State Street Corp Q3 2024 Earnings Call Transcript

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

Question: Glenn Schorr - Evercore ISI - Analyst : I appreciate all that detail. I like the NII guide and what that, I think, implies for next year. Can you talk about the management actions taken? You mentioned the five-quarter payback. I want to be blunt and say does that mean you'll make at least the $81 million of that cost over the next five quarters? And then maybe a little more color on what within the book you actually restructure and offloaded.

Question: Glenn Schorr - Evercore ISI - Analyst : That's a nice part of it. Maybe one quick one. You mentioned in the SSGA conversation about the hybrid products with Apollo. I'm curious if you could give us any bits of detail of how it will work and why you chose maybe 15% going to private credit? Is that enough to drive differentiated performance and scalability. Is this just like a toe in the water to see how this is going to be received?

Question: Brennan Hawken - UBS - Analyst : Eric, congrats on the new role. Big change in the multiples? I hope that doesn't create issues give you the bends or something when you go. So curious about with Eric's departure, kind of brings this session to mind. So Ron, could you maybe update us on the latest on that front? And what you can tell us about the board's plan?

Question: Brennan Hawken - UBS - Analyst : That's right. Yes, overall.

Question: Brennan Hawken - UBS - Analyst : Okay. Great. And then repo has been pretty solid. Clearly, you guys see some continued strength, hence the updated NII outlook for the year. But could you tell us about how repo comes into play there into your expectations? And what we should think about the recent strength there?

Question: Alex Blostein - Goldman Sachs - Analyst : Eric, congrats to you as well. I guess in that vein, and the question for both of you guys, State Street has made some pretty meaningful progress improving profitability recently. But with the new CFO search underway, how durable do you think these profitability improvements are likely to be? So like in other words, how much of this is already in motion and sort of on the rails that can more seamlessly perhaps transition to whoever comes next. And what are your ultimate sort of aspirations for pretax margins for the firm as a whole over time?

Question: Alex Blostein - Goldman Sachs - Analyst : Yes, all makes sense. Just wanted to clarify that. So for my follow-up, maybe quickly on NII. Obviously, very nice update for the fourth quarter. probably too early to talk about '25 with a lot of specificity. But as you sort of think about how the balance sheet is positioned, especially on the back of the recent securities repositioning you've talked about earlier today. How should we think about the sustainability and just durability of this kind of NII run rate over the next couple of quarters? I think, in the past, you talked about being a little more asset sensitive in Europe still, maybe a little bit more neutral in the US, but maybe help us with some broader framework of how to think about '25.

Question: Alex Blostein - Goldman Sachs - Analyst : Got you. All right. Well, I think we'll get you for one more quarter after that. So I'm sure that will be another topic yet again.

Question: Betsy Graseck - Morgan Stanley - Analyst : Eric, I'll miss you. Sorry to see you go. Good luck in the next role. And I guess, my final question for you is just around how we should be thinking about the trajectory here of NII in an environment where maybe we get slower pace of cuts. Is that better for State Street?

Question: Betsy Graseck - Morgan Stanley - Analyst : All right. And then Ron, one for you. I think recently, I saw a headline about State Street leaning into Mexico, and wanted to understand, is this a new effort? Or this is an expansion of existing business? And maybe just put it into context around growth strategy? And are there other countries that you're looking to lean into?

Question: Brian Bedell - Deutsche Bank - Analyst : Great. Congrats, Eric, also. Maybe just taking on a comment that you mentioned, Eric, about putting more of your balance sheet to work to support clients. Can you just go into a little bit more detail in terms of which areas I assume you mean on the asset side and lending? And then in conjunction with that, maybe if you can talk about deposit pricing strategies with your asset servicing clients in terms of both either deposit beta or also supporting your clients in terms of the revenue model?

Question: Brian Bedell - Deutsche Bank - Analyst : Perfect. Actually, I can tie in the back half of that question with the second one, and that's just on the revenue -- on the fee revenue side of your new wins, particularly the Alpha products. I know the Alpha platform rather. And I know the private market initiatives as well. Should we be thinking of those as fee rate accretive. Or are you also flexible on pricing some of those with deposits as well on compensating balances?

Question: James Mitchell - Seaport Global Securities, LLC - Analyst : Eric, just on deposit behavior after the rate cut. How did mix and volume growth look and pricing? Any thoughts on the initial reaction to the rate cuts in the deposit side?

Question: James Mitchell - Seaport Global Securities, LLC - Analyst : Okay. That's helpful. And maybe just pivoting to servicing fees. Still a significant backlog yet to be installed business in asset servicing. So can you discuss how you're -- how quickly you expect that new business to be onboarded and how you're thinking about the quarterly trajectory from here?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Congratulations, Eric on the new position. Ron, you mentioned about the new business wins in the quarter. And I think you said $466 billion in assets under custody administration. Can you share with us how much of that came from existing clients where you grab the bigger wallet share from those clients versus new customers? And second, were the wins primarily in the US? Or were they outside the United States, Europe or Asia?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. And then as a follow-up question, obviously, you guys are well capitalized. You've been using your capital to support organic growth, as Eric pointed out, with lending and you're paying, obviously, dividends and increasing them and buying back your stock. Alternatively, obviously, capital can be used for acquisitions. Can you give us an update on your appetite for acquisitions? Recognizing, of course, the Brown Brothers transaction did not work out the way you intended, but can you share with us your thoughts there as well?