State Street Q1 2025 presentation: EPS jumps 49% as fee revenue grows 6%

Introduction & Market Context

State Street Corporation (NYSE:STT) released its first quarter 2025 financial results on April 17, showing significant earnings growth and positive operating leverage across its business segments. The financial services company, which specializes in investment servicing, management, and research, reported an EPS of $2.04, representing a substantial 49% increase year-over-year, or 21% excluding notable items.

The strong performance comes amid a backdrop of higher global market levels and client flows, which helped boost the company’s assets under custody and administration (AUC/A) to $46.7 trillion, up 6% from the same period last year. The results demonstrate State Street’s continued momentum following its better-than-expected performance in Q3 2024, when the company exceeded analyst expectations with an EPS of $2.6.

Quarterly Performance Highlights

State Street reported total revenue of $3.3 billion for Q1 2025, a 5% increase compared to the same period last year. Fee revenue, which comprises the majority of the company’s income, grew by 6% year-over-year. The company also demonstrated strong expense discipline, with total expenses of $2.5 billion, down 3% compared to Q1 2024, though up 3% excluding notable items.

As shown in the following comprehensive overview of the quarter’s performance:

These results translated into positive operating leverage of 7.2 percentage points (1.8 percentage points excluding notable items) and positive fee operating leverage of 8.6 percentage points (3.3 percentage points excluding notable items). The company achieved a pre-tax margin of 25%, with return on equity (ROE) of 11% and return on tangible common equity (ROTCE) of 16%.

State Street’s detailed financial results show improvement across most revenue categories:

Detailed Financial Analysis

The company’s assets under custody and administration (AUC/A) reached $46.7 trillion at quarter-end, representing a 6% increase year-over-year, primarily driven by higher market levels and positive flows. Assets under management (AUM) grew to $4.7 trillion, up 9% from Q1 2024, reflecting both higher market levels and net inflows.

The following chart illustrates the growth in AUC/A and AUM, along with market indices performance:

Breaking down the fee revenue components, servicing fees totaled $1,275 million, up 4% year-over-year but down 1% quarter-over-quarter. The company reported new servicing fee revenue wins of $55 million in Q1, with trailing 12-month wins of $365 million. State Street also secured $182 billion in new AUC/A wins during the quarter.

The servicing fees performance and business momentum are illustrated in the following chart:

Management fees showed strong growth, reaching $562 million, up 10% year-over-year though down 2% quarter-over-quarter. This growth was supported by higher average market levels and continued momentum in ETFs, with market share gains in U.S. Low Cost products and inflows across Fixed Income, Gold, and EMEA products.

The management fees trend and business momentum are shown below:

FX trading services revenue increased to $362 million, up 9% year-over-year and 1% quarter-over-quarter, primarily due to higher volumes. Securities finance revenue grew to $114 million, up 19% year-over-year but down 3% quarter-over-quarter, largely driven by higher client lending balances, partially offset by lower Agency spreads.

Software (ETR:SOWGn) and processing fees totaled $225 million, up 9% year-over-year but down 13% quarter-over-quarter. The company’s Annual Recurring Revenue (ARR) increased approximately 15% year-over-year, driven by 25+ SaaS client conversions and implementations. Professional services and Software-enabled revenue combined increased 7% year-over-year.

Net interest income (NII) was $714 million, flat year-over-year but down 5% quarter-over-quarter. The company’s average assets increased 13% year-over-year and 3% quarter-over-quarter, primarily due to growth in total deposits and balance sheet funding.

Strategic Initiatives

State Street continues to focus on expanding its capabilities and client solutions through strategic partnerships and product innovations. The company announced a strategic investment and partnership with Ethic Inc., launched innovative products leveraging Apollo Global Management (NYSE:APO) and Bridgewater Associates, and established a partnership with the Saudi Arabia Public Investment Fund.

In the ETF space, State Street maintained momentum and gained market share in U.S. Low Cost products, while also seeing inflows across Fixed Income, Gold, and EMEA products. The company also launched three new U.S. money market funds with a new share class aimed at the retail market via institutional platforms.

These strategic initiatives align with the company’s focus on innovation and expanding its market presence, which was also highlighted in its Q3 2024 earnings call, where CEO Ron O’Hanley noted the launch of 20 new ETFs and partnerships as key elements strengthening the company’s market position.

Capital Position and Shareholder Returns

State Street maintained a strong capital position with a CET1 ratio of 11.0% and a State Street Bank and Trust LCR of 139% at quarter-end. The company returned $320 million to common shareholders during the quarter, including $100 million in share repurchases and $220 million in declared dividends.

The following chart illustrates the company’s capital and liquidity ratios:

This capital return strategy continues the trend seen in Q3 2024, when the company returned $670 million to shareholders, reflecting its commitment to delivering value while maintaining a strong balance sheet.

Forward-Looking Statements

Looking ahead, State Street is well-positioned for continued growth with $3.1 trillion in AUC/A yet to be installed and $356 million in servicing fee revenue to be installed. The company’s uninstalled revenue backlog reached the highest level on record, driven by record bookings in Q4 2024.

For fiscal year 2025, State Street expects total fee revenue growth of 4-5% and a similar increase in net interest income. The company aims to achieve $500 million in productivity savings by the end of 2025, with expenses projected to rise by approximately 3.5%.

These projections suggest State Street is on track to maintain positive operating leverage and continue its momentum from 2024, when it exceeded analyst expectations with strong financial performance across its business segments.

Full presentation:

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