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As one of the “Big Three” asset managers along with BlackRock and Vanguard, State Street (which has $3.9 trillion in assets under management) has been using its position to advocate for stronger diversity and sustainability measures across corporate America. <a href="https://www.gibsondunn.com/blackrock-vanguard-and-state-street-update-corporate-governance-and-esg-policies-and-priorities-for-2022/">In 2022</a>, all of the Big Three have raised the bar for the companies in which they hold stakes, advocating for disclosures from “carbon intensive” sectors and increased scrutiny over climate-based proposals; they have also said they may vote against or withhold votes from companies that do not have at least one woman on the board or that fail to disclose demographic data. State Street has specifically said it might vote against an independent board director if a company fails to provide sufficient disclosure or progress on such issues.

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One of the oldest financial institutions in the U.S., Boston-based State Street offers a diverse array of products across its asset management and banking divisions. The company helped pioneer exchange-traded products, including launching the first ETF in 1993, and counts as one of the Big Three index fund managers alongside Vanguard and BlackRock. State Street also serves as one of the top asset custodians in the U.S., including expanding into crypto assets such as Bitcoin. State Street continues to launch new investment vehicles. In 2025 the company partnered with private equity giant Apollo to create a private credit ETF available to retail investors. State Street is the second-oldest continuously operating bank in the U.S., with its predecessor receiving a charter from Massachusetts Gov. John Hancock in 1792.

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State Street (STT): Company Profile, Stock Price, News, Rankings

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State Street

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Good morning, and welcome to State Street Corporation's First Quarter twenty twenty five Earnings Conference Call and Webcast. Today's call will be hosted by Elizabeth Lynn, Head of Investor Relations at State Street. We ask that you please hold all questions until the completion of the formal remarks, at which time, you will be given instructions for the question and answer session. Today's discussion is being broadcasted live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay.

State Street's conference call is copyrighted, and all rights are reserved. This call may not be recorded for rebroadcast or distribution in whole or in part without the expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be held on the State Street website. Now I would like to hand the call over to Elizabeth Lynn.

Good morning, and thank you all for joining us. On our call today, our CEO, Ron O'Hanley, will speak first. Then Mark Keating, our interim CFO, will take you through our first quarter twenty twenty five earnings presentation, which is available for download on the Investor Relations section of our website, investors.statestreet.com. Afterward, we'll be happy to take questions. Before we get started, I'd like to remind you that today's presentation will include results presented on a basis that excludes or adjusts one or more items from GAAP.

Reconciliations of these non GAAP measures to the most directly comparable GAAP or regulatory measure are available in the appendix to our presentation. In addition, today's call will contain forward looking statements. Actual results may differ materially from those statements due to a variety of important factors, such as those referenced in our discussion today and in our SEC filings, including the risk factors section of our Form 10 k. Our forward looking statements speak only as of today, and we disclaim any obligation to update them even if our views should change. With that, let me turn it over to Ron.

Thank you, Liz, and good morning, everyone. At present, investors are contending with notable uncertainty. While much attention is focused on US trade policy, uncertainty is also arisen around other topics such as taxes, geopolitics, interest rates, deficits, and deregulation. This wide range of uncertainties, some negative and others positive, has introduced significant volatility into global financial markets and investor sentiment. During times such as these, our purpose to create better outcomes for the world's investors and the people they serve is even more relevant.

Our financial strength combined with our deep investment services, markets, software, and asset management capabilities uniquely positions us to serve as our clients' essential partner. Throughout its two hundred thirty year plus history, State Street has supported both clients and financial markets for many periods of uncertainty By focusing on those things that we can control and preparing for those that we can't, State Street has developed a track record of financial and operational resilience and adaptability, which has enabled State Street and our clients to navigate through difficult periods. I believe as we progress through the current environment, we will strengthen our position with clients even further. Turning to Slide two of our investor presentation, I will cover our first quarter highlights before Mark takes you through the quarter in more detail. During the turbulence experienced in financial despite the turbulence experienced in financial markets in March, we delivered growth, solid financial performance and good business momentum in Q1.

Year over year, fee revenue increased by 6%, while total revenue rose by a healthy 5%. We achieved both positive fee and total operating leverage, resulting in year over year margin expansion, excluding notable items, with State Street's pretax margin reaching 30%, excluding seasonal expenses. Supported by capital return, EPS reached $2.04 as compared to $1.37 in Q1 last year, which included the impact of an FDIC special assessment. Excluding notable items, year over year earnings per share growth was a very strong 21%. Turning to business performance.

We generated new asset servicing AUCA wins of 182,000,000,000 within investment services in the first quarter. New servicing fee revenue wins totaled $55,000,000 with the majority coming from back office mandates in line with our strategic aim. We recorded one new State Street Alpha mandate, demonstrating continued momentum in this unique value proposition. While the current environment presents some uncertainty, our existing pipeline in in investment services is robust, and I am confident in our platform and the improvements we have made to our sales effectiveness. As a result, we are maintaining our goal of $350,000,000 to $400,000,000 in new servicing fee revenue wins this year while also being mindful of the potential for variability in the current environment.

We continued to make significant strategic progress and growth in our investment management franchise, resulting from our focus on broadening Global Advisors' product and distribution capabilities. This has better equipped GA to capitalize on growth opportunities. Management fees increased by 10% year over year. Q1 saw net outflows driven by an anticipated single client event within the institutional business. At the same time, the quarter was marked by a number of significant accomplishments.

For example, the importance of our strategic focus on low cost ETFs is underscored by the fact that half of all ETF industry flows were directed towards this segment in Q1. Our SPDR U. S. Low cost ETF suite continued to expand its market share in this fast growing segment, capturing new flows in Q1 at a rate more than twice our industry AUM market share, with our low cost ETF AUM reaching a record $256,000,000,000 at quarter end. Importantly, we expanded share in The U.

S. Low cost fixed income segment. Further, we saw strong ETF flows in EMEA, while the commodities ETF segment gained market share, benefiting from market volatility in our industry leading gold ETFs, which exceeded $100,000,000,000 of AUM for the first time. GA has a history of employing strategic partnerships to open new avenues for future growth. In Q1, we completed several important strategic growth initiatives, including the launch of the innovative ETFs leveraging our partnerships with both Apollo Global Management and Bridgewater Associates.

We also announced the expansion of our partnership with the Saudi Arabia public investment fund through the launch of the first Saudi Arabia fixed income USITS ETF in Europe. Finally, GA recently announced a strategic investment in partnership with Ethic, a leading technology provider that distinctively empowers wealth advisers to build tailored client portfolios at scale. This partnership will enable investment advisers to access our model portfolios and spider ETFs through Ethics platform, reinforcing our commitment to expanding investor access to our investment capabilities and strengthening our intermediary franchise. Turning to our markets franchise. As a leading provider of trading, research, and lending solutions coupled with innovative platforms, financing, and portfolio solutions, our markets franchise is well equipped to support clients through this volatile period with deep liquidity and trading expertise while also providing important diversification to our revenue profile.

In Q1, FX trading services and securities finance revenues both grew strongly year over year, supported by notably higher FX client volumes and average assets on loans, which increased 1419%, respectively, position positioning us well for future growth. Our balance sheet position is robust, providing us with a strong foundation to weather the current market environment. Time and again, our resilient balance sheet has been a proven stabilizing force for our clients and markets during periods of stress, such as in 2020 and early 'twenty three. In the first quarter, our strong capital position enabled us to return $320,000,000 to shareholders for common share repurchases and dividends, while we also built upon our already strong liquidity position. Looking forward, we will continue to support our clients with our balance sheet while also returning significant capital to our shareholders as planned, subject to market conditions and other influencing factors.

Turning to expenses. We tightly managed costs in the first quarter. Year over year, expenses increased by just 3% excluding notable items, contributing to the strong fee and total operating leverage we delivered in Q1. We have established a track record of consistent expense discipline in recent years. As outlined in January, we have a comprehensive book of work underway focused on delivering significant new recurring productivity savings this year.

As you would expect, we are well prepared as we look ahead with a detailed plan for a broad range of scenarios. We are laser focused on controlling expenses tightly and calibrating them in line with the revenue environment while also continuing to make client and capabilities investments consistent with our focus on our long term strategic priorities. Finally, I would like to provide an update on our search for a permanent CFO. The process is advanced, and we expect to be in a position to make an announcement in the near term. To conclude my prepared remarks, we had a strong start to the year in Q1.

However, the operating environment has changed dramatically since the end of the first quarter. As a result, the economy, financial markets and the world's investors are navigating through a period of uncertainty. Despite the hurdles this environment may present, we have strong conviction in our strategy and in our ability to serve our clients well, underpinned by our distinctive value proposition and financial strength. We are focused on being agile in the current environment, and I firmly believe that we have this right strategy to deliver solid financial returns in both the near and long term for our shareholders. With that, let me hand the call over to Mark, who will take you through the quarter in more detail.

Thank you, Ron, and good morning, everyone. I'll begin my review of our first quarter financial results on Slide three of the presentation. For the first quarter, we reported EPS of $2.04 with year over year EPS growth of 21%, excluding prior period notable items. Looking at results for the quarter, we demonstrated solid execution across the franchise and a strong start to the year with broad based fee revenue growth of 6% year over year. Our strong fee revenue performance combined with stable NII and well controlled expense growth of 3% excluding notable items enabled us to generate over 300 basis points of fee operating leverage and over 180 basis points of total operating leverage this quarter.

While we've seen uncertainty weigh on global equity markets in recent weeks, our first quarter results demonstrate the strength of our business with a nearly two percentage point expansion of our pretax margin year over year, excluding notable items, and an ROTC of over 16% for the quarter. Turning now to slide four. Period end AUCA and AUM increased 69% year over year, respectively. The increases in both metrics reflect higher market levels as well as positive flows. Moving on to some of the key market indicators that impact our business.

Though we saw rising economic uncertainty in the latter part of the quarter, daily average global equity market levels were roughly flat while daily average FX volatility declined slightly relative to the prior quarter. Turning to slide five. Servicing fees increased 4% year over year, driven by higher average market levels, net new business, and improved client activity, partially offset by normal pricing headwinds. The previously disclosed client transition was a headwind of just under one percentage point to year over year growth in 1Q. Consistent execution against our growth objectives has been a key focus area for us, and we were pleased with the solid business momentum across services in the first quarter.

As Ron mentioned earlier, we reported one alpha mandate win with nearly half of the AUCA wins driven by alpha. New servicing fee wins were 55,000,000 in January and nearly 370,000,000 over the past four quarters. Importantly, the vast majority of these first quarter wins were in the back office, consistent with our goal of prioritizing our sales mix towards faster time to revenue products. I would also add that the pace of quarterly installations went as planned in 1Q. Looking ahead to the second quarter, we are cognizant of the potential for variability that has been introduced into the operating environment.

That said, our pipeline is healthy, and we expect to see very good sales momentum in 2Q as we continue to actively pursue opportunities in key regions as well as in strategically important growth areas such as private markets. And as Ron noted, we continue to target 350 to 400,000,000 in new servicing fee revenue wins this year. Moving to slide six. Management fees increased 10% year over year, largely reflecting higher average market levels and the benefit of prior period net inflows. For the quarter, net inflows net outflows totaled 13,000,000,000 and were primarily driven by an anticipated client transition within our institutional business.

ETF inflows were muted in 1Q as market uncertainty led to outflows in our institutional oriented SPY product. That said, Global Advisors continued to demonstrate solid underlying momentum within its ETF business. In 1Q, we launched two ETFs leveraging our strategic partnerships with Apollo Global Management and Bridgewater Associates, and we generated strong inflows and market share gains in key product segments such as our US low cost offering. In addition, our global ETFs surpassed $100,000,000,000 of AUM in the quarter as investors contended with rising global uncertainty. Taken together, we were pleased with the strong performance of our investment management business in the quarter, which generated a pretax margin of approximately 28%, including seasonal compensation expense.

Turning now to slide seven. FX trading revenue increased 9% year over year as the evolving geopolitical climate drove FX volatility higher, resulting in increased client volumes across most of our trading platforms. Securities finance revenues increased 19% year over year as continued client engagement resulted in higher balances and solid revenue performance in Prime services. Moving on to slide eight. Software and processing fees increased 9% year over year in the first quarter, primarily driven by higher front office software and data revenue associated with Charles River.

During the quarter, front office software continued to demonstrate solid growth, increasing 10% year over year to 158,000,000 with our software enabled and professional services revenues up 7%. The front office software market continues to represent an important growth area for State Street, strengthening client relationships and providing us with a valuable source of consistent fee revenue. In the first quarter, annual recurring revenue grew by approximately 15% year over year to 373,000,000, driven by over 25 SaaS client conversions and implementations. Moving to slide nine. NII was relatively flat compared to the year ago period at $714,000,000 as higher investment security yields and continued robust loan growth were offset by lower short end rates and changes in deposit mix.

On a sequential basis, NII decreased 5%, primarily reflecting changes in deposit mix, lower short end rates, and lower day count with two fewer days in the quarter. These factors, along with higher deposit balances to support business growth and to further enhance our already secure strong liquidity levels resulted in some net interest margin compression in 1Q. As detailed on the right of the slide, average total deposits were up 11% year over year and 3% sequentially, marking the sixth consecutive quarter of growth in balances. As expected, noninterest bearing deposits moderated from the seasonally high levels observed in 4Q. As we look ahead, we remain dedicated to supporting our clients during times of macroeconomic uncertainty, and our strong, highly liquid balance sheet provides us with a solid foundation to meet their needs.

Turning to slide 10. We remain acutely focused on continuing to manage our expense base with year over year expense growth limited to 3% in the first quarter, excluding notable items. At the same time, we continue to make targeted investments in technology and infrastructure, bolstering resiliency and product capabilities to ensure that we can meet the evolving needs of our clients. Continually driving productivity and other savings is what enables us to fund these investments. For the quarter, we generated savings of roughly 90,000,000, and we continue to target 500,000,000 of savings this year.

Our ability to effectively manage our expense base has developed over a number of years and is ingrained in our culture. As a result, over time, we have been able to drive meaningful and consistent productivity savings while self funding investments in our business. In an uncertain operating environment such as the one today, we are intensely focused on calibrating our expense base to a range of scenarios. Importantly, as we look ahead, we have a number of different levers to achieve that goal. Moving to slide 11.

Our capital and liquidity levels remain strong and well in excess of regulatory minimums. As of quarter end, our standardized CET1 ratio of 11% was up approximately 10 basis points quarter over quarter. RWAs increased roughly 4,000,000,000 sequentially in part driven by higher period end securities finance RWA along with increased loan balances. Our bank LCR was a robust 139%, up from 134% in April as we prudently managed our liquidity levels in a dynamic market environment. In the quarter, we were pleased to return 320,000,000 to shareholders consisting of 100,000,000 of common share repurchases and 220,000,000 in declared common stock dividends.

We've previously commented that we expect a progressive cadence of capital return this year. And as we look to the second quarter, we anticipate a step up in repurchase activity. For 2025, we continue to expect to return around 80% of earnings to shareholders subject to market conditions. So in summary, our first quarter performance demonstrates the continued strength of our franchise as we executed against our strategic priorities, supported our clients, and delivered significant positive fee and total operating leverage and pretax margin expansion on a year over year basis. With that, let me touch on our full year outlook, which I will remind you is on an ex notables basis.

In January, we provided guidance for 2025 that was supported by various assumptions and scenarios. As we stand here today, our outlook is unchanged, albeit with the understanding that the operating environment has evolved and also presents a higher degree of uncertainty. Assuming markets remain generally supportive from recent levels, we continue to expect to deliver full year fee revenue growth of 3% to 5%. Turning to NII. We continue to expect NII to be roughly flat for the full year with a range of up low single digits to down by a similar amount in percentage terms consistent with our prior guide and subject to global monetary policy as well as deposit mix and levels.

And we continue to expect expenses to be up approximately two to 3%. However, as noted earlier, we have developed plans for a range of scenarios given the uncertain environment, and we are prepared to aggressively manage expenses as required. As such, we continue to expect to deliver both positive fee and total operating leverage, the latter of which continues to assume that NII does not become a material year over year headwind. And with that, operator, you can now open the call for questions.

At this time, we will open the floor for questions. If you would like to ask a question, please press 5 on your telephone keypad. You may remove yourself at any time by pressing 5 Please note you will be allowed one question and one follow-up question. Our first question will come from the line of Ken Houston with Autonomous. Your line is now open.

Great. Thanks. Good morning. I I did wanna ask just on the the capital return front. I know you mentioned the two two step up and the 80 payout still holds.

But does anything in the environment with regarding, you know, uncertainty and deposit flows just potentially also change your view around how you might think about returning capital? I know the slow start is kinda how you started last year as well. So but just just in terms of thinking, like, how would you think about any adjustments to that expected pacing that you that you reiterated? Thanks.

Yeah. Hi, Ken. It's Mark. I'll I can take that. You know, I think right now, we would say that that we're on track with our plan that we communicated back in January, which was to return capital at a progressive rate throughout the year.

So consistent with that, during the first quarter, as I mentioned, you know, we we started with the hundred million of capital buyback of capital, and share buybacks. So we anticipate a nice step up in q two, as I mentioned. And right now, we're expecting to continue with our plan, which overall, again, as I mentioned, is to return about 80% of of earnings back to shareholders. So right now, I would say we're on track with that.

Yeah. Ken, it's Ron. Maybe let me just add to what Mark said. It as he noted and I noted, I mean, we're we've developed a range of scenarios as we think about the current environment. So what you're hearing from us reflects that range of outcomes, which is probably wider.

The potential range is wider than it would be in a normal year. But given all that, we still feel confident in what we're saying about, about capital return.

Okay. Got it. And second question, just on some of the big picture environment around new contracts and just how people are reacting to the environment, especially on the servicing side. You know, you've done a great job putting on more new wins. And and but any changes to just how you sense the world is feeling in terms of signing up new business?

And and does anything then change also in terms of your ability to onboard like you were talking about in January? Thank you.

So, Ken, it's Ron. I I I would say that, certainly, our our clients are very aware of the operating environment, but we're not seeing any meaningful change in behavior, in in terms of timing, in terms of, doing the work that they need to do to, for this onboarding, or for that matter, even pacing. So, obviously, that could change if we see some, kind of significant deterioration in the market, but we're not seeing that yet, which, again, goes back to why we we've we've affirmed what we said earlier in the year about what we expect in terms of of new business wins.

Our next question will come from the line of Jim Mitchell with Seaport Global. Your line is open. Please go ahead.

Hey. Good morning. Maybe just Mark, you talk Imran, you've talked about recalculating 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.

would say, Jim, is that, remember, we've we've been on this journey for a while. And each year, we build upon what we've done in the prior year, and sometimes it's multiyear kinds of transformation efforts that we have underway. So we have, I would say, some flexibility in terms of pulling forward some kind of actions, reprioritizing investments, putting in more towards productivity based technology investments. So there's some flexibility there. Secondly, we we've got a fairly significant investment book here, and we wanna be very careful that we're not we're not doing anything to harm or impair what we're doing in the long term, but we see some flexibility and still be able to deliver what we need to do strategically for the long term.

So, the answer is just given the pace that we've been on and the multiyear nature of some of the transformation efforts that we have underway, we feel we have some, we we have some flexibility here.

Okay. Great. That's that's helpful. And 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 and sort of you know, there's some good volatility for you guys in FX and Sec Lending and deposits. So how how are you seeing that play out so far in April?

Yeah. Hi. It's Mark. Yeah. I think as you'd expect and then we've been through, you know, a series over time of of uncertainty, you know, cycles.

And, you know, we usually see and we're seeing what we usually see, which is we've seen our deposit levels, you know, tick up. We've seen more volatility, and our trading organization's able to capture that volatility. Now, again, it's early, first couple of weeks of of April, but we are seeing, you know, elevated deposit levels and, an additional, trading, coming from the volatility.

Our next question will come from the line of Alex Blostein with Goldman Sachs. Your line is open. Please go ahead.

Thank you. Thank you. Good morning, guys. I was hoping to just dig in a little more into the current environment. And, specifically, when you look at the deposit trends, I was hoping you can bifurcate between interest bearing and noninterest deposits trends.

Obviously, the interest bearing side probably doesn't produce a whole lot of NII still, but the noninterest bearing piece could be quite meaningful. If we look at where you are today, noninterest bearing deposits, I think, pretty pretty low still near kinda record lows as a percentage of total. So where where does that stand today? And maybe remind us which client segments are the larger drivers of non interest bearing deposits so that we can kinda maybe evaluate how the environment shakes out and what that could mean for those balances.

Yeah. It's Mark. I can take that as well. Yeah. I guess I'd start by saying it's it's generally non interest bearing deposits.

So, generally, we see it through some of our asset manager clients, but also in the asset owner space. So it's there's some variability between segments. I'd say, you know, just to get to the, you know, noninterest bearing levels right now, you know, we did see NIB deposits decline roughly a billion. That's about 5% in q one. Now, again, that was expected as we talked about in January.

It was about you know, we'd had a seasonally high fourth quarter. You know? So right now, we're still expecting that there's, you know, some room long term for that balance to continue to decline as we talked about in January. You know, right now, we are seeing, you know, the all the deposit levels are tending to be, you know, a bit elevated. And we had talked about overall client deposits in the $2.30 to 240,000,000,000, range when we gave our original guide.

I think the high end of that range right now is probably a better estimate. So, you know, we still expect there to be some, you know, you know, decrease in noninterest bearing. But right now, we're seeing it hold up, pretty well. Again, it's early in the quarter, and we'll see how things play out from here.

I gotcha. 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?

Alex, well, it's a couple of things. First of all, as you know, we sell in one period and install in another. And so just the sheer volume of business to be installed and the fact that, as Mark noted, he said we were going to accelerate that a bit, and we have. So that's one, and we see a clear path to to meaningful installations throughout the year. Secondly, the the you know, we talked about a 350 to 400,000,000 new business goal, and we're we're we we see that.

We we see the pipeline developing, and it's a combination of, we've invested very heavily in our various platforms. And so that investment is paying off. Plus, as you know, back a couple of years ago, we started focusing on overall relationship management and Salesforce effectiveness, and those investments are paying off. So it's not that we're immune to the market, but that given those kinds of things, we feel pretty confident in our ability to to, deliver within that range of the fee guide. Now market levels, will ultimately be a significant driver here, which is why we talk about scenarios.

But even as we look at those scenarios, we've developed what are reasonably plausible scenarios. We feel we feel pretty confident.

I mean, maybe I could just add yeah. I'm sorry. Go ahead.

I guess, you know, a lot has changed in terms of how we're looking at the macro environment. But I guess, I think what Ron is getting at is what has not changed is the core, you know, business momentum that we brought from 2024 into 2025. And I would you know, I mentioned the 370,000,000 of servicing fee sales over the last four quarters. And, also, I would note that the, 356,000,000 of to be installed revenue, is the highest, number that we have, reported since we've started that disclosure. So there's a lot of, you know, revenue, to be, you know, coming on to the p and l.

And then, obviously, you can see the growth that we've had in our, our management, fees, software. So there's a lot of good core momentum that hasn't changed, even though markets have been in the overall macro environment has been quite uncertain.

Great. Perfect. And then just the clarification for me just on this front. You guys are assuming market levels are flat from kinda current levels, for the rest of the year, underwriting this guide?

Yeah. If if we do that, we wouldn't be on this call with you.

Yeah. Yeah. I mean, there there's a there's a rate of there's our scenarios obviously include a range of of market levels, Alex, as you'd expect. I guess what we're trying to say is that given where we are, given the momentum we have, and, you know, given the fact that we have a a quarter and now, you know, half of a month under our belts in the second quarter, The the guide that we've given, we feel pretty good about.

Great. Alright. That's great to see. Thank you, guys.

Our next question will come from the line of Mike Mayo with Wells Fargo Securities. Your line is open. Please go ahead. Mike, your line is open. Feel free to ask your question.

Alright. We'll go to the next one, and we will try Mike again. Our next question will come from Glenn Schorr with Evercore. Glenn, your line is open. Please go ahead.

Thanks very much. Just tacking on to your good sales momentum and revenue momentum comments on on keeping the growth, which is great. I'm I'm curious, you you made that shift towards back office as the faster time to implement on on revenue. You also just commented about managing and focusing on the overall relationship. So I'm curious, does the 350 to 400,000,000,000, 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 in the door to expand the relationship? What are some of those likely areas and and and and what kind of successes have you had with that given the new focus? Thanks.

Yeah. Glenn, just just to clarify. So what we've been saying now for this year and certainly most, if not all of last year, is we develop our pipeline, but also as we as we work with clients, even in an alpha kinds of situation, where we've got, it could be front, middle, and back. It could be middle and back. It could be data and everything.

What we work very hard to do is front load the back office installation. It requires less engineering. It's pretty easy to move it over. So and that's that continues to be the approach that we take. As much as possible, we try and, we we try and front load that.

If we get back office only, I mean, typically through the sales process, that would include if it's a global portfolio, it would include some kind of FX relationship. It typically not always, but typically would include a securities finance relationship. And it also typically would include some of the services like fund accounting, performance measurement, and all that. So that's kind of a a routine part of the process. And just going back to to big picture, and Marco, correct me if I get this wrong, but we've been trending that about that about half of our new business has been associated with alpha.

And so and and and we foresee that trend continuing. So in terms of your question about back office share, it's it's awfully hard to calculate that, but we believe that we continue to gain share.

Okay. Appreciate 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 should we assume your reinvestment stays super short? Like, what what are you thinking about on the reinvestment side, Mark?

Yeah. I think that's a good assumption that we'll be staying short in the environment that we're in.

So that's that impacts the the the NIM for the time being?

Possible. Yeah. It's possible you'll see the NIM float down a little bit, you know, in the current environment.

For our next question, we'll return to the line of Mike Mayo. Mike, please go ahead.

Hi. Sorry about that. In terms of, first, the the CFO search, I mean, I guess you could stay the course right now if you want to. When will we know who the next CFO is?

Yeah. As as I mentioned, Mike, it's advancing well, and we anticipate to be able to come to you in the near term.

Okay. And then just more more generally, I know this is the the big quest picture question, and you're reaffirming your fee guide. So and you mentioned April deposits and some of the the trading is still going well. So I guess that's all good. But, you know, there's a scenario here that's reflected in the stock market and Chairman Powell's speech yesterday that it it might not end so well.

And you're in so many countries moving so much money. You know, how do you put your arms around?

a tail risk. It'd be kind of a almost a base case, the stock market as a whole. How can State Street survive in an environment where there's a global trade war? Thank you.

Mike, there is a there is certain certainly heightened uncertainty. As I mentioned at the beginning of my remarks, just about trade, but about other things like deficits, taxes, geopolitics, etcetera, deregulation. So I we are very vigilant at this point, and that's why, one, we're doing what we're doing in terms of developing this range of scenarios and then building and have built out plans to accommodate the range. And as you'd expect, that would include a fair amount and accelerated expense management, which we think that we're capable of doing. We also have the investment book that we and I'm talking now about the investment in the business.

We wanna be careful on that, but that always is a lever. And then thirdly, we have a track record of continuing to manage down unit costs and BAU expenses. We've been doing that now every year, and, we believe we've gotten good enough at it that we've got a pretty big ambitious set of work for 2025. But if we need to, we're looking at ways where we can accelerate and pull forward some things that we we had planned to do in the 2026 time frame. So it's in a kind of catastrophic market situation.

Could we offset all that? Of course not. But do we feel that we're very well positioned to manage through a broad range of scenarios? Yes. We yes.

One short follow-up. Just remember a couple decades ago, thought it was, like, 80% of your expenses were fixed costs. Right? And I think that's changed. We've 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 I know in the long term, all expenses are variable. Right? But in the next one to two year, is it like I don't What's the percentage?

Hey, Mike. Hi. It's Mark. It's a it's a good question. I wouldn't wanna necessarily put a a pin on it, a number on it.

State Street (STT) Q1 2025 Earnings Call Transcript

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