State Street Corporation (NYSE: STT) concluded 2025 on a high note, reporting its highest-ever assets under management (AUM) at $5.7 trillion, reflecting a 20% year-over-year increase. The firm's fourth-quarter earnings surpassed analyst expectations, with adjusted earnings per share (EPS) of $2.97 compared to the consensus estimate of $2.85.
During the quarter, State Street also reported revenue of $3.667 billion, representing a 7% increase relative to the prior year and exceeding the estimated $3.599 billion forecast by market analysts. Asset under custody and administration (AUC/A) rose 16% to reach a record $53.8 trillion at quarter-end. This growth was driven primarily by improved market valuations and positive inflows.
The period also saw the introduction of 37 new products, including 16 exchange-traded funds (ETFs), bolstering the company’s investment services offerings.
Revenue Growth Primarily Fueled by Fee Income
The company’s revenue growth largely stemmed from an 8% increase in fee-based income, propelled by stronger performances in servicing fees, investment management, foreign exchange (FX) trading, and securities finance.
- Servicing fees climbed 8%, reflecting robust activity in asset servicing.
- Management fees advanced 15%, supporting the expanded AUM.
- FX trading revenue grew 13%, benefiting from market demand.
- Securities finance fees rose 8%, contributing further to overall fee growth.
However, these gains were partially offset by a 15% decline in software and processing fees, reducing the total fee revenue expansion.
Quarterly Financial Metrics and Expense Analysis
Net interest income (NII) for the quarter increased 7% to $802 million, a result of a 3 basis point rise in the net interest margin (NIM) and a 4% growth in average interest-earning assets. The modest improvement in NIM contributed positively to the bank's interest income generation.
Credit provisions remained contained, with a total provision for credit losses of $8 million, down from $12 million in the same quarter of the prior year. The prior period included elevated reserves tied to commercial real estate loan exposures and reflected the shifting economic conditions.
Total operating expenses increased by 12%, mainly influenced by $206 million in notable items recognized during the quarter. Included were $226 million in net repositioning costs, largely attributable to workforce optimization ($111 million) and initiatives to streamline the real estate portfolio ($69 million).
Capital Position and Shareholder Returns
Standardized Common Equity Tier 1 (CET1) capital ratio strengthened to 11.7% by quarter-end. This represented an 80 basis point improvement from the fourth quarter of 2024, primarily driven by earnings generation and modestly tempered by capital distributions. Compared with the previous quarter, CET1 increased by 40 basis points due to earnings and reduced risk-weighted assets (RWAs), offset in part by capital returns.
During the quarter, State Street returned $635 million in capital to its common shareholders, which included $400 million in share repurchases and $235 million paid in dividends (equivalent to 84 cents per share), reflecting the company's commitment to delivering shareholder value.
Forward-Looking Guidance
Chief Executive Officer Ron O’Hanley outlined strategic focuses for 2026, emphasizing the integration of advanced technology and artificial intelligence to enhance operational transformation. Growth plans include expanding the core business and innovating client solutions.
The corporation anticipates fee revenue to grow approximately 4% to 6% on a year-over-year basis in 2026. Net interest income is projected to rise at a low single-digit percentage rate, supported by expectations for an improving net interest margin.
Operating expenses are forecasted to increase by around 3% to 4%, reflecting deliberate investments in strategic growth projects and continued transformation efforts.
Market Reaction
Following the earnings announcement, State Street’s stock price declined by 2.42% during premarket trading on Friday, settling at $132.99. Although trading lower, the stock remained close to its 52-week high of $137.04, indicating a degree of market resilience despite the pullback.