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State Street (STT) Q2 Earnings call transcript Jul 16, 2024

AInvestWednesday, Jul 17, 2024 11:25 am ET
1min read

State Street Corporation, a leading financial services company, reported a strong second quarter performance with sustained momentum, as evidenced by fee and total revenue growth, continued expense discipline, and a return on equity of nearly 12%. The company's financial health and growth prospects are promising, with significant investments in its business and a commitment to returning capital to shareholders.

During the call, CEO Ron O’Hanley highlighted the successful consolidation of their second operations joint venture in India, a strategic move that will enable State Street to improve client experience and unlock further productivity savings. The transition to T+1 settlement was also discussed, showcasing State Street's position as an essential partner to clients and underscoring the depth of their operational capabilities.

Despite mixed market conditions, State Street demonstrated resilience and focus, executing against key strategic priorities. The company's financial performance was bolstered by revenue growth of 3%, with a durable nature evident in the quarter's fee and total revenue growth. AUC/A and AUM reached record levels, supported by market tailwinds.

Servicing fees, which declined 2% year-on-year, were more than offset by higher average equity market levels and net new business. The strong pipeline and anticipation of a pickup in installations in the coming quarters bode well for future servicing fee revenue growth. In the Global Advisors segment, management fees were up 11% year-on-year, driven by higher average equity markets and net inflows.

NII performance was robust, with a 6% increase year-on-year and a 3% sequential increase, reflecting higher investment portfolio yields and loan growth. The company's balance sheet remains strong, enabling over $700 million in capital returns year-to-date.

State Street's strategic focus on Alpha, a client value proposition that creates a clear competitive advantage, is paying off. A large new client was won in the APAC region, demonstrating the appeal of State Street's Alpha strategy. This win, coupled with strong servicing fee revenue wins, positions the company well for future growth.

Looking ahead, State Street is committed to returning excess capital to shareholders, subject to market conditions. The company's outlook for the full year remains positive, with a focus on delivering positive fee operating leverage and positive total operating leverage, excluding notable items.

The earnings call provided valuable insights into State Street's financial health and strategic initiatives. The company's strong performance in a challenging market environment, combined with its focus on client experience and productivity savings, underscores its position as a leader in the financial services sector. With a robust pipeline and continued investment in its business, State Street is well-positioned for future growth and success.

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