STATE STREET CORP Q1 FY2025 earnings call

• Uncertainty and Purpose: Addresses global market uncertainty, reaffirms the purpose to create better outcomes for investors. - Financial Performance: Q1 saw fee revenue up 6%, total revenue up 5%, EPS at $2.04 (21% growth excluding notable items), and pre-tax margin at 30% excluding seasonal expenses. - Business Performance: Achieved $182 billion in AUCA wins in investment services, $55 million in new servicing fee wins with majority in back-office, and a State Street Alpha mandate win. - Investment Management: Management fees up 10%, net outflows due to a client event, but launched ETFs via partnerships and saw market share gains in ETFs. - Markets Franchise: FX and securities finance revenue growth, supported by strong balance sheet enabling $320 million return to shareholders via repurchases and dividends. - Expenses: Tight cost management with 3% year-over-year expense growth excluding notable items, and an ongoing productivity savings initiative. - CFO Search: CFO search process advanced, with an announcement expected in the near term.

Investment Services: New asset servicing AUCA wins totaled $182 billion, with new servicing fee revenue wins at $55 million (majority back-office) and one State Street Alpha mandate win. Fee revenue grew 6% year over year. Investment Management: Management fees increased 10% year over year, with net outflows of $13 billion driven by a client transition, but launched ETFs via partnerships and global ETFs surpassed $100 billion AUM. Markets Franchise: FX trading revenue grew 9% due to higher client volumes, and securities finance revenues rose 19% from higher balances. Software and Processing: Fees increased 9% year over year, with front office software up 10% to $158 million and annual recurring revenue up 15% from SaaS conversions. NII: Relatively flat year over year at $714 million, impacted by lower short-end rates and deposit mix, but strong deposit balances were maintained.

• Full-year fee revenue growth expected to be 3%-5%. - NII expected to be flat year over year, plus or minus low single digits. - Expenses projected to be up 2%-3%, with plans in place for various scenarios. - Target of $350 million to $400 million in new servicing fee revenue wins for the year. - Capital return plan to return approximately 80% of earnings to shareholders, with a step-up in share repurchases expected in Q2.

• Global market uncertainty including US trade policy, taxes, geopolitics, interest rates, deficits, and deregulation. - Potential impact of regulatory changes such as Basel III endgame and supplementary leverage ratio adjustments on capital and liquidity. - Volatility in financial markets affecting client behavior and business outcomes.

Q: On the capital return front, any adjustments to the expected pacing?

A: Mark Keating states they are on track with the plan communicated in January, expecting a step-up in Q2 repurchases and to return ~80% of earnings to shareholders.

Q: Thoughts on new contracts and signing up new business in the current environment?

A: Ron O'Hanley says clients are aware of the environment but no meaningful change in client behavior regarding onboarding new business, expecting to meet the new business win goals.

Q: Impact of regulatory changes like Basel III endgame on State Street?

A: Ron O'Hanley notes the regulatory environment is under review, expecting progress on capital and liquidity rules, which could be favorable for the industry overall.

Q: Bifurcation of non-interest-bearing and interest-bearing deposits trends?

A: Mark Keating mentions non-interest-bearing deposits are influenced by asset manager and owner clients, with levels ticking up, and reinvestment staying short in the current environment.