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STATE STREET CORP (STT) Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 total revenue rose 12% year-over-year to $3.412B, driven by broad-based fee revenue growth (+13% to $2.662B) and higher NII (+10% to $749M); GAAP EPS was $2.46 and $2.60 excluding notable items .
  • Investment Servicing and Investment Management both expanded, with Investment Management revenue up 15% YoY to $628M and pre-tax margin at 31.5% .
  • New business momentum accelerated: $154M of new servicing fee revenue wins in Q4, $1.1T AUC/A wins, and $346M fee revenue backlog with $3.0T AUC/A to be installed; Alpha added 2 mandates (7 in 2024) .
  • FY2025 outlook: fee revenue up ~3–5%, NII ~flat (+/– low-single-digits), expenses up ~2–3%, positive operating leverage; currency translation to reduce fee growth by ~1ppt .
  • Consensus estimate data from S&P Global was unavailable due to vendor limits; therefore, beats/misses vs Street cannot be assessed this quarter (S&P Global request limit exceeded).

What Went Well and What Went Wrong

What Went Well

  • Broad-based fee growth: servicing (+6% YoY), management (+20%), FX trading (+17%), securities finance (+22%), and software/processing (+9%) supported revenue expansion .
  • Strong sales and pipeline: $154M Q4 servicing fee wins; $346M fee revenue and $3.0T AUC/A to be installed; Alpha mandates totaled 7 in 2024, underscoring strategy execution .
  • Management’s tone confident on sustainable fee growth: “the real guide…is 5% to 7% [gross];…FX headwind…takes it down to 3% to 5% for 2025” (CEO) .

What Went Wrong

  • Deposit mix headwinds to NII: management expects continued decline in non-interest-bearing deposits and sensitivity to non-U.S. rate cuts ($5–$10M per cut per quarter in EUR/GBP) .
  • Pricing headwinds and client activity adjustments persisted in servicing fees, partly offsetting market and new business tailwinds .
  • Estimates comparison unavailable: S&P Global consensus retrieval failed due to rate limits; beats/misses vs Street cannot be evaluated this quarter (S&P Global request limit exceeded).

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($USD Millions)$3,043 $3,259 $3,412
Total Fee Revenue ($USD Millions)$2,365 $2,616 $2,662
Net Interest Income ($USD Millions)$678 $723 $749
GAAP EPS ($USD)$0.55 $2.26 $2.46
EPS ex-notables ($USD)$2.04 $2.26 $2.60
Pre-tax Margin (GAAP, %)6.6% 28.4% 28.1%
Pre-tax Margin (ex-notables, %)27.0% 28.4% 29.8%
Consensus Revenue ($USD Millions)N/AN/AN/A
Consensus EPS ($USD)N/AN/AN/A

Segment and revenue detail:

Line Item ($USD Millions)Q4 2023Q3 2024Q4 2024
Servicing Fees$1,212 $1,266 $1,283
Management Fees$479 $527 $576
FX Trading Services$307 $374 $360
Securities Finance$97 $116 $118
Software & Processing$237 $208 $259
Net Interest Income$678 $723 $749

KPIs:

KPIQ4 2023Q3 2024Q4 2024
Period-end AUC/A ($T)$41.8 $46.8 $46.6
Period-end AUM ($T)$4.10 $4.7 $4.7
New Servicing Fee Revenue Wins ($M)N/A$84 $154
AUC/A Wins ($T)N/A$0.466 $1.1
Fee Revenue Backlog to be Installed ($M)N/A$276 $346
AUC/A to be Installed ($T)N/A$2.4 $3.0
Net Interest Margin (FTE) (%)1.16 1.07 1.07

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Fee Revenue GrowthFY2025Not previously providedUp ~3–5% YoY; currency translation reduces growth by ~1ppt New
NIIFY2025Not previously providedRoughly flat YoY (+/– low-single-digits) New
ExpensesFY2025Not previously providedUp ~2–3% YoY; ~$400M+ incremental investments; ~$500M productivity savings New
Operating LeverageFY2025Not previously providedPositive fee and total operating leverage New
DividendQ1 2025Prior run-rate$0.76 per share declared, payable Jan 13, 2025 Maintained/increased vs earlier 2024 actions

Earnings Call Themes & Trends

TopicQ2 2024 (Prev-2)Q3 2024 (Prev-1)Q4 2024 (Current)Trend
AI/Technology initiativesCRD SaaS migration; 10%+ software growth; Alpha installs to 23; path to $1B software in 5 years Software-enabled up; Alpha wins and “enterprise outsourcer” positioning Machine learning broadly deployed; early LLM/AI use cases in client service and HR; cautious deployment with data safeguards Building from ML to targeted AI deployments
Deposits/NIINII +6% YoY; deposit growth across pricing stack; stabilization expected over next few quarters NII up 16% YoY; repo tailwinds modest; inflection expected “next few quarters” NII guide considers deposit mix headwinds; EUR/GBP rate cut sensitivity; deposits expected ~$230–$240B range with seasonality Stabilizing with non-interest-bearing decline; rate sensitivity non-U.S.
Sales/Alpha/Backlog$72M servicing wins; backlog $276M fee revenue and $2.4T AUC/A to be installed $84M servicing wins; two Alpha mandates; $466B AUC/A wins $154M servicing wins; $346M fee backlog; $1.1T AUC/A wins; 2 Alpha mandates Accelerating sales and installation pipeline
SSGA product & flowsAUM record $4.4T; ETF repricing supports share; institutional outflows due to rebalancing Record net flows $100B; market share gains in low-cost and EMEA Record management fees; $64B net inflows; retail intermediary focus; ~60 launches in 2024 Sustained product innovation and distribution expansion
Regulatory/legalCCAR dividend increase plan; no major new items FDIC special assessment impact noted earlier in year FDIC special assessment release $31M; notable items reconciled Prior-year headwinds abating
Prime services/lendingLending double-digit growth to support clients Securities finance up; more balance sheet to support clients Prime services integral; ~$450M securities finance revenue in 2024; RWA up $2B to serve clients Continued growth to deepen client relationships

Management Commentary

  • “2024 marked an important year… strong results… both positive fee and total operating leverage supported by record NII” (CEO) .
  • “The real guide… is 5% to 7% [gross fee growth]… FX headwind… takes it down to 3% to 5% for 2025” (CEO) .
  • “We expect our loan growth to continue… ~14% in 2024… particularly with private markets clients” (Investment Services CFO) .
  • “Alpha… distinctive front-to-back… longer contract terms (7+ years)… ~35 announced, ~25 installed” (CEO/Investment Services CFO) .
  • “AI… broad deployment of machine learning today… early LLM use cases (client service chat, HR)… careful data controls” (CEO) .

Q&A Highlights

  • NII outlook drivers: deposit levels/mix, non-U.S. rate sensitivity ($5–$10M per EUR/GBP cut per quarter), loan growth, investment portfolio rollovers (~$4B per quarter; +100–150bps pickup) .
  • Deposits: seasonality after year-end; non-interest-bearing expected to trend lower; overall deposits expected ~$230–$240B range (directional) .
  • Fee growth: core fee growth ex BlackRock roll-off and FX described; gross 5–7% with nets to 3–5% for 2025 .
  • Prime services and securities finance: integral growth area; ~one-third to half of ~$450M securities finance revenue; deepens client relationships .
  • Capital return: commitment to return ~80% of earnings; manageable leverage constraints; CET1 is the dominant binding constraint .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q4 2024 were unavailable due to vendor limits during retrieval; as a result, beats/misses vs Street cannot be assessed this quarter (Values retrieved from S&P Global were unavailable due to request limit exceeded).

Key Takeaways for Investors

  • Fee momentum plus backlog ($346M to be installed; $3.0T AUC/A) supports FY2025 fee growth target of ~3–5%, despite FX translation headwinds (~1ppt) .
  • NII to stabilize around current levels with modest variability; watch non-U.S. rate paths (EUR/GBP) and ongoing decline in non-interest-bearing deposits .
  • Private markets lending and prime services are strategic growth levers, reinforcing cross-sell (servicing, FX, repo) and deepening client relationships .
  • SSGA’s product cadence (~60 launches in 2024) and retail intermediary expansion underpin double-digit management fee growth; sustained ETF share gains in U.S./EMEA .
  • Alpha front-to-back wins (2 in Q4; 7 in 2024) and longer contract terms increase revenue durability and retention; installation standardization should improve onboarding cadence .
  • Operating discipline: FY2025 expense growth ~2–3% with ~$500M productivity saves; continued positive operating leverage targeted .
  • Capital return policy (~80% of earnings) remains intact; watch CET1 dynamics and leverage ratios as balance sheet grows and preferred equity usage flexes .

Bolded and surprise-worthy elements:

  • Record-like breadth in fee growth across categories and $154M Q4 servicing wins; AUC/A wins $1.1T in the quarter .
  • FY2025 fee growth guide (3–5%) and NII flat guide despite deposit mix headwinds—supported by loan growth and security yield rollovers .

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