State Street's 2025 Outlook: Navigating NII, Fee Growth, and Strategic Deposits Amid Market Challenges

Net Interest Income (NII) Outlook and Factors:
- State Street Corporation's net interest income (NII) guidance for 2025 is influenced by deposit levels and mix, and the impact of rate cuts, particularly in non-US currencies.
- The guidance is based on an expectation of elevated deposit levels in the $230 to $240 billion range, with a similar forecast for noninterest-bearing deposits, which were down about 12% in 2024.
- Factors affecting NII include asset sensitivity to non-US rates, which could result in a meaningful impact of around $5 to $10 million per cut per quarter, and expected loan growth and portfolio rollovers.

Fee-Based Revenue Growth and Strategy:
- State Street's fee-based businesses are expected to achieve core organic revenue growth rates of 5% to 7% in 2025, excluding certain headwinds.
- Growth is driven by a multi-year strategy focused on enhancing service quality, restructuring sales teams, and investing in products and services, leading to a 45% increase in servicing fee sales since 2022.
- The company has a significant backlog, with nearly $350 million at the end of 2024, indicating substantial potential for ongoing growth.

Deposit and Loan Growth Strategies:
- State Street's deposit levels are expected to remain elevated with a focus on maintaining a strategic deposit base, despite seasonal fluctuations.
- Loan growth is anticipated to continue at around 14%, driven by support for private market clients and the integration of lending with servicing fee growth.
- The company is leveraging its capital-light model to support client needs, with no immediate lending growth constraints identified.

Prime Services and Asset Management Performance:
- Prime services revenue exceeded $450 million for the year, with nearly half attributed to prime services, supporting client relationships and enhancing other revenue streams.
- SSGA achieved strong organic growth, driven by innovative product development and distribution capabilities, with over 60 new products launched in 2024, contributing to market share gains in EMEA and the US.