State Street Corp at Sanford C Bernstein Strategic Decisions Conference Transcript

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

Question: David Smith - AllianceBernstein Holding LP - Analyst : Thanks, Eric. Ron, to kick things off, could you tell us a little bit about State Street for those of the conference who may not be as familiar with the organization? And tell us a bit about how the company has evolved in recent years and how you find that you're positioned strategically with everything that's going on in the industry.

Question: David Smith - AllianceBernstein Holding LP - Analyst : Thanks, Ron. Just thinking about all those businesses, do you think the combination of an asset servicer and investment manager creates any strategic advantages for State Street? You're talking about the shared customer bases, and any benefits State Street and its clients get from having these businesses sit together?

Question: David Smith - AllianceBernstein Holding LP - Analyst : Thanks, Eric. I think that's a great segue to shift from talking about the company to the environment that we're in. Ron, we're obviously in a very dynamic operating environment in the past few years. What are your thoughts on the current macro environment as we look ahead? Then, I guess on that note, is there an ideal macroenvironment that you see for State Street across rates, inflation, equity markets, FX volatility, or any other aspects that you'd highlight with regard to that?

Question: David Smith - AllianceBernstein Holding LP - Analyst : In your conversations with clients, what do you think they need to see to be more willing to get more active and come off the sidelines in earnest?

Question: David Smith - AllianceBernstein Holding LP - Analyst : So Eric, shifting gears from the environment now to the more direct impacts on your balance sheet, obviously, there's a lot of moving parts in the economic backdrop as Ron just mentioned. But I think in some ways for you, particularly on the balance sheet, the most impactful is the Fed's recent decision to start tapering down quantity of tightening and slow the shrinkage in its balance sheet, which I think is scheduled to actually start tomorrow as we get into June. Can you talk to us about the impact that you see, the wind down of QT driving on your balance sheet in terms of mix, size? And also beyond the balance sheet, any impacts that you see in the rest of the business?

Question: David Smith - AllianceBernstein Holding LP - Analyst : Sure. That all makes sense. And I should also mention, we are taking questions via the Pigeonhole app. Hopefully, you all have access to that and anything that comes up, feel free to type in a question. So now let's talk about the individual businesses a bit. The trust and custody business as an industry has seen a fair bit of pricing pressure for some time now. Can you talk about how State Street Alpha deepens your client relationships and creates a stickier product offering that helps you shift competition on other fronts besides just price? Talk about what progress has been like so far their, and how do you think about the potential for this to accelerate as these new offerings become better tested and your process becomes more fine-tuned as you onboard more clients?

Question: David Smith - AllianceBernstein Holding LP - Analyst : Eric, staying on the topic of new business and pipeline, you had almost $0.5 trillion of AUC and AUA wins last quarter. And I think there was a backlog of $2.6 trillion to be installed as of March, almost $300 million of servicing fee revenue wins that are yet to be installed. How should we think about the way these wins are going to flow through the P&L in the coming quarters? It does seem like a nice tailwind. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 31, 2024 / 1:00PM, STT.N - State Street Corp at Sanford C Bernstein Strategic Decisions Conference

Question: David Smith - AllianceBernstein Holding LP - Analyst : But over time, we'd like to implement even more of that and more quickly as we continue to build the sales throughput. As we think about this shift in your business mix and winning more full front-to-back office relationships, does that change the timeline for implementing business as you win it at all?

Question: David Smith - AllianceBernstein Holding LP - Analyst : That makes sense. And talking about from a client standpoint, one of the fastest growing areas of your business is private markets. Historically, private markets have been more fragmented, less standardized. Can you talk about the opportunity this creates for State Street? Do private markets provide another avenue to deepen relationships with your existing clients? You mentioned capital co-lending earlier, for example. Or does it open up a whole new range of potential partners for State Street?

Question: David Smith - AllianceBernstein Holding LP - Analyst : And maybe we've got a good segue before we go and talk about your asset management business. We have an audience question. A lot of traditional asset managers are now making inroads into alternatives given the growth opportunities there, also typically higher fee rates. Is that something that you see as interesting for State Street in some capacity down the line?

Question: David Smith - AllianceBernstein Holding LP - Analyst : Yes, yes. I think this is more on the asset management side, isn't it?

Question: David Smith - AllianceBernstein Holding LP - Analyst : Interesting. Because as we're coming up on time, just turning to expense management briefly, does it take an increased focus in this kind of revenue environment? You've got NII forecast to be down this year. How do you balance achieving positive operating leverage in any given year versus making investments where you see clear benefit, but it might only manifest over a multi-year time horizon?

Question: David Smith - AllianceBernstein Holding LP - Analyst : Great. To close things out, Ron, you've been leading the company for just over five years at this point. What's the biggest point of change since you took over in 2019? Then thinking ahead, what's your best guess at what will change the most at State Street five years out? How is that informing the strategy that you're setting for the company today?

Question: David Smith - AllianceBernstein Holding LP - Analyst : All right. Well, Ron, Eric, thank you so much for joining us today.