to increase sequentially in Q4, supported by non-rate related tailwinds such as the reinvestment of maturing securities portfolio cash flows at higher yields and the run-down of negative drag from terminated interest rate risk management hedges.

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