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Home»Banking»State Street keeps full-year guidance despite tariff turmoil
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State Street keeps full-year guidance despite tariff turmoil

April 18, 2025No Comments4 Mins Read
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State Street keeps full-year guidance despite tariff turmoil
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State Street brushed off uncertainty surrounding a potential global trade war spurred by President Donald Trump and affirmed its full-year guidance. 

State Street maintained its goal of $350 million to $400 million in new servicing fee revenue in 2025 due to strong new-business volume, despite uncertainty prevailing in the global financial market, Chairman and CEO Ronald O’Hanley said on the company’s earnings call Thursday. 

“While the current environment presents some uncertainty, our existing pipeline of investment services fees is robust, and I am confident in our platform and the improvements we have made to our sales effectiveness … while also being mindful of the potential for variability in the current environment,” O’Hanley said, citing taxes, geopolitics, deficits and changing regulation as other variables. 

The investment and custody bank also maintained its outlook for net interest income, which it expects to be flat, with a range of up by low-single digits to down by low-single digits, interim Chief Financial Officer Mark Keating said on the call. 

“In 2024, we grew [net interest income] by 6% year over year, so it’s a pretty high stepping off point,” Keating said. 

State Street sees loan growth and investment portfolio rollover as potential tailwinds for NII but counts the interest rate environment and changes to the bank’s deposit mix as potential tailwinds. 

“I use ‘potential’ because some of those can become tailwinds as well, depending on macroeconomic developments,” Keating said. 

State Street joined KeyBank in reaffirming full-year guidance today. Truist and Regions Financial trimmed their outlooks.

For the first quarter ended March 31, State Street lived up to analysts’ expectations on profits but missed on revenue expectations. 

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Net income for the Boston-based investment and custody bank landed at $644 million, a 39% year-over-year increase, beating analysts’ estimates of $583.58 million. Earnings per share amounted to $2.09, ahead of analysts’ $2.01 target. 

Revenue, on the other hand, tallied $2.83 billion, below analysts’ expectations of $3.32 billion. 

A 6% year-over-year increase in fee revenue helped offset flat net interest income in the first quarter, reflecting “broad based strength across the franchise,” according to State Street. 

Net interest income landed at $714 million, reflecting higher investment security yields and continued loan growth, which grew almost 16% to $44 billion. Those gains were partially offset by lower average short-end rates and a deposit mix shift. Deposits grew 11% to $243 billion. 

“We had talked about overall client deposits in the $230 to $240 billion range when we gave our original guide,” Keating said. “I think the high end of that range right now is probably a better estimate.We still expect there to be some decrease in non-interest bearing [deposits], but right now, we’re seeing it hold up pretty well.”

Fee revenue breakdown was as follows: 

  • Servicing fee revenue increased 4% year over year to $1.28 billion, with net new business and increased client activity offsetting “normal pricing headwinds;” 
  • Management fees increased 10%, propped up by new partnerships such as an equity investment in technology-driven asset management platform Ethic Inc., product launches with Apollo Global Management and Bridgewater Associates, and the launch of the first Saudi Arabia fixed-income UCITS ETF in Europe with the Saudi Public Investment Fund; 
  • FX trading services fees increased 9% on higher volumes driven by market volatility; 
  • Securities finance fees increased 19%, largely due to higher client lending balances but partially offset by lower agency spreads; 
  • Software and processing fees increased 9%, with annual recurring revenue increasing 15% as a result of more than 25 new software-as-a-service clients; and, 
  • Other fee revenue decreased 36%. 
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Evercore senior analyst Glenn Schorr called the results “decent (but not great)” in a note to investors Thursday. 

“Some concerns that we think investors will focus more heavily on are: deposit mix shift continues to be a problem as [non-interest bearing] deposits fell ~5% q/q (maybe some NII pressure to come),” Schorr said. “FX trading left something to be desired as it was up 9% y/y but only 1% q/q despite elevated volatility in March.” 

Fee revenue increases came amid growth in State Street’s two key portfolios. Investment Servicing assets under custody and/or administration increased 6% to $46.7 trillion, driven by “higher quarter-end market levels and flows.” Investment Management assets under management rose 9% to $4.7 trillion, also buoyed by higher quarter-end market levels and net inflows. 

Expenses excluding the impacts from a $130 million Federal Deposit Insurance Corp. special assessment in the first quarter of 2024 declined 3% to $2.51 billion, but increased 3% on a GAAP basis. Information systems and communications expenses increased 15% to $497 million due to higher technology and infrastructure investments.

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