State Street Corp at Barclays Global Financial Services Conference Transcript

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

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Thank you, Eric. And maybe to kick off the discussion, we could start with some of the recent management changes at State Street. Eric, State Street, as a whole, kind of recently announced the appointment of a new Head of Investment Services, which is obviously your largest business. Can you walk through what you've changed from a management perspective and how you're thinking about the revenue opportunity for that business going forward?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. We could put up the first ARS question that we ask everyone else. I'm not going to ask to comment on this. But Mostapha, Eric, just to kind of hyped you up -- so I will not put you on the spot, but State Street's talked about driving efficiencies and scale kind of being key parts of its strategic priorities. And maybe to start, just maybe share us a little bit more on your background? And just more importantly, just on some initial observations as you take on the COO role?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Helpful. I guess, looking ahead, if you could just talk to what are your main focus areas when you think about State Street's productivity objectives, and just really the broader transformation of its operating model.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess, Eric, maybe one way to think about it is last year at this conference, you signed up for positive fee operating leverage. And then on the July earnings call, you kind of update to positive overall operating leverage. Given everything looks up, as you said, when you start to think about 2025, could some of these initiatives help lead to kind of continued positive operating leverage for the company as a whole?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. Maybe quickly on to the individual businesses, starting with investment servicing. I guess, in terms of new business, you talked about strong pipelines, and the servicing fee revenue sales, well, $150 million to $200 million this year, which is up from last year. Just maybe more context in terms of what you've been winning for your business, winning it from, or where it's coming?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. We're at the halfway marker. So I'm going to maybe pause the business drivers. And maybe we could switch to more of the financial aspects and kind of come back to these other business questions at the end. Eric, I guess, since we last spoke in July, puts and takes in the markets in the environment, perhaps you can just provide us an update in terms of kind of what you're seeing in thinking for the third quarter rest of the year, how do you want to frame it? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 3:15PM, STT.N - State Street Corp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : A lot in there. Good thing I asked early on. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 3:15PM, STT.N - State Street Corp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : If we could pull up the next ARS question -- but Eric, you mentioned deposits holding up well. Could you maybe talk to -- I would say that's probably better than expected, at least, results we've seen so far. Trying to delve more into in terms of what you're seeing in terms of kind of that mix. And just how you're thinking about deposit pricing that's widely expected to cut next week? Just kind of your thoughts around that?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I could put up the next ARS question. But Eric, you reiterate guidance of NII modestly higher for the full year, although you were talking down 5% in April and down 10% in January. So things have, I guess, outperformed those expectations. But as part your guidance, it's 2H below 1H. So just maybe talk to -- I mean, what drove that outperformance, maybe why that's not continuing, and just how you kind of think about the second half of this year as a jumping-off point for next year?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : The room seems to think you'll have continued NII growth into 2025.

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Maybe a couple on fee income questions. But the only thing to get is servicing fees declined year over year in the second quarter despite assets under custody up to 12%. At what point do you think you can see AUC growth kind of translate into organic servicing fee growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 3:15PM, STT.N - State Street Corp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Bank PLC - Analyst : I guess maybe on the asset management fee front, obviously, there's been beneficiaries of the higher market average levels. But we've seen net outflows and fee reductions in ETFs. Just maybe some context in terms of what you expect for that line?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Got it. Maybe the next ARS question. Just to circle back on expenses, you mentioned up a little north of 3% for the full year with your prior guide. Is that all kind of currency related?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : And I guess more longer term, you used to talk to this pre-tax margin target, 30%. You're approaching, I think, 29% last quarter. Is 30% still the right target? Is there some upside to that given what's Mostapha talked about? Just how you're thinking about that given all you know today?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : In our final, I guess, rounding out the discussion on capital, you bought back $200 million of stock in the whole first half of the year. It sounds like $450 million in the third quarter. If I do math quickly, another $450 million in the fourth quarter, probably to the upper end of the 80% to 90% kind of payout ratio target. Is that how we should think about it, and then how you're kind of thinking about 2025 when you put together the budget?

Question: Jason Goldberg - Barclays Bank PLC - Analyst : Great. Please join me in thanking Eric and Mostapha for their time today. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 3:15PM, STT.N - State Street Corp at Barclays Global Financial Services Conference