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- Full-Year Fee Revenue Growth: Increased by 7%.
- Total (EPA:TTEF) Revenue Growth: Increased by 9%.
- EPS: $8.21, up from $5.58 in 2023.
- Pre-Tax Margin Expansion: Expanded by more than 100 basis points.
- Return on Average Tangible Common Equity: 19%.
- AUC/A Wins: Over $2.3 trillion in 2024, including $1.1 trillion in Q4.
- New Servicing Fee Revenue Wins: $377 million for the full year, $154 million in Q4.
- Net New Assets: $146 billion in 2024, including $64 billion in Q4.
- ETF Inflows: Record levels in 2024.
- FX Trading Revenue Growth: Double-digit growth.
- Capital Returned to Shareholders: $2.2 billion, including share repurchases and a 10% dividend increase.
- Productivity Savings: Approximately $500 million year-over-year.
- Fourth-Quarter Fee Growth: Up 13% year-on-year.
- Fourth-Quarter NII Growth: Up 10% year-on-year.
- Fourth-Quarter Pre-Tax Margin: Approximately 30%.
- Fourth-Quarter ROE: Over 13%.
- Fourth-Quarter Management Fees: Increased 20% year-on-year to $576 million.
- Fourth-Quarter FX Trading Revenues: Increased 17% year-on-year.
- Fourth-Quarter Securities Finance Revenues: Increased 22% year-on-year.
- Fourth-Quarter Software (ETR:SOWGn) and Processing Fees: Up 9% year-on-year.
- Fourth-Quarter NII: $749 million, up 10% year-on-year.
- Fourth-Quarter Average Total Deposits: Up 15% year-on-year.
- Fourth-Quarter Capital Return: $770 million, total payout ratio of 106%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- State Street Corp (NYSE:NYSE:STT) reported a strong close to 2024 with a 7% increase in full-year fee revenue and a 9% increase in total revenue.
- The company achieved a record full-year EPS of $8.21, up from $5.58 in 2023, with a 13% year-over-year growth excluding notable items.
- State Street Corp (NYSE:STT) generated over $2.3 trillion in AUC/A wins in 2024, with $1.1 trillion in Q4 alone, demonstrating strong sales performance.
- The Investment Management franchise achieved record management fees and generated $146 billion of net new assets in 2024, indicating robust growth.
- The company returned $2.2 billion of capital to shareholders in 2024, including common share repurchases and a 10% increase in quarterly dividends.
- State Street Corp (NYSE:STT) faced a headwind of roughly 1 percentage point to year-on-year growth due to a previously disclosed client transition.
- The company experienced pricing headwinds and lower client activity, which impacted servicing fee growth.
- Despite strong performance, the company anticipates a headwind of nearly 1 percentage point to servicing fee revenue in 2025 due to client transitions.
- The company's CET1 ratio decreased by approximately 70 basis points quarter on quarter, indicating some pressure on capital levels.
- State Street Corp (NYSE:STT) expects NII to be roughly flat for 2025, with potential fluctuations due to global monetary policy and deposit mix.
A: Mark Keating, Incoming Interim CFO, explained that the company has been on a multi-year journey to enhance its servicing fee business. They have increased sales significantly from previous years, reaching nearly $380 million in 2024. The focus has been on restructuring sales teams, realigning incentives, and investing in business products and services. The company targets a revenue retention rate of 97% and expects fee compression of about 2%. The backlog of future revenue, which increased by 75% to $350 million, supports sustainable growth.
Q: What gives you confidence in the sustainability of the servicing fee growth?
A: CEO Ronald O'Hanley highlighted three factors: an intense focus on improving service quality through technology investments, enhancing capabilities in core custody and private markets, and building up sales capabilities. These elements are now in place, providing confidence in future growth.
Q: Could you elaborate on your capital management strategy for 2025, especially regarding the 80% payout target?
A: Ronald O'Hanley stated that the company aims to return 80% of earnings to shareholders through dividends and buybacks. There is a seasonality to this approach, with a modest start and progression throughout the year, similar to the previous year.
Q: How has the company managed to achieve strong fee growth despite market challenges?
A: Eric Aboaf, CFO, noted that the company achieved broad-based fee growth across the franchise, with a 13% increase in fees and a 10% rise in net interest income. This was driven by higher market levels, net new business, and strategic investments in private markets and other growth areas.
Q: What are the expectations for fee revenue and expenses in 2025?
A: Mark Keating expects fee revenue to grow by 3% to 5%, with a headwind from a previously disclosed client transition. Expenses are anticipated to rise by 2% to 3%, with continued productivity savings enabling self-funding of growth investments. The company aims for positive fee operating leverage and potentially positive total operating leverage, depending on net interest income performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.