State Street Corp Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Ken Usdin - Autonomous US - Analyst : Great. Thanks. Good morning. I did want to ask just on the capital return front, I know you mentioned the 2Q step-up and the 80% payout still holds. But does anything in the environment with regarding uncertainty and deposit flows, just potentially also change your view around how you might think about returning capital. I know the slow start is kind of how you started last year as well, but just in terms of thinking like -- how would you think about any adjustments to that expected pacing that you reiterated? Thanks.

Question: Ken Usdin - Autonomous US - Analyst : Okay. Got it. And second question, just on the big picture environment around new contracts and just how people are reacting to the environment, especially on the servicing side, you've done a great job putting on more new wins. But any changes to just how you sense the world is feeling in terms of signing up new business? And does anything then change also in terms of your ability to onboard like you were talking about in January? Thank you.

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : Hey. Good morning. Maybe just, Mark, you talked -- and Ron, you've talked about recalibrating expenses quite a bit in a lot of different scenarios. So how much flex do you have in the expense line if revenues are worse? Just be helpful to think about the range of outcomes there?

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : Okay. Great. That's helpful. And just maybe trying to think around the current environment in April, it's been very volatile. I think you guys talked a little bit about being there for your clients. Are you seeing elevated deposit flows and sort of -- there's some good volatility for you guys in FX and sec lending, and deposits. So how are you seeing that play out so far in April?

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Thank you. Good morning, guys. I was hoping to just dig in a little more into the current environment and specifically, when you

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : I got you. And then one for maybe both of you guys, but definitely encouraging to see the fee guide staying intact despite what obviously has been a much tougher environment. Just mechanically flowing through the mark-to-market dynamics would put some pressure, I guess, on the outlook. So just curious what's holding up better in the business to fill the gap, I guess, from the market impact on fees in 2025 to keep your guidance largely intact?

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : No, please.

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Great. Perfect. And then just a clarification for me just on this front, you guys are assuming market levels are flat from kind of current levels for the rest of the year underwriting this guide?

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Nobody knows. I get it.

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Thanks very much. So just tacking on to your good sales momentum and revenue momentum comments on keeping the growth, which is great. I'm curious; you made that shift towards back office as the faster time to implement on revenue. You also just commented about managing and focusing on the overall relationship. So I'm curious, does the $350 million to $400 million, does that leave you in a position to take share? We can't see the net; we only see the gross. And then most importantly, what do you do once you get the back office in the door to expand the relationship? What are some of those likely areas? And what kind of successes have you had with that given your focus. Thanks.

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Okay. I appreciate all that. One quick follow-up on the deposits that are coming in the door -- and we're at the high end -- given this uncertainty, should we assume your reinvestment stays super short, like what are you thinking about on the reinvestment side, Mark?

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : So that impacts the NIM for the time being?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hi. In terms of -- first, the CFO search, I guess, you can stay the course right now if you want to. When will we know who the next CFO is?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. And then just more generally, I know this is the big picture question and you reaffirmed your fee guide. And you mentioned April deposits and some of the trading is still going well. So I guess that's all good, but there's a scenario here that's reflected in the stock market and Chairman Powell's speech yesterday that it might not end so well. And you're in so many countries moving so much money, how do you put your arms around -- I wouldn't even call it a tail risk, it'd be kind of almost a base case, the stock market as a whole. How can State Street survive in the environment where there's a global trade war? Thank you.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : One short follow-up. Just remember a couple of decades ago, I thought it was like 80% of your expenses were fixed costs, right? I think that's changed -- been reduced over the years. Do you have a sense for how much of your expenses are variable over the one- to two-year period? I know in the long term, all expenses are variable, right? But in the next one to two years, is it like -- I don't know -- what's the percentage?

Question: Betsy Graseck - Morgan Stanley & Co. LLC - Analyst : Hi, good morning. Hi. I did just want to understand a little bit about the NII outlook and what the scenario is that it's based on. I know you mentioned flat year on year, plus or minus low single digits, either side. I'm assuming you're using the forward curve in the various countries, but if there's any difference to that, let me know. And then I also wanted to understand what is a -- what is the scenario that would drive plus low single digits year on year? And what are the scenarios that drive below, less than low single digits. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 17, 2025 / 3:00PM, STT.N - Q1 2025 State Street Corp Earnings Call

Question: Betsy Graseck - Morgan Stanley & Co. LLC - Analyst : Okay. Higher for longer is the positive. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 17, 2025 / 3:00PM, STT.N - Q1 2025 State Street Corp Earnings Call

Question: David Smith - Truist Securities, Inc. - Analyst : Hi. So you mentioned that about half of your new business over the past year, I think, came from Alpha. Is it as simple as just taking the servicing fee win number, dividing it by 2 and dividing it by the 7 mandate wins for Alpha you had to get a sense of the relative impact of like an Alpha client versus another client? Or is there anything else that we should be thinking about in terms of the revenue rate of wins attached to Alpha versus other assets?

Question: David Smith - Truist Securities, Inc. - Analyst : Just trying to get a sense of like if your Alpha penetration accelerates, what that could mean for the revenue rate in asset servicing?

Question: Vivek Juneja - J.P. Morgan Securities LLC - Analyst : Thanks. Ron, a question for you, maybe, or Mark. When I look at your servicing fee revenues, what's the mix in terms of US versus non-US? And if you look at your servicing new business wins over the past year -- not concerned about quarter-to-quarter -- what percentage came from non-US versus US? And a similar kind of a breakdown for asset management.

Question: Vivek Juneja - J.P. Morgan Securities LLC - Analyst : Right. That would have been my guess. And is it similar in SSGA?

Question: Vivek Juneja - J.P. Morgan Securities LLC - Analyst : And I guess given what's going on in the geopolitics right now, do you see there could be some shift in this now? If there's a desire to go more local for some of your clients? Do you see that it may be too early because it's all just happened and yours are very long contracts with very long timelines? But do you see that starting to potentially shifting? And what does that mean then for you?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Thank you. Good morning, guys. Can you guys -- you talked on the call about growing your obviously, net interest income, and you talked about the robust loan growth. Can you share with us some color about that loan growth? I know in the fourth quarter, the regulators asked everybody, the top banks, to disclose in the best efforts way, the loans to non-depository financial institutions, and you guys certainly did that along with your peers. And you showed that you -- most of your loans are in the business credit intermediary category. So can you give us some color where the growth is coming from, and what type of risk might be associated with it?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Very good. And I assume most of this loan growth is direct and is not -- participations with other firms. Is that fair?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Okay. And then, Ron, just a bigger picture question for you. Obviously, there's a lot of potential change coming on the regulatory front with different capital ratios, possibly the Basel III Endgame changes with new nominee for the Vice Chair of Safety and Soundness at the Fed, is even talked now of excluding government securities possibly from the supplementary leverage ratios. When you guys look at it and if these changes take place, can you share with us how it would impact you folks, and number two, how it might impact your actual business in terms of more liquidity in, let's say, the treasuries market, if that's what happens with the exclusion of the US treasuries and SLR?