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    STT
    Earnings call· Dec 2025(Q4 FY25)

    STATE STREET CORP STT

    Jan 16, 2026 Source

    Executive summary

    State Street Q4 FY25 — Strong Finish to a Successful Year with Strategic Momentum

    State Street concluded FY25 with robust Q4 results, marked by strong EPS growth, record revenues, and expanded margins, driven by strategic investments in digital assets, wealth services, and AI-enabled capabilities. The company achieved its productivity savings target and delivered positive operating leverage for the second consecutive year, positioning it for continued growth and efficiency gains in 2026, despite a planned transition in its software business and seasonal NII factors.

    Highlights

    7

    • Q4 EPS grew 14% year-over-year, excluding notable items.

    • Achieved record quarterly fee and total revenue in Q4 FY25.

    • Pretax margin expanded to 31% in Q4 FY25, excluding notable items.

    • Full-year 2025 EPS increased 19% year-over-year to $10.30, excluding notable items.

    • Return on tangible common equity reached 20% for full-year 2025, excluding notable items.

    • Assets Under Custody/Administration (AUC/A) surpassed $50 trillion for the first time, reaching $53.8 trillion, up 16% year-over-year.

    • Assets Under Management (AUM) hit an all-time high of $5.7 trillion, up 20% year-over-year.

    Concerns

    2

    • Software and processing fees declined 15% year-over-year in Q4 FY25, primarily due to lower on-premises renewals.

    • Q4 NII benefited from seasonal factors, particularly noninterest-bearing deposit balances, which are expected to moderate in 2026.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year 2026 fee revenue growth
    up 4% to 6%
    high materiality
    High
    Full-year 2026 Net Interest Income (NII) growth
    up low single digits
    high materiality
    High
    Full-year 2026 Net Interest Margin (NIM)
    expected improvement relative to 2025
    medium materiality
    High
    Full-year 2026 expenses growth
    up approximately 3% to 4%
    high materiality
    High
    Full-year 2026 positive operating leverage
    in excess of 100 basis points
    high materiality
    High
    Full-year 2026 pretax margin
    roughly 30%
    high materiality
    High
    Full-year 2026 effective tax rate
    approximately 22%
    medium materiality
    High
    Full-year 2026 total payout ratio
    roughly 80%
    high materiality
    High
    Full-year 2026 productivity and other savings
    comparable to 2025
    medium materiality
    High
    Full-year 2026 average deposits
    around $250 billion
    medium materiality
    Medium
    Full-year 2026 noninterest-bearing deposits
    around $25 billion
    medium materiality
    Medium
    Full-year 2026 loan growth
    maybe a little, but below what you might have seen in '25
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Investment Services
    Driven by higher average market levels, net new business, and currency translation. Strong momentum in Alpha client onboarding and strategic focus on private markets, wealth services, and digital assets.
    AUC/A: $53.8 trillionAUC/A growth YoY: 16%Servicing fee revenue wins (FY25): ~$330 millionPrivate markets servicing fees growth (FY25): 12%Private markets servicing fees as % of total servicing fees (FY25): 10% (up from 9% in 2024)
    		increased 8% year-over-year8%——
    Investment Management
    Record quarterly management fees and all-time high AUM, reflecting higher market levels and strong performance across ETFs, cash, and institutional segments. Innovation and new product launches are driving business momentum.
    Management fees: $662 millionManagement fees growth YoY: 15%AUM: $5.7 trillionAUM growth YoY: 20%Quarterly net inflows: $85 billionNet new asset growth (FY25): >3% (3rd consecutive year)
    		$662 million15%——
    State Street Markets
    Solid year-over-year growth in both FX trading services and securities finance, supported by continued engagement with Investment Services clients and higher client lending balances, despite a decline in currency volatility.
    FX trading revenue growth YoY: 13%Securities finance revenues growth YoY: 8%Full year fee revenue growth (FX trading & securities finance): double-digit
    		————
    Software and Processing
    Decline primarily driven by lower on-premises renewals, partially offset by increased software-enabled revenues and progress in transitioning clients to cloud-based SaaS platform. Underlying fundamentals are strong with high single-digit organic growth in software.
    Software-enabled revenues growth: 7%Annual recurring revenue (ARR): ~$420 millionAnnual recurring revenue (ARR) growth YoY: 11%Front office revenue backlog growth YoY: 16%
    		declined 15% year-over-year-15%——

    Operational metrics

    24
    EPS growth (ex-notable items)
    14%YoY
    Q4 FY25

    Supported by record quarterly fee and total revenue.

    Pretax margin (ex-notable items)
    31%expanded
    Q4 FY25

    Helped by healthy positive operating leverage.

    Return on tangible common equity (ex-notable items)
    22%
    Q4 FY25

    Increased in the fourth quarter.

    Operating leverage (ex-notable items)
    over 100 basis points
    Q4 FY25

    Represents the 8th straight quarter of positive operating leverage excluding notable items.

    Total revenue (ex-notable items)
    $14 billionup more than 7% from prior year
    FY25

    Record total revenue for the full year.

    Fee revenue (ex-notable items)
    $11 billionincreased 9% YoY
    FY25

    Record fee revenue for the full year, reflecting broad-based growth.

    Expenses (ex-notable items)
    $9.8 billionincreased 5%
    FY25

    Primarily driven by strategic initiatives and technology investments, net of productivity savings.

    Operating leverage (ex-notable items)
    nearly 220 basis points
    FY25

    Generated for the full year.

    Pretax margin (ex-notable items)
    29%up from 28% in 2024
    FY25

    Full year pretax margin.

    EPS (ex-notable items)
    $10.30up 19% YoY
    FY25

    Full year earnings per share.

    Return on tangible common equity (ex-notable items)
    20%up from 19% in 2024
    FY25

    Full year return on tangible common equity.

    Notable items (pretax)
    $206 million
    Q4 FY25

    Primarily repositioning charges and an FDIC special assessment release.

    Notable items (after tax per share)
    $0.55
    Q4 FY25

    After tax impact per share.

    Net interest income
    $802 millionup 7% YoY
    Q4 FY25

    Reflecting NIM expansion and increase in average interest-earning assets.

    Net interest income (sequential)
    increased 12%QoQ
    Q4 FY25

    Driven by NIM improvement, partially offset by decline in average interest-earning assets.

    Expenses (ex-notable items)
    increased approximately 6%YoY
    Q4 FY25

    Driven by strategic initiatives, technology investments, and higher operational costs, net of productivity savings.

    Compensation-related costs (ex-notable items)
    increased 6%YoY
    Q4 FY25

    Reflecting higher salaries and incentive compensation, partially offset by headcount reductions.

    Productivity and other savings
    $500 million
    FY25

    Achieved full-year target, representing 5.5% of underlying cost base.

    Cumulative productivity and other savings
    nearly $2 billion
    last 5 years

    Enabled aggressive reinvestment in the business.

    Capital returned to common shareholders
    $635 million
    Q4 FY25

    Includes common share repurchases and declared common stock dividends.

    Common share repurchases
    $400 million
    Q4 FY25

    Part of capital returned to common shareholders.

    Declared common stock dividends
    $235 million
    Q4 FY25

    Part of capital returned to common shareholders.

    Capital returned to common shareholders
    over $2.1 billion
    FY25

    Through common share repurchases and dividends.

    Terminated hedges tailwind (NIM impact)
    about 2 basis points
    Q4 FY25

    Contributed to NIM expansion and expected to continue having a positive impact in 2026.

    Industry KPIs

    5
    MetricValueDetails
    Cet1 ratio11.7%%
    Payout ratioover 90%%
    Pretax margin31%%
    Organic fee growth2%%
    Net interest income$802 millionUSD

    Product announcements

    4
    ProductTypeDetails
    Digital Asset Platformlaunch
    New Investment Management Productslaunch
    New Investment Management Productslaunch
    Innovative Alternatives ETF offeringslaunch

    Deals & partnerships

    6
    Apex Fintech SolutionsMinority investment and strategic partnership to advance capabilities in the wealth services market.

    Enables State Street to capitalize on new opportunities and significantly strengthen its market position in wealth services.

    EthicInvestment in a technology leader that enables wealth advisers to build tailored client portfolios at scale.

    Cultivated as part of Investment Management's strategic partnerships to strengthen investment, distribution, and technology capabilities.

    smallcaseStrategic relationship with India's largest model portfolios platform.

    Cultivated as part of Investment Management's strategic partnerships to strengthen investment, distribution, and technology capabilities.

    Van Lanschot Kempen Investment ManagementPartnership to drive further growth in Europe.

    Cultivated as part of Investment Management's strategic partnerships to strengthen investment, distribution, and technology capabilities.

    Coller CapitalStrategic minority investment in one of the world's largest dedicated private market secondaries managers.

    Cultivated as part of Investment Management's strategic partnerships to strengthen investment, distribution, and technology capabilities.

    Groww AMCStrategic minority investment in the asset management arm of one of India's most innovative and fast-growing digital investment platforms.

    Announced after quarter end as part of Investment Management's strategic partnerships.

    Risks & headwinds

    4
    Decline in software and processing feesQ4 FY25

    declined 15% year-over-year in the fourth quarter

    Mitigation: Primarily driven by lower on-premises renewals, partially offset by a 7% increase in software-enabled revenues reflecting strong client engagement with CRD and continued progress in transitioning clients to our cloud-based SaaS platform.

    Seasonal moderation of NII2026

    some seasonal factors with respect to deposit mix that tend to moderate a bit

    Mitigation: The primary contributor was noninterest-bearing balances on the deposit portfolio in Q4 FY25, which will likely come off a little in 2026. Management is focused on managing for stable and consistent NII with growing net interest margin.

    Meaningful decline in currency volatilityQ4 FY25

    meaningful decline in currency volatility

    Mitigation: Q4 performance benefited from strong client franchise growth and healthy activity across all trading venues in FX trading services.

    Uncertainty around Basel III Endgame proposalongoing

    G-SIB proposal is very important and what actually happens with capital as it relates to G-SIB as a result of Basel III and everything else that the Fed is doing

    Mitigation: Management believes that collectively, the outcome will be favorable to G-SIBs, and State Street should benefit proportionately. The new regulatory approach is seen as more risk-based and predictable.

    What to watch in Q1 FY26

    5

    NII and NIM trajectory

    FY26
    CurrentQ4 NIM 1.10%
    TargetNIM higher than FY25 (1.00%) but lower than Q4 FY25 run rate

    Why it matters

    NII and NIM are key drivers of profitability, and their trajectory will indicate the success of balance sheet optimization efforts and impact of rate cuts.

    net interest margin probably comes in a little low, a little lower than the run rate from 4Q, but it comes in higher than what you saw last year. So somewhere -- the balance point is probably somewhere in the middle of that, and I think that underpins an expectation of net interest margin growth on a multiyear basis if you go over the medium term⏳.

    Q&A highlights

    7

    How does State Street balance driving operating leverage with investing for future growth, especially considering AI's potential to supercharge leverage?

    Management stated that the 2026 operating leverage outlook reflects a judgment call to invest significantly in multi-year strategic initiatives (private markets, wealth, digital, technology transformation) while still driving margin expansion. They noted that AI's contribution to savings will accelerate in H2 2026 and into 2027.

    “it's really a judgment call on balancing, continuing to drive key metrics higher while investing in multiyear attractive initiatives across our businesses.”

    asked by Glenn Schorr · answered by John Woods

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Investments & Digital Transformation

    State Street is actively investing in next-generation operating model transformation, leveraging AI-enabled capabilities to improve efficiency and decision-making. The company launched its Digital Asset Platform, enabling tokenization of assets, funds, and cash for institutional investors, aiming to bridge traditional and digital finance. Additionally, a partnership and minority investment in Apex Fintech Solutions strategically advanced State Street's position in the wealth services market, which is seen as a highly attractive growth opportunity.

    02

    Investment Services Momentum

    The Investment Services business achieved significant milestones, with Assets Under Custody/Administration (AUC/A) surpassing $50 trillion for the first time in 2025, reaching $53.8 trillion. Servicing fees increased 8% year-over-year, supported by higher market levels and net new business. Private markets servicing fees demonstrated strong growth of 12% in 2025, now representing approximately 10% of total servicing fees, up from 9% in 2024, highlighting a strategic pivot to faster-growing segments.

    03

    Investment Management Strength

    State Street's Investment Management business delivered record quarterly and full-year management fee revenue in 2025. Assets Under Management (AUM) reached an all-time high of $5.7 trillion, driven by higher market levels and $85 billion in quarterly net inflows. This marks the third consecutive year of net new asset growth above 3%, reflecting successful innovation, including the launch of 134 new products in 2025 and strategic partnerships with firms like Apollo Global Management and Blackstone for ETF offerings.

    04

    Markets Franchise Performance

    The State Street Markets franchise posted strong Q4 results, with FX trading revenue increasing 13% year-over-year and securities finance revenues up 8% year-over-year. Full-year fee revenue growth was double-digit across both segments, supported by higher client volumes and engagement. The company's strength in this area was recognized with 8 category wins in Euromoney's FX Awards for 2025, doubling its achievements from 2024.

    05

    Productivity & Operating Leverage

    State Street achieved its full-year productivity savings target of $500 million in 2025, representing 5.5% of its underlying cost base. Over the last five years, cumulative savings reached nearly $2 billion. This efficiency has enabled aggressive reinvestment in the business, driving revenue growth, positive operating leverage (over 100 basis points in Q4 and 220 basis points for FY25), and expanding pretax margins, which reached 31% in Q4 and 29% for the full year, excluding notable items.

    06

    Capital Allocation

    The company maintained a strong capital position, with a standardized CET1 ratio of 11.7% at quarter-end, up 40 basis points from the prior quarter. State Street returned over $2.1 billion in capital to shareholders in 2025 through common share repurchases and dividends, representing a total payout ratio of roughly 80%. In Q4 alone, $635 million was returned, including $400 million in share repurchases and $235 million in dividends, resulting in a payout ratio over 90% for the quarter.

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