STT

State Street Corporation recently reported second-quarter 2026 results, with net income rising to US$1.08 billion and diluted EPS from continuing operations at US$3.65, alongside confirming completion of a large share repurchase program and declaring higher common and preferred dividends. Beyond the headline earnings, State Street’s decision to boost its common dividend while laying out higher medium-term margin and return targets highlights management’s confidence in the company’s fee-generating franchises and cost-efficiency efforts. We’ll now examine how this stronger profit performance and higher medium-term margin ambitions influence State Street’s existing investment narrative. This technology could replace computers: discover 26 stocks that are working to make quantum computing a reality. To own State Street, you need to believe its core strengths in custody, ETF servicing and technology can offset pressures from fee compression, regulation and evolving market structure. The latest quarter’s stronger earnings and higher margin targets support the near term profit story, but they do not remove key risks around regulation and competition in asset servicing and digital platforms, which still look like the most important swing factors for the stock. Among the recent announcements, the completion of the US$2,899.91 million buyback, retiring 10.25% of shares since early 2024, stands out most. It ties directly into the earnings narrative by amplifying per share results and interacting with the higher medium term margin and return targets, making capital allocation and future repurchase flexibility an important catalyst to watch alongside the company’s operational execution. Yet investors should also weigh how rising regulatory pressures could constrain future buybacks and capital returns, which is something you really need to be aware of... Read the full narrative on State Street (it's free!) State Street's narrative projects $16.5 billion revenue and $4.2 billion earnings by 2029. Uncover how State Street's forecasts yield a $157.46 fair value, a 15% downside to its current price. Some of the most optimistic analysts were already banking on revenue reaching about US$18.4 billion and earnings of roughly US$4.9 billion, so if you agree that operating leverage from the Alpha platform could offset fee and deposit risks more than consensus expects, this latest quarter might strengthen that view, but you should recognise that these higher targets reflect a far more optimistic path than the baseline narrative and may well be reassessed as the new information is digested. Explore 3 other fair value estimates on State Street - why the stock might be worth 15% less than the current price! Don't just follow the ticker - dig into the data and build a conviction that's truly your own. A great starting point for your State Street research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision. Our free State Street research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate State Street's overall financial health at a glance. Every day counts. These free picks are already gaining attention. See them before the crowd does: Outshine the giants: these 16 early-stage AI stocks could fund your retirement. Capitalize on the AI infrastructure supercycle with our selection of the 54 best 'picks and shovels' of the AI gold rush converting record-breaking demand into massive cash flow. Rare earth metals are the new gold rush. Find out which 29 stocks are leading the charge. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include STT. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Image source: The Motley Fool. Thursday, July 16, 2026 at 11:00 a.m. ET Chairman and Chief Executive Officer - Ronald O'Hanley Chief Financial Officer - John Woods Head of Investor Relations - Elizabeth Lynn Need a quote from a Motley Fool analyst? Email [email protected] Operator: Good morning, and welcome to State Street Corporation's second quarter 2026 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 broadcast 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 part or in whole. Without the express written authorization from State Street Corporation. The only authorized broadcast of this call will be on the State Street website. Now I would like to hand the call over to Elizabeth Lynn. Elizabeth Lynn: Good morning, and thank you all for joining us. On today's call, our CEO, Ron O'Hanley; and our CFO, John Woods, will review our second quarter 2026 results and provide an update on our medium-term financial outlook. Both are included in our earnings presentation, which is available in the Investor Relations section of our website at investors.statestreet.com. Following prepared remarks, we will be happy to take your 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 earnings release addendum. 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 in 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. Ronald O'Hanley: Thank you, Liz. Good morning, everyone, and thank you for joining us. Today, we'll focus on 2 key topics. First, we'll review our strong second quarter performance, the momentum we continue to build across the franchise and our improving outlook for 2026. We'll then discuss our new medium-term financial targets, which we released this morning. We are excited to outline the strategic pillars that will drive this next phase of State Street's growth, the significant opportunities we see to further strengthen our compelling value proposition and competitive position and the actions we are taking to further transform our operating model. Together, these initiatives reinforce our confidence in our ability to deliver sustained growth, expand margins and returns, and create long-term value for our clients and shareholders. But first, let me begin with our second quarter highlights on Slide 3. We delivered a strong set of financial results in the second quarter, driven by disciplined execution, deep client engagement and continued momentum across our businesses. These results reflect the strength of our platform and position us well for continued progress as we look ahead. Second quarter EPS was $3.65, up from $2.17 in 2Q '25. Excluding prior year notable items, we delivered significant earnings growth of 44% year-over-year, driven by record quarterly fee revenue, including record servicing, management and FX trading revenues together with record NII, driving total quarterly revenue up 17% year-over-year to an all-time high. This performance drove continued margin expansion and stronger returns. Taking a step back, this quarter's results reinforce the durability of our franchise and the sustained progress in our financial performance. 2Q marks our 10th consecutive quarter of positive operating leverage, excluding notable items, reflecting disciplined execution and the momentum we're building across the business. In addition to our strong 2Q financial results, we also meaningfully advanced our strategic agenda in the second quarter, further strengthening our franchises and positioning us for continued growth. Within Investment Services, innovation continues to be a key driver of future growth. For example, our digital asset platform is always on financial infrastructure that will enable clients to rapidly bridge from traditional to digital finance, and we continue to make strong progress in advancing this strategy. In 2Q, we announced our intention to deliver a tokenized fund servicing capability by year-end, subject to regulatory approval. Following a competitive process, a leading European asset manager selected State Street to service tokenized money market funds expected to launch later this year. Importantly, State Street Investment Management is also expected to be an early adopter of this offering, underscoring the strength of our One State Street approach. Our Investment Management business continued its focus on innovation and product capability to position the franchise for sustained growth, and it demonstrated further evidence of the power of our franchises working together as an integrated One State Street. In 2Q, Ninety One, a State Street Alpha client, entered into a strategic partnership with State Street Investment Management, paving the way for a suite of active co-branded ETFs. This is a clear example of how we bring the value of our combined firm to clients for our One State Street approach as well as how we drive innovation within the industry, deploying our extensive expertise and capabilities to identify and create solutions for the world's investors. We also recently announced that SPYM, our low-cost S&P 500 ETF, has been selected by the U.S. Department of the Treasury as the exclusive default ETF for Trump Accounts. These accounts are designed to make investing simple and accessible, giving children a straightforward opportunity to begin early in life as asset owners, benefit from the power of compounding and stay invested over time to build wealth. We're proud to help Americans through that journey with SPYM. Turning to State Street Markets. We continue to demonstrate the strength of our integrated liquidity and financing capabilities, driving strong client activity. We experienced record FX trading volumes and revenues in the second quarter with securities lending also up significantly year-over-year. Our markets franchise provides industry-leading capabilities to our investment services clients, deepening client relationships, while driving revenue diversification and earnings growth. Before I turn the call over to John, let me briefly touch on the strength of our capital position, which was reflected in the Federal Reserve's recent stress test. Following the release of those results, we announced an increase to our quarterly common stock dividend of 10% to $0.92 per share beginning in the third quarter. Dividend growth remains an important component of our capital return as demonstrated by the double-digit average dividend per share growth we've delivered over the last 4 years. In closing, we delivered a strong second quarter, driven by disciplined execution, deep client engagement and broad-based momentum across the franchise. Our results highlight the strength of our businesses, both individually and as One State Street and the role innovation plays in driving performance today and growth ahead. We are encouraged by our progress and confident in our ability to continue delivering improved performance for the balance of the year and over the medium term, supported by solid financial and strategic momentum. With that, I'll turn it over to John to walk through the quarter in more detail. John Woods: Thank you, Ron, and good morning, everyone. Starting on Slide 4, our second quarter results, excluding the impact of notable items in the prior year period, reflect continued momentum across the franchise with broad-based revenue growth driving 645 basis points of positive operating leverage. Total revenue increased 17% year-over-year to a record $4 billion. Fee revenue of $3.2 billion increased 16% year-over-year, reflecting strong performance across Investment Services, Investment Management and Markets, while net interest income of $860 million increased 18%, driven by a 17 basis point increase in net interest margin to 113 basis points. Against the backdrop of strong revenue performance, expenses of $2.7 billion increased 10% year-over-year, primarily reflecting higher revenue-related costs as well as continued strategic investment in the franchise. These results drove another quarter of improved profitability with pretax margin expanding 470 basis points year-over-year to 34% and ROTCE increasing over 6 percentage points to approximately 26%. Turning to Slide 5. Servicing fees were $1.5 billion in the second quarter, up 13% year-over-year, primarily reflecting organic growth of approximately 7%, driven by client activity, flows and net new business with the remainder from higher average market levels and currency translation. AUC/A ended the quarter at a record $57.9 trillion, up 18% year-over-year, reflecting higher period-end market levels, client flows and net new business. Servicing fee sales totaled $87 million in the second quarter, reflecting continued client demand across regions and strength in strategic growth areas, including alternatives. Turning to Slide 6. Management fees were $772 million in the second quarter, up 29% year-over-year, reflecting approximately 9% organic growth and strong support from higher average market levels. Assets under management ended the quarter at a record $6.3 trillion, up 23% year-over-year, supported by higher period-end market levels and positive net flows. Net inflows totaled $114 billion in the quarter, marking our fifth consecutive quarter of positive organic growth. This performance was primarily driven by strong index ETF and cash net inflows of $66 billion and $35 billion, respectively. Net inflows were broad-based across geographies, led by the Americas and complemented by solid contributions from Asia Pacific and EMEA. We launched 38 new products and solutions during the quarter, including a tokenized money market solution and a stablecoin reserves fund, further advancing our digital asset strategy. As Ron mentioned, SPYM was selected as the exclusive default ETF for Trump Accounts, expanding access to investing for U.S. children. Beyond the near-term asset gathering opportunity, the program introduces a new generation of investors to State Street Investment Management and reinforces our position in the growing U.S. wealth market. Turning to Slide 7. Our global client franchise continued to support healthy activity across our markets business in the second quarter. FX trading services revenue increased 27% year-over-year, excluding a notable item in the prior year period to $494 million, driven by record high client volumes. These volumes reflect both our distinctive capabilities and the continued deepening of relationships with clients. Asia Pacific was a particular area of strength with robust equity market activity in a number of markets across the region, supporting client volumes. Securities finance revenue increased 19% year-over-year, reflecting higher client lending balances. Turning to Slide 8. Software services revenue declined 14% year-over-year in the second quarter, excluding a notable item in the prior year period, reflecting elevated on-premises renewal activity last year. That said, underlying trends were strong with software and data revenue up 10% year-over-year, driven by client onboarding and conversions. In addition, annual recurring revenue increased approximately 14% and revenue backlog grew 6% year-over-year, reflecting continued SaaS implementations and conversions as well as ongoing sales momentum across the software platform. Turning now to Slide 9. Net interest income of $860 million increased 18% year-over-year, driven by a 17 basis point expansion in net interest margin to 113 basis points. The improvement in NIM reflected a more favorable funding mix, continued benefits from investment portfolio repricing and the runoff of terminated hedges, partially offset by lower average market rates. Average interest-earning assets of $305 billion were largely stable from the prior year quarter as growth in deposit balances was partially offset by lower short-term borrowings. Moving to expenses on Slide 10. Expenses increased 10% year-over-year in the second quarter, excluding notable items, primarily reflecting strong revenue performance. The majority of expense growth in the quarter was tied to higher business activity with revenue-related costs contributing approximately 6 percentage points. Additionally, we continue to invest in our business, including capabilities, products, AI and technology. These strategic investments contributed an additional 2.5 percentage points, while underlying run-the-bank costs net of productivity savings accounted for the remaining 1.5 percentage points. Headcount was down approximately 3% from a year ago, consistent with our focus on productivity and disciplined resource allocation across the enterprise. Turning to Slide 11. Our capital position remained robust at quarter end, providing flexibility to support client activity, invest in the business and return capital to shareholders. Our standardized CET1 and Tier 1 leverage ratios were 10.8% and 5.3%, respectively, broadly stable relative to the first quarter. We returned $631 million to shareholders during the quarter consisting of $400 million of common share repurchases and $231 million in declared common stock dividends for a total payout ratio of 62%, bringing our year-to-date payout ratio to approximately 73%. As Ron noted, we announced a 10% increase in our quarterly common dividend per share beginning in the third quarter, reflecting the strength and resiliency of our business. Let's turn to our full year outlook on Slide 12, which, as a reminder, excludes notable items. Our outlook assumes global equity markets remain flat on a point-to-point basis from the end of 2Q through year-end. Our rate outlook is broadly aligned with forward curves and assumes the Fed and BOE remain on hold, while the ECB delivers one additional rate hike this year. We now expect fee revenue growth of 12% to 13%, up from our prior outlook of 7% to 9%, reflecting continued organic growth across servicing and management fees as well as healthy client activity in markets. We expect NII growth of 14% to 15%, up from our prior outlook of 8% to 10%, primarily reflecting stronger average deposit balances. Consistent with our stronger revenue outlook, expenses are expected to increase by roughly 8%, up from our prior outlook of 5% to 6%, reflecting higher revenue-related costs and continued investment. Based on our current outlook, we expect to deliver roughly 500 basis points of positive operating leverage in 2026 implying a pretax margin of approximately 32%. Finally, we continue to expect an effective tax rate of approximately 22% for the full year and a total payout ratio of roughly 80%, subject to Board approval and other factors. Our strong first half results and improved outlook for 2026 reflect the strength of our franchise and continued execution against our strategic priorities. With that, I'll turn it back over to Ron to discuss our medium-term financial targets. Ronald O'Hanley: Thank you, John. Let me turn to the second part of our discussion on Slide 14. Our strong execution in the second quarter, combined with our improved outlook for 2026, provides meaningful momentum as we begin the next phase of our journey towards achieving new medium-term targets. State Street is well positioned for its next phase of growth and value creation. That begins with the scale and strength of our franchises. The breadth of our platform is substantial, enabling us to compete and serve clients from a position of strength. Globally, we are the second-largest custodian, largest ETF servicer and a partner to the world's largest asset managers and asset owners, entrusted with more than 10% of the world's financial assets, and we operate in more than 100 markets worldwide. We are the fourth-largest asset manager and the third-largest ETF manager globally. And in our Markets franchise, we are the #1 provider of FX to asset managers as well as a top-3 securities lender with capabilities that are deeply integrated with our Investment Services business and client relationships. Not only do these businesses hold leading market positions, they come together as a powerful One State Street, an integrated firm creating meaningful synergies and delivering greater value for both our clients and our shareholders. Importantly, our businesses are integrated, not just in how they go to market, but also in how they serve a shared client base across asset managers, asset owners and wealth managers. As illustrated on the right side of the page, we serve as an essential and trusted services and investment partner to the world's leading investors. As a result, we are strategically aligned with firms positioned to grow, enabling us to drive further value as we broaden and deepen our relationships and participate in their growth in the years ahead. This One State Street is the foundation for everything you will hear from us today, and it is the platform from which we will deliver the medium-term financial targets. With that understanding of who we are and how we go to market as One State Street, let me turn to what all of this translates into strategically and financially, starting with our track record and where we're committing to take the franchise from here. Turning to Slide 15. In recent years, State Street has delivered structural improvement across the metrics that matter most. Excluding notable items and over the past 2 years through the end of 2025, pretax margin expanded by approximately 300 basis points and return on tangible common equity increased to approximately 20%, supported by revenue growth of more than 14%. That strong performance continued into the first half of this year. As you can see on the left of the slide, year-to-date pretax margin improved to approximately 32% and ROTCE increased to roughly 23%, excluding notable items. This reflects the deliberate choices we have made in recent years to strengthen the franchise, improve operating efficiency and invest in areas that positioned us for durable growth. As we look ahead, our continued momentum and next phase of growth will be driven by 3 key strategic pillars, which are outlined on the center of the slide. First, our core businesses. Many of our most compelling growth opportunities lie within the franchises we already lead. These are businesses where we have built deep capabilities, operate at scale and enjoy strong competitive positions. We remain focused on strategically investing to accelerate these opportunities and executing with discipline to deepen client engagement and deliver durable growth over the medium term. Second, to complement the growth of our core franchises, we are prioritizing 3 strategic growth initiatives: alternatives, digital assets and wealth services that span and connect our Investment Services, Investment Management and Markets franchises, creating opportunities across the breadth of the firm. These 3 initiatives are adjacencies that align us with evolving client demand and some of the fastest-growing and most attractive revenue pools while also deepening our essential role to our clients as the industry evolves. Importantly, these initiatives are diversified across the maturity curve, driving growth from our already strong position today in alternatives, positioning us for the next phase of market structure and digital assets and enabling access to the largest and fastest-growing pools of client demand through wealth services and investment solutions. And third, our next phase of technology and AI-enabled transformation will be a critical enabler, simplifying how we operate, accelerating time to market and fundamentally improving productivity through a more integrated product platform model, which John will speak to shortly. Finally, as we execute against these 3 strategic pillars, we believe the firm is advantaged by the interconnected capabilities across Investment Services, Investment Management and Markets, enabling us to deliver through a One State Street model that provides a whole portfolio of solutions at scale rather than just stand-alone products. Taken together, our consistent track record of stronger financial performance positions us well for the next phase of growth. We entered that phase with positive momentum, supported by the continued strength of our global franchises, a differentiated portfolio of strategic investments spanning multiple stages of maturity and the evolution of our operating model through technology and AI-driven transformation. These efforts underpin the new medium-term targets we are announcing today, which include the milestones of expanding our pretax margin to 35% and increasing return on tangible common equity to the mid-20s over the cycle. We are confident in our ability to achieve these ambitious targets as we build on our strong momentum and continued improvement in financial performance. With a clear path to sustained organic revenue growth and positive operating leverage, we believe we are well positioned to unlock long-term value for our shareholders. With that, let me turn it over to John, who will walk through our path to achieving these objectives in greater detail. John Woods: Thanks, Ron. Turning to Slide 16. The pretax margin expansion we expect to achieve over the medium term is broad-based with contributions across Investment Services, Investment Management and Markets. In Investment Services, the approximately 300 basis point contribution to enterprise margin expansion is expected to be driven by a combination of organic revenue growth and productivity initiatives. On the revenue side, we see opportunities to deepen our existing client partnerships. Our key growth priorities include extending our ETF servicing leadership, broadening our reach across key international markets, expanding adoption of our differentiated Alpha front-to-back capabilities and capturing growth across alternatives, digital assets and wealth servicing. We also expect continued support from net interest income, which remains closely tied to the client deposit growth and underlying strength of our servicing business. On the productivity side, given the scale of our global operations, Investment Services is expected to be the largest contributor to the expense saves in our technology and AI-enabled transformation program. By simplifying our operating model, scaling common platforms, modernizing our technology stack and increasingly leveraging data and AI capabilities, we expect to deliver an upgraded client experience and improve service quality while lowering unit costs over time. In Investment Management, we see significant opportunities to drive growth through scale and expanded client access. ETFs, index investing, fixed income and other solutions remain core growth engines for the business. In addition, wealth is a key strategic focus as we expand our presence across advisory, intermediary and retirement channels, while partnerships with next-generation wealth platforms extend our distribution to new investors and bring differentiated investment solutions to market. We also see substantial opportunities in alternatives and tokenization where we are broadening access and developing new ways for clients to incorporate private market and digital asset exposure into their portfolios. Taken together, these opportunities support our confidence in delivering sustained organic growth, operating leverage and approximately 200 basis points of enterprise margin expansion from Investment Management over the medium term. In Markets, we see continued opportunities from both geographic expansion and product innovation. This includes scaling our financing, trading and execution capabilities in our faster-growing international markets, expanding our product offerings and deepening engagement with our core investment services clients. Beyond this, growing demand across alternatives, digital assets and wealth is creating new opportunities to expand our solution set. Supporting these growth drivers, enhanced data capabilities, automation and operating efficiency initiatives are expected to enhance execution and help to deliver approximately 100 basis points of enterprise margin expansion over the medium term. Underlying all of these opportunities is our One State Street approach, which enables us to connect capabilities across Investment Services, Investment Management and Markets to deliver more integrated solutions, deepen client relationships and increase wallet share. Turning now to Slide 17. Let me expand on the transformation initiatives that will accelerate execution, enhance service quality and create capacity for future growth. First is the migration of our operating model to a technology and AI-enabled product platform structure. Rather than just reengineering legacy processes, we are taking an end-to-end view of the enterprise and are planning to rewire how we operate, embedding AI and modern technology into our core business processes. Under this model, business, operations and technology resources are reorganized into integrated agile delivery teams with business leaders holding end-to-end ownership of the client delivery process and experience. The result is meaningful efficiency gains from simplification, automation and AI enablement. Beyond these efficiency benefits, faster time to market for new products, enhanced service quality and improved client experience are expected to drive incremental revenue opportunities across the franchise. Supporting this operating model is our technology simplification and modernization agenda. By reducing legacy applications, expanding the use of modern cloud platforms and further strengthening our enterprise data foundation, we are lowering unit costs, improving resiliency and reducing operational risk. At the same time, a modernized data foundation unlocks new revenue potential by creating capacity for investment in growth and innovation. Finally, we're scaling AI adoption across the enterprise to improve execution, enhance productivity and accelerate software development. AI will drive meaningful gains in developer efficiency and code modernization, freeing up capacity for higher-value work. Beyond these productivity benefits, AI is enabling new client-facing capabilities and better data insights that will increase the earnings power of our franchises over time. Together, these efforts are expected to deliver approximately $1 billion of run rate transformation benefits by 2029, with approximately 75% of this driven by expense productivity and 25% from revenue. Turning to Slide 18. We outline our capital allocation framework and how we intend to deploy capital over the medium term to support our strategic objectives, generate attractive returns for shareholders and maintain the resilient balance sheet our clients expect. Our capital priorities remain unchanged, supporting a strong and growing common dividend, investing in the franchise to drive organic growth and returning excess capital to shareholders through share repurchases. Consistent with these priorities, we continue to target a total payout ratio of approximately 80%. To support these objectives, our current medium-term outlook includes a CET1 ratio of approximately 11% and a Tier 1 leverage ratio of approximately 5.25% to 5.75%. Turning to our final slide. State Street is entering its next phase of growth from a position of strength. The momentum we have built in recent years has fundamentally repositioned State Street to deliver sustained growth, continued margin expansion and stronger returns over the medium term. The scale and strength of our franchises, our distinctive portfolio of strategic growth initiatives and the accelerating impact of our transformation agenda give us real conviction in the path ahead and in our ability to execute against it. Collectively, these drivers support our new medium-term targets of 35% pretax margin and a return on tangible common equity in the mid-20s. With that, operator, please open the line for questions. Operator: Our first question will come from Alex Blostein with Goldman Sachs. Alexander Blostein: So I was hoping to start with the medium-term targets. Maybe starting with the revenue question first. So helpful in the way you framed it in terms of sort of qualitatively where you're looking to lean into. But I was hoping you can give perhaps just a little more granularity on the $250 million and kind of which businesses that's likely to come from. And I guess, more importantly, you guys have been improving organic growth to begin with over the last couple of years. So as you think about the firm-wide organic fee growth today, where does that stand? And I guess, when you layer in these incremental efficiencies or incremental initiatives, where do you see organic growth firm-wide going on the fee side? John Woods: Yes. I mean, thanks for the question, Alex. This is John. I'll go ahead and give you some context with respect to overall how we're thinking about it. Over the medium term, the way I would think through it would be positive operating leverage is the main sort of North Star that we're committing to. So what we're saying here is, and as I mentioned in my remarks, look at the baseline from which we're launching this in 2026, whether it's 1H or even our outlook for 2026 overall, we're around 32%. That's growing over the medium term to that 35%. And I'd say that, that would be consistent with positive operating leverage of 100 to 150 basis points, which is driven by organic growth across all 3 of those businesses that we're talking about. I would pair that with some commentary with respect to NII over the medium term. So we do see net interest income rising in that low to mid-single digits area, driven by balance sheet growth in the low single-digit range and our net interest margin getting to the upper end of our 1.10% to 1.15% range as you get out over the medium term. And so those are the underlying engine that drives this progression. And then when you flip over to the transformation program, and that 75-25 split, that $1 billion that we expect to deliver by 2029, as you asked, 25% of that is decked against revenue opportunities. And I think that's the starting point given what we're trying to accomplish here is so broad-based and has huge impacts on client experience and time to market and cycle times. But the $250 million that we have in there is primarily related to the targeted strategic initiatives that you'll see that we're mentioning here that are One State Street-driven, that would be in the alternative space and in digital and in wealth. And among those 3, probably alternatives is the biggest contributor just given its maturity profile, where we've gotten — that initiative has been ongoing for a number of years, and we're accelerating into it. So that's how I would think about, overall, the context for the medium-term outlook and putting revenue into the mix there. Alexander Blostein: Got it. That's helpful. And just for a follow-up, maybe double-clicking on the $750 million of, I guess, cost savings you expect to see here. Again, it feels like there's inherent operating leverage in the business regular way as you described it initially, and then this sort of comes on top. If you round that through, obviously, that leaves you with much higher pretax margin than the 35%. So if I think about the $750 million being a gross number, maybe help us frame how much of that will ultimately get reinvested back in the business to think about what the net kind of efficiency on the net cost savings could be on the back of the program. John Woods: Yes. I mean it's fungible, right? But I would say that the transformation program has 2 overall objectives, maybe more than 2, but 2 overall financial objectives. It has the broader objective in the revenue space, which we've already covered. But when it comes to just the $750 million, it's doing double duty. First, it's allowing us to grow our strategic investment capacity over this medium term in order to drive the outcomes that we're talking about with respect to these One State Street initiatives as well as the broader powering our leading franchises. So that's the first part of it. And then the second part of it is helping us stay on track for the margin expansion. So I think I would — without giving you a specific percentage, I think it's relatively equal parts allocated to reinvestment and margin expansion is, I think, the best way to think about it. And we also mentioned that when you look at our businesses, just given the footprint of our Investment Services business, that's the majority of that — of the productivity saves get generated by that where all that headcount is over in the servicing side of the business. So that's the way to think about it across the businesses as well. Operator: Your next question will come from Glenn Schorr with Evercore ISI. Glenn Schorr: So I definitely want to ask a question on all things digital assets, stablecoin and tokenized deposits. But the lead into that is I just want to make sure I get the right perspective. And I think this is for you guys and for the industry is the initiatives and you have many in that space are included in that incremental $250 million, and it's not even the biggest piece. So the message I'm hearing is — for you guys and the industry is we're investing a lot in the future infrastructure of the financial markets, but it's a long-term commitment because even if all $250 million was from digital assets, that would be less than 2% of State Street's revenue. So focus on the big picture first. And either way, my next question is, I noticed there were 2 announcements during the quarter. One on the Visa, Mastercard stablecoin network with over 100 businesses, and you weren't one of them and also tokenized deposit network with a bunch of banks, and that's more of a bank thing. So my question is, what is taking place in terms of as we're modernizing all the payments and clearing and settlement systems? And are we paying too much attention because right now, it's not adding up too much money? So I apologize, I smushed those 2 together, but I want to get the right perspective on all things digital. Ronald O'Hanley: Glenn, maybe I'll start, and John will pick up on the specifics as it relates to the numbers. And as you think about the $750 million and the $250 million, again, that was in the context of the go-forward next phase of transformation that we just described. We've got initiatives underway. And if you think about just the — on the cost side, if you think about the margin expansion that we've enjoyed over the past several years, I mean, that's been the result of our ongoing transformation program. What we're talking about here in the $750 million and the $250 million is the next phase, which is incremental. But we've got existing initiatives that also will be contributing. So I just want to make sure that people understand the mathematics here. Number one. Number two, in terms of your specific question on digital, the way we think about this is we're primarily an infrastructure provider to our clients, enabling them to do — to execute their digital strategies. So who are our clients? Our clients are global investors, right? So that's why we're focusing on the — if you think about it, the traditional to digital back to traditional kind of rails because it will be a long time before the whole infrastructure stack is digital. And then secondly, we're focused on things that relate to those investors, asset managers or asset owners. Hence, for example, the focus on tokenized money market funds who are our client base. Well, a large segment of them are large asset managers. So we're picking our spots and going to where we know our clients want to go is the way to think about it. John Woods: Yes. Just a few comments to add to that. I mean, I'd say that, as you know, we launched our digital asset platform recently. It's a secure, scalable platform. I think we're trying to create the capabilities to manage wallets and really manage the on-ramp and off-ramp between traditional finance and into the digital on-chain world. A few comments about some things that we've also been able to do is we're — in the Investment Services side of the business, we're focused on enabling client launches of tokenized money markets. And so that's early in the road map, and we're excited about that. And I think on the other side of the house with respect to Investment Management, we also announced a couple of digital asset ecosystem product launches as well. So you think about this across the One State Street lens, State Street Investment Management did launch a tokenized money market fund on chain, basically cash equivalent for the digital ecosystem, creating new distribution, et cetera. And broadly, asset managers love this with respect to the distribution aspects as well as collateral mobility. And Investment Management also launched a stablecoin reserves money market fund as well, targeted to stablecoin issuers. I think it's going to be table stakes for us in the space that we're in to have these capabilities. As we mentioned, alternatives is probably the most mature of the 3 that we're spotlighting here today. Digital is gaining momentum, but lots of activity, as I articulated here in the here and now as well that we're making progress on. Glenn Schorr: I appreciate that. I mean it sounds like you make a lot of progress. It doesn't add up to huge numbers right now. But that actually, I take as a good thing because it means the other $15 billion, $16 billion of your revenues is that much safer from the digital invasion. But if you agree with that, I'm good and done. Operator: Your next question will come from Mike Mayo with Wells Fargo. Michael Mayo: Could you guys give us more confidence on — or why you're confident that this new phase at State Street over the next 3 to 5 years is going to succeed? I guess I have — in my plus column, I recognize that you have 10 quarters in a row of positive operating leverage, better returns, better pretax margin. And the organic growth seems to pick up. I'd love if you could verify that. It looks like the servicing fees have picked up organic 2% last year to 5% this year. Asset Management 6% to double digits this year. So that would be in the plus column. But I'd say the negative column is I've heard this before at State Street for the last 15 years and this certainly predates you, John, and it predates you, Ron. But the whole cloud, the tech, the rewiring, as you said, John, was the story last decade and it failed to produce the results that were desired. So really, why is this time different? Why should investors think that this major kind of demarcation new phase of State Street should succeed? Ronald O'Hanley: Mike, it's Ron. I'll start with that. We begin with a very strong foundation. If you look at our track record of execution, we've got, as you point out, the 10 quarters of positive operating leverage. I mean that didn't come out of nowhere. That came out of investment in the platform, but also investment in products and the revenue growth capabilities that we've now demonstrated over those 10 quarters. So what you're seeing in this foundation is consistent organic revenue growth and a very productivity-focused culture, right? John noted in the results that, yes, our expenses have gone up, revenue related, and reflecting the revenue-related costs plus investments in these capabilities, but our headcount has actually gone down. We didn't have that kind of foundation in the history that you're referring to. Secondly, I put a lot of — we put a lot of credence in this team. The current management team is a strong one. Over 50% of that team is either new or new to its role in the last 3 years. They work very well together, and you're seeing it in terms of this strengthening each of the franchises, but also the real results coming out of the integrated One State Street approach. You're seeing out of this team improved operating efficiency literally across the board quarter after quarter, year after year. And our first half 2026 results kind of reinforce this trajectory, right? We had the prior 3 years that we pointed to, and you're seeing that now play out again in the first half year. So taking it all together, we look at these targets. And these are targets over a cycle. I mean we're in a very constructive environment now. We're not assuming that, that's going to last forever. But when we look over the cycle, these are the targets that we're aiming for, they're ambitious, but we're going to hit them. We selected margin and ROTCE because they're within our control and they are things that are important to you as investors. So we bring it all together. We've got a lot of conviction. We've got a lot of confidence, and we intend to execute what we laid out there. Michael Mayo: I guess in terms of the rewiring part, I mean, it all sounds good on paper, and it may or may not play out the way you expect it. Is there any metric that you or we on the outside can monitor to see that success, like revenues per employee or number of employees, just the idea of going to a more agile infrastructure, kind of what that means in financial terms. John Woods: Yes, Mike, it's John. I guess a couple of things. One is the — starting with the overall number of the $750 million, it is disproportionately being driven by this operating model transformation, which is pretty tangible. I mean what we're talking about is basically migrating to a product platform approach where our business technology and ops teams are reorganized into cross-functional integrated teams that deliver specific business outcomes for clients. That's a physical organizational migration that's very tangible to see. And what we're going to be doing is taking out the unneeded interfaces that currently exist that slow down and create some inefficiencies between those groups today. That's pretty tangible and that will flow through to headcount. I think what you saw over the last couple of years is that our headcount is down. The gross headcount is down by more than what the net is. And the reason for that is that we've been investing in driving strategic initiatives along the way. And that theme will continue. So I think you should keep an eye on headcount and watch that area. We'll also, over time, look for a short list of metrics that will help support what we're talking about here in terms of product development, release cycle times and client experience and service quality metrics, et cetera, which we expect to improve. And in the platform space, having — migrating to more applications in the cloud and reducing the footprint of our data centers are also — lend themselves to metrics that I think we can share, and also migrating our overall investment spend because of the efficiency that we should get in software development life cycle and in the product life cycle overall, you should see the percentage of our grow — of our investment spend rise over time as well. So I think there's a handful of metrics that we can share in combination with the fact that we are actually going to reorganize the company along these lines, and that will be very tangible. It won't be — and that will be something that we can demonstrate over this medium term. Operator: Your next question will come from Ken Usdin with Autonomous Research. Kenneth Usdin: Actually, if you don't mind to focus on the current outlook. John, just maybe give a little color, just looking at kind of what you're expecting for the full year now, I guess I would assume that NII kind of flattens out from here and fees probably revert a little bit. Given how strong FX was in the second quarter, I can imagine some of that would be there. But can you kind of just distill how you expect some of those to progress from here? And anything we should just be thinking about with regards to either seasonality or things that revert from the recent results? John Woods: Yes, sure. I mean I think maybe starting with fee revenue, I mean, I think we expect continued organic growth in the servicing fee and management fee space. And I think that's an important anchor point of continuing the momentum that you're seeing in the first half. That continues into the second half. We're not assuming, however, as much of a tailwind from markets — market levels, I mean, as well as Markets. I'll get back to Markets in a second, but market levels, we're keeping it flat to the end of the second quarter. And so we'll see how that plays out. But most importantly, organic growth continues into 2H. But to your point, we're setting records in FX trading services here quarter after quarter, it seems. And we do have built in some moderation into the second half. And you can be of 2 minds there. I mean I think we've been — we've seen client volumes be extremely resilient. We've seen opportunities internationally where spreads are wider and growth is a little stronger, but continue to support our Markets business. And so we're excited about that, but we're not counting on that in this — continuing in this outlook for the revenue side of things in the Markets business. I think it's going to be a strong second half for Markets, but moderating a bit from the record in 2Q is what we're assuming in this outlook. When it comes to NII, that's about right. I mean, I think you're seeing some flattening out there. I mean I'd say earlier, we had a sense that deposits would be in the $250 billion to $260 billion range. We came in above that in the second quarter. Average was around $270 billion. And I think we're going to assume that, that is going to be the outlook for the whole year. So we're raising that in terms of balance sheet contribution coming from NII. And that's underpinning this increase in the outlook from 8% to 10% to up 14% to 15% year-over-year. And with the net interest margin kind of staying in that range of 110 to 115 that we mentioned last quarter. So those are the thoughts from my standpoint on those — on the revenue side. And on expenses, I think the point there is that we're going to see some moderation in the growth in part due to some lower costs on the third-party spend side in the numerator. And then there's also a year-over-year denominator impact from 2H '25 that takes our expenses up to 8% from the prior 5% to 6%, including revenue related. So just a few comments across each one of those line items. Kenneth Usdin: Okay. And just one clarification, and I apologize if I missed this in the deck somewhere, but can you just make sure we understand the 3 to 5 years, just what years we're talking about there? And the question people are just asking about like possibility of achieving it inside — when you can get to these targets inside that range? John Woods: Yes, sure. I'd add 2 points there. One is we — on the $1 billion transformation program, that is explicitly tied to achieving that by 2029. So that's sort of earlier than the 3 to 5 years, I would say. So that's by 2029. So that's more in the 3-year range, early end of it with respect to the targets overall. So I think we like to talk about the medium-term meeting 3 to 5 years, but that 100 to 150 basis point positive operating leverage expectation would imply that we would get there in the early end of that medium-term time frame. Operator: Your next question will come from David Smith with Truist. David Smith: The $1 billion of transformation, it's a nice goal. Are you anticipating any major upfront spend required to get there by the 2029 target? Or is it just embedded between your normal investment spend each year net of efficiencies? John Woods: Yes. I think on the recurring side of things, that's all embedded in the numbers that you heard. I think there will be some onetime costs that are predominantly severance related with respect to the headcount implications. And so I'd probably frame that in the neighborhood of around $500 million or so would give you a sense for how that would equate to headcount reductions gross. And then on a net basis, maybe similar to what you saw over the recent past, we would expect headcount to be down in the low single digits range on a net basis after reinvestment of that capacity into strategic initiatives and growing our franchises. So that's the way to think about it. And we think that's a highly attractive ROI on that severance cost. There's a little contract termination in there, too. But almost the substantial majority of that $500 million, I would say, is severance-related, which typically ends up with very solid ROIs and solid earn-backs as well. David Smith: Okay. And then in terms of the lines of business targets, just focusing on investment management, you're saying you're going to get about 200 basis points of enterprise-wide margin expansion from there, but it was less than 20% of revenues last year. So just thinking about the weighted contribution, it would take a pretty big improvement in margins, specifically in Investment Management to get 200 for the overall company. Can you just talk a little bit more about the key drivers there and your confidence in achieving them? John Woods: Yes. I'd say — I think the answer is — I think that's right. I mean the math there is that if you go back to 2025, Investment Management was around 33% margin. In second quarter, Investment Management has already improved that to 38%. So — and I think that's probably about halfway home from a mathematical standpoint in order to deliver that 200 basis points top of the house. So it seems large from '25, but about 50% of that's already delivered here in the second quarter. Now nothing is linear, and the market levels can have an impact on that over time. But we're just seeing incredible momentum in the Investment Management space. And just reflecting the scale advantage that they have and the innovation in terms of the products that's being delivered, we've got a lot of confidence in this 200 basis point top-of-house contribution coming from Investment Management. And I think the specific areas that we're talking about is continuing to drive our leading franchise as it stands with ETFs, index and fixed income and just our global distribution expanding, that is — that's a big driver. And then their own transformation delivery as part of the overall transformation program is also a large contributor where cycle times and product release cycle times all shorten, and there's revenue uplift that's embedded in that 200 as well. So those are some of the ways I think about the credibility of that 200. Operator: Your next question will come from Jim Mitchell with Seaport Global Securities. James Mitchell: Just maybe on the margins and expenses again. I guess as we think about the Tech and Ops transformation, do you expect any drag, I guess, in the very short term on pretax margins as you invest? Or is a lot of that stepped-up investment spending kind of in the run rate? Just trying to think through 100, 150 basis points of pretax margin improvement per year. Would you view that as somewhat linear or back-ended? John Woods: Yes, it's not back ended. I would say that the base case is that we would expect to generate positive operating leverage in each year of the medium-term outlook. That's our goal, and that's what we're trying to accomplish to make progress along the way. So it's not back-end loaded, but what I'm giving you is an average. And there will be some variation in that inevitably based on both the pace of internal activity and execution as well as external macro factors. But I think 100 to 150 is a good planning range that takes it to the earlier end of that 3- to 5-year outlook. And there's not an early years large investment cycle that has been back-end unveiled over the medium term. The tech investments are planned and consistent with the $1 billion program along the way across the medium term without it being back-end loaded. James Mitchell: Right. Okay. That's helpful. And then on the numerator side, obviously, this year has been a great year, and you've gotten 500 basis points of operating leverage. But what — you talked about expectations for the rest of the year from assumptions. But how are you thinking about the assumptions over the medium term for the revenue backdrop? And if we have more years like this, can you get there even quicker? Does that flow to the bottom line, the upside? John Woods: Yes. I mean I think, as I mentioned, the 100 to 150 basis points assumes and we expect to deliver organic fee growth over this time frame. I also mentioned that NII would come in low to mid-single digits when we think about how that will contribute over the time frame. And so to the extent that the positive operating leverage exceeds the 100 to 150, we would achieve the 35% earlier. That's for sure. I would hasten to add that we are going to be looking for a sustainable level at the 35% and at these targets, where we're delivering it not only in real time for a sufficiently long multiple quarter period, but also have an expectation that it will continue to stabilize and grow from there. And then that's the timing for when we would reassess whether those targets have been achieved and then consider whether they should be adjusted higher. Operator: Your next question will come from Ebrahim Poonawala with Bank of America Securities Merrill Lynch. Ebrahim Poonawala: First of all, John, thanks for all the details in the slide deck on the targets. Nicely laid out. I had a question. I think it's an interesting point in time where you're going through — when you talked about rewiring the business and kind of when we think about AI adoption within financial services, just talk to us, as you've approached the targets, as you're thinking about adopting AI, how difficult is it to sort of implement that through workflows and rewire that? Is it — do you think over the next 12 to 24 months, you'd have a franchise or an enterprise that's fully, I guess, I don't know, AI native or — yes, if you don't mind talking through that? And I guess tied to that, how much of AI-driven gains are in these targets as opposed to you could be an even more profitable bank if kind of AI delivers to its promise on productivity? John Woods: Yes, sure. I mean, I'll make a few comments about this. I'd say I'd put the AI benefits in maybe 3 categories. The first one would be within our operating model, which is the lion's share of what we're really delivering here in terms of the $750 million and which depends upon the tech simplification and AI adoption. We are going to be embedding agentic capabilities within our operating model redesign. So we are migrating to agile ways of working. And within any given cross-functional team, if we would have done this, call it, 5 years ago, that would have been composed of all humans, of course. Now it's going to be a hybrid of human-agentic team that actually staff these integrated teams. So I would describe the savings that will be coming from the operating model transformation as embedded with agentic capabilities. And I'm not sure you can fully unpack how much is separately driven by the agentic aspects versus there are a lot of other things going on where we're reengineering, taking out interfaces from business processes. At the same time, the rewiring is basically creating these human-agentic hybrid teams. And so it will all happen together. And I'd put that one category, which is agentic is helping to power the operating model efficiencies that we're talking about. So I'd say that's the first one. The second one is within the technology organization itself, where it's much more able to be ring-fenced, if you will, when we look at software developer productivity. And it's very explicit and we're indicating that it's our expectation that you'll see equipping software developers with these tools that we would expect to see a 30% to 40% increase in productivity. And that likely gets deployed in faster cycle times and more product launch and higher innovation, which drives revenue. So we're excited about that, and that's the second overall category. I think the third one is really kind of a rising tide lifts all boats story where we're going to be and have delivered agentic capabilities from a standardized standpoint on a copilot platform to all eligible employees. And it's basically allowing them to actively use these AI tools and create higher-value work. So knowledge retrieval, data document extraction, content creation, all of those things and analytics and decision support, all of that is improving the productivity of our colleagues across the platform. And those are the 3 ways that I think about it. And you're going to see the savings expressed and embedded in that $750 million with respect to expense saves, definitely, but you'll also see it driving the expectation of the $250 million on revenue and beyond over time. Ebrahim Poonawala: Got it. That was helpful. And just a separate question following up on Glenn's on digital assets. I mean there seems to be a lot of hype around that. Not that the technology is not real, but just talk to us when you think about blockchain and digital assets kind of playing a critical role in the plumbing of the market. Do you think of that as a 5- to 10-year build-out? Or do you think over the next year or 2, this is going to have a meaningful impact on how you think about revenue growth and including disruption risks to certain line items? Just, yes, your thought process around that. Ronald O'Hanley: Ebrahim, it's Ron. It's a really good question. And I think what's playing out is like a lot of technologies, there's an awful lot of promise and the early delivery, I think, underwhelms and is disappointing. And then the later delivery actually is greater than what everybody anticipated. And I suspect that's how this will play out. I mean if you think about some of this blockchain technology, it's not new at all. I mean it's been around for a while. Part of it is you're taking new technology and putting it into an ecosystem. And I'm not talking about just State Street ecosystem. You're talking about a financial ecosystem. But the — there's a lot of enablement that's occurred over the past couple of years, things like the GENIUS and whatever is going to come out of the CLARITY Act. There's a regulatory movement that's starting to align around this. Again, given some of these things, the regulatory movement has to align across borders. But if you think about what it enables, just think about collateral loan and the ability to create a — to transform money market funds into collateral eligible, there'll be so much pressure to do that. If you think about in real assets, the growth in real assets and the ability to use blockchain to actually tokenize some of these things, enable it to be broken up and put into smaller portfolios, wealth and retail portfolios. I think market pressures will accelerate this. So I believe that it's not surprisingly slower than what the hype might have suggested. But if you look at what's going on under the covers, there's real adoption going on. There's real stuff being built out. And I think you will see this promise over the medium to long term. Operator: Your next question will come from Manan Gosalia with Morgan Stanley. Manan Gosalia: John, you've spoken about the balance sheet optimization and the NII durability as being central pillars of the medium-term outlook. Can you just remind us on what the near-term and medium-term impacts of the balance sheet optimization efforts are and what the impact is to NII? John Woods: Yes. I mean I would say it's all embedded in that outlook with respect to — I think, in mid-2025, our net interest margin was around 96 basis points, I think. And we've been able to raise that predominantly through optimization activities, not exclusively, but a big part of it was optimization activities to remix the funding side of our balance sheet into higher deposits as a percentage of overall funding and lower short-term wholesale funding. And so that net interest margin has risen from around that 96 level to 110 to 115 range that we're talking about today. So if you do the math on that, that's around 15 to 20 basis points overall of net interest margin lift. I think there's some environmental factors and business execution that has been driving that, which is great. And then there's a reasonably large piece of that was restructuring the balance sheet over the last several quarters to stabilize it at this 110 to 115 level. And then as I mentioned earlier, we're expecting to try to see continued tailwinds there on net interest margin. And so I would — what's assumed in the medium-term outlook is that we'll migrate to the high end of that 110 to 115 and be around the 115 range as you — as the medium term plays out. Manan Gosalia: Got it. And then maybe on the capital side, it seems like you raised the CET1 target a little bit from 10% to 11%. Can you speak to what's driving that? Is it just conservatism? Or is it a desire to keep some sort of capital buffer right now while the environment is good? And is there any upside to that 80% payout ratio? John Woods: Yes. I mean I think 80% is a good planning level. That's what we've got included and assumed in our medium-term outlook. And I'll start with that and come back to the — back to the ratio itself. We do have very attractive opportunities to put capital to work in support of our strategic clients, whether it's in our global credit finance business, supporting our Investment Services clients or in the Markets business, who are supporting Investment Services clients as well as asset owners and increasingly thinking about wealth managers over time. So there's RWA there that we think about aligning with our strategic goals over the medium term and also being attractive marginal deployment, just a growth mindset there. So I think it balances reasonably well our opportunities in terms of putting balance sheet to work with our desire to continue to have an attractive return of capital for shareholders. So that's what's going on there. I mean I think what you're seeing with respect to the CET1 ratio is a couple of things. One is we're leverage constrained. If we're increasingly able to continue to grow deposits, which is our expectation, not only here in — we demonstrated that in the first half. We're committing to that and maintaining those levels on an average basis in 2026, that creates more of a leverage constraint. And so we'll have to be managing the interplay between leverage capital and CET1. And so that's probably the thing to think about when you see that 11%. Operator: Your next question will come from Brennan Hawken with BMO Capital Markets. Brennan Hawken: I had a couple on the ETF business. So recently, you launched a new product, QNDX, which is a rather interesting market, had been dominated by the Qs and recently opened up for new competition. But what was particularly interesting to me was the pricing of the product. You priced it at 10 basis points, which was a pretty narrow spread above NASDAQ's 8 basis point licensing charge and suggested to me that maybe this might be a new pricing strategy for SPDRs, given your inherent advantage of having your own servicer and effectively being able to price more attractively than a lot of your competition. Is this what we're starting to see here? And does it lead to any concerns around potential pricing pressure on ETF servicing? Ronald O'Hanley: Yes, Brennan, I mean we — unlike if you think about the history of us in ETFs if you think about SPY in the SPDR franchise, which started out as an institutional franchise. And later on, we thought about, okay, what are we going to do for the wealth and the asset holder world, if you will. That's what led to the launch of SPYM to sit alongside SPY. We didn't have that equivalent institutional product. So our view was when we went into this, that we needed to round out our product line, we just didn't have it. It's a good strategy for the wealth and buy-and-hold investors. So we thought about it positioning that way is really how we thought about it and really nothing more than that. Obviously, because we are the leading ETF servicer when we're both the servicer and the sponsor, we're in effect deriving revenues from 2 different places. So sure, that's a factor. But in terms of how we position the product, it really has to do with our starting point, which was not being in that market at all. And when NASDAQ in effect, opened it up to others, that's how we thought about the positioning. Brennan Hawken: Got it. That makes sense. And also, we've heard a noise from wealth management firms talking about rolling out revenue share programs for ETFs. Do you have any sense for that potential impact? Have you been in dialogue with any of those wealth management firms? And what would you expect on that front going forward? I know the ETF business is a little more institutional oriented, but the wealth side is still relevant. Ronald O'Hanley: Yes. So I mean, we're — I think you know, our ETF franchise is growing and the fastest-growing part of that is the wealth side of it. So we clearly are in dialogue with all these distributors. We've worked with all of them. There's long-term partnerships here with them. In many cases, not only are they our distributor, but we serve them in other ways and they serve us in other ways. So these are — virtually all these distributors are also important partners. So we talk to them. We'll do things that make sense, and we won't do things that won't make sense. Operator: Your next question will come from Steven Chubak with Wolfe Research. Steven Chubak: So I wanted to ask on the pricing outlook. Pricing pressures have been less acute in recent years. At the same time, there are more investors that are questioning pricing resiliency going forward, just given the significant windfall, you and your peers are expecting to realize from AI deployment and just a structurally lower cost to serve. I was hoping you could speak to what you're hearing from customers as you engage in more recent discussions on pricing? And what are some of the assumptions on pricing that are underpinning the 35% medium-term target? How much of that benefit do you expect will be shared with customers over time? Ronald O'Hanley: Yes. I'll start on that. I mean I'm just reflecting on your question. And I mean, I spent a lot of time with clients. And I can't think of one — we always talk about AI, and I can't think of one that's talked about and we're really looking forward to you lowering prices, right? They think of it more and the discussions are more around, first, State Street, how is it going to help you serve us? And we talked there about speed, so kind of cycle times and those kinds of things. We then talk about how we can actually think about AI across our firms, particularly in those cases where we're not just the back office, but we're providing middle office services. So it's most — most of the dialogue is around what does this enable us to do in terms of getting things faster to them or how we might work more intensively and in an automated way together. John Woods: Yes, I might just add on to that. I mean I think what we've got planned over the medium term is organic growth in the servicing business. And within that, there are multiple drivers, and that incorporates conversations with clients with respect to pricing and all of that. And they all end up being positive. I mean we are going to lower cost to serve over the medium term. There is net new business. There is client activity and turnover that we really benefit from. And I think all of that would be included in and inclusive of our organic growth on the top line. And then when you look at the contribution we expect from the servicing business of 300 basis points to the overall enterprise, that drops to the bottom line as well from a pretax margin standpoint. Steven Chubak: That's great color. And for my follow-up, I wanted to ask on the medium-term target, but maybe looking at it from a sum-of-the-parts lens, if you will. You noted the 35% margin target is ambitious. If I look across each of the core segments, best-in-class peers are running with stand-alone margins, somewhere around 40%-plus. And just wanted to better understand how you and the Board settled on 35% just given some of the higher margin upside that might be implied when benchmarking to best-in-class peers? And is there anything structural that's precluding you from getting somewhere closer to high 30s to maybe 40% type margin over time even beyond the medium term? Ronald O'Hanley: Yes. Firstly, I think it's important to put these targets into context. They're — it's not a destination, it's a milestone, right? And if you think about the progress that we've made to date and the fact that we've — we're talking about what we're going to do through a cycle, we feel like over the time frame that we've talked about, 3 to 4 to 5 years, that this is a reasonable number, and we'll reset them again. So number one. Number two, that margin is composed — I'm not sure the number you're citing kind of which segment that you're alluding to there. But if you if you think about it, obviously, embedded in this are the 3 businesses, you've got a services kind of service-intensive business, like the Investment Services, which will have a lower margin, but a higher opportunity for improvement just given this next generation of transformation that we're putting in. You've then got the Investment Management and the Markets business, which starts with high margins and will continue to improve. So there's a portfolio of businesses here. John Woods: Yes, I think I would just add on to that, just that we've — we're looking at in 2025, we were at 29% pretax margin. And we are delivering 32% in the first half of 2026. So that's 300 basis points. And what you're seeing here today, given the outlook for 32%, also implied by 2026, another 300 basis points of sustainable pretax margin where we want to have ambitious and achievable targets. And that's some of the thinking that went into this. And you heard from Ron that all of these are milestones. And when and if we've been able to demonstrate sustainability, not only from a demonstrated delivery of that level, but an expectation that would continue and rise over time, we would reconsider them. And I think that's a pretty natural cadence that you would expect from us as we're delivering these targets. Operator: Your next question will come from Vivek Juneja with JPMorgan. Vivek Juneja: John, I wanted to clarify a couple of things. One from the last — your last answer. You said pricing discussions have been positive. Does that mean you're actually having discussions for being able to raise pricing? Or what does that positive mean? John Woods: Yes. I'm not sure we said that. We'll have to go and reflect on that one, Vivek. But what I said was that we have an expectation of organic revenue growth in the servicing fee business over the medium term that incorporates all impacts with respect to client activity, net new business. And all pricing expectations are all built into that, and that incorporates organic growth and that drops to the bottom line because servicing contributes 300 basis points over the medium term. So I think that's what you should take away from that. Vivek Juneja: So what do you mean by pricing expectations Are you expecting pricing to go up, stay static? And given that you've never had this kind of operating margin of this anywhere — this level of return on tangible common equity, isn't it — I understand that AI is in the early stages. People trying to figure out how to use it. But once it gets set in and the returns are much higher, wouldn't your clients come back to you? And this is something that you all have talked about over the years when the ROE came down that you went back to clients saying you weren't earning an adequate return. Wouldn't the flip side happen when the return goes up a lot and you have clients look at you and say, "Hey, why aren't you sharing that with us?" Ronald O'Hanley: Vivek, I just think we're in a very different environment than we saw — if you go back 5-plus years ago where there was a lot more price compression in the market. Think about the environment we were in. It was largely a mutual fund-driven environment. That was at some level, particularly in the retail space, it was a time when mutual funds were being rapidly consolidated, platforms were basically kicking mutual funds off the platform trying to get down from the old supermarkets to a curated selection. That's not what we're in now, right? You've got this rapid adoption and proliferation of ETFs and applications in areas that nobody would have even contemplated 5 years ago, number one. Number two, if you think about the firms themselves, particularly our — the segment that we operate in, which tends to be the larger multidisciplined kind of asset managers and the most sophisticated asset owners, right? The kinds of asset classes that they're competing in, the needs that they have that are driving a couple of things. One, more traditional servicing, but now it's alternatives and things like that. But two, it's working with them on their own operations and how do we deliver technology and services to them so they can actually adapt to not only these multiple kinds of assets, but the movement from institutional to wealth. So obviously, these clients are sophisticated and they want to get value for what they're spending, but it's just a very different environment than the one you're referencing. Operator: Your next question will come from Gerard Cassidy with RBC. Gerard Cassidy: Throughout your conversation on the call today, you keep on referring to through the cycle, these milestones that you're planning on reaching. I'm assuming that's an economic market cycle. And if it is, is this an average that you think you can get to during — through the cycle? Or can you frame out the highs and lows at all? John Woods: Yes. I mean I think maybe a couple of thoughts there, Gerard. I mean I'd say that just going back to the 100 to 150 basis points of positive operating leverage is an average over the medium term. It does imply the earlier end of the medium term. But we're just saying that often these things don't happen on a linear straight line. And so they're just based on what may occur in terms of business opportunities as well as the macro environment could have an impact on exactly how this gets achieved over the medium term. But the average what we're talking about is that 100 to 150 basis points. I think one of the larger contributors, not just with respect to the business delivery from an organic growth standpoint, one of the — maybe the way to frame it could be in the NII space, where that's a reasonably important contributor to this over time. And you could think about the rate environment having an impact on net interest margin. And so framing that for you may be helpful and responsive to your inquiry. If we think about rates, we've got the base case here with respect to forward rates. If we end up, we do a little better if rates are higher. And so — and given that we're asset sensitive and maybe a little lower before management optimization or actions on a static basis, plus or minus 50 basis points on rates would have along the lines of a 3 to 5 basis point impact up or down with respect to net interest margin. And that can give you a sense for some of the variability from one factor, which is where rates would play out. But other factors, as I already mentioned, in terms of the operating environment, et cetera, would also play into that in terms of the impact on fee revenues. But nevertheless, we're feeling very good about the organic growth profile over the medium term. Elizabeth Lynn: Thank you all for joining us today. Please feel free to reach out to Investor Relations with any follow-up questions. Thank you again, and have a nice day. Before you buy stock in State Street, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and State Street wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $369,577!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,301,557!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of July 23, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. State Street (STT) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

(Bloomberg) -- The pound’s rally is at risk from the new UK government’s still unclear fiscal plans as well as the potential for fewer interest-rate hikes eroding the currency’s high-yield appeal. Most Read from Bloomberg Retina Chip Designed to Restore Sight to Go on Sale in Europe Hegseth Turns to UNC, Virginia Tech After Dropping Ivy League Apple Plans Overhaul of MacBooks, iMac in Push to Meet AI Demand Trump’s 100% Generic Drug Duty Threatens US Low-Cost Supply Alphabet’s $205 Billion Spending Target Fuels AI Cost Fears The pound has weakened 0.4% versus a trade-weighted basket this week, on track for its worst stint in a month, after Prime Minister Andy Burnham’s pledge to seek “any flexibility” in fiscal rules brought the spotlight back on government spending. Very few major policy proposals have emerged during the first days of the new cabinet. “There could still be some testing times ahead for gilts and GBP,” said Jane Foley, head of G10 FX strategy at Rabobank. “It is not clear how much ‘flexibility’ Burnham wants to see in the fiscal rules, so there is still the problem of the Treasury finding ways to fund the new agenda.” Support for the pound could dissolve after the summer, according to Foley, who sees the currency sliding to $1.32 in three months, from around $1.34 on Thursday. Against the euro, she sees it weakening to 0.865 from current levels around 0.854. The pound has gained 2% versus its currency basket this year, bolstered by the second-highest benchmark yields in the developed world. While signs of a surprisingly resilient economy have also helped, investors see a risk that these could be overshadowed if Burnham’s spending plans raise concerns about government borrowing costs. Foley isn’t alone with her bearish view, even as Burnham and Chancellor of the Exchequer John Healey have repeatedly stressed the importance of fiscal discipline. Kaspar Hense, a senior portfolio manager at RBC Bluebay, said the pound “is too expensive” and the market is underestimating “the political difficulties to establish a credible budget.” CG Asset Management Ltd.’s portfolio manager Emma Moriarty believes the market is at “peak sterling” and has been reducing exposure to UK assets, betting that the pound will fall. Fiscal risks are an ongoing concern in the UK, and hit a flashpoint in 2022 when former prime minister Liz Truss announced a budget which contained unfunded tax cuts, triggering a surge in gilt yields and a selloff in the pound. While few expect a repeat of that situation, many see the possibility of a further climb in longer-dated yields, which are sensitive to political and fiscal risks. Such a selloff may drag down the pound. Hawkish Benefits What’s more, Hense, Moriarty and other investors think that the market has gotten ahead of itself in pricing up to three interest rate rises over the next year, and that the pound could suffer as these bets are trimmed. “GBP has certainly benefited from a more hawkish repricing in short-term rates,” said Michael Metcalfe, head of macro strategy at State Street Markets. “If this week’s softer inflation and labor market data challenge those short-term rate expectations, GBP may give back some of these gains independent of any political risk.” The real test for the pound and UK bond market will come in November, when Healey is expected to unveil the Autumn Budget — the first major announcement outlining the government’s spending and financing plans. In the meantime, Burnham this week has already announced a smattering of tax cuts to help the country’s households and businesses. As he drip-feeds more spending plans, how they are funded will be scrutinized by investors, and may cause risks for the pound and gilts. “The honeymoon period seems to get shorter and shorter,” said Moritz Kraemer, chief economist and head of research at LBBW. “You have a large deficit, low growth, a restless electorate which is not willing to take any sacrifices. I don’t envy any chancellor.” --With assistance from George Nixon and Alice Atkins. Most Read from Bloomberg Businessweek The Bitcoin Slump Is Crushing Companies That Stockpiled Tokens How China’s ‘Temu Range Rover’ Became Britain’s Top-Selling Car Van Leeuwen’s Path From a Single Ice Cream Truck to a Dessert Giant Credit Card Holders Are Using ‘Friendly Fraud’ to Get Back at Retailers For Software Engineers, the AI Reckoning Is Already Here ©2026 Bloomberg L.P.

Investors might want to bet on State Street Corporation (STT), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook. Analysts' growing optimism on the earnings prospects of this company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. For State Street Corporation, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: The earnings estimate of $3.56 per share for the current quarter represents a change of +28.1% from the number reported a year ago. Over the last 30 days, five estimates have moved higher for State Street compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 8.47%. For the full year, the earnings estimate of $13.35 per share represents a change of +29.6% from the year-ago number. There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, seven estimates have moved up for State Street versus no negative revisions. This has pushed the consensus estimate 8.13% higher. The promising estimate revisions have helped State Street earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. While strong estimate revisions for State Street have attracted decent investments and pushed the stock 8.4% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report State Street Corporation (STT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

State Street has posted a net income of $1.08bn for the second quarter (Q2) of 2026, compared with $693m a year earlier, an increase of 56%. Total revenue climbed 17% year on year to $4.05bn, while total expenses rose 5% to $2.6bn. At the end of the quarter, investment servicing assets under custody and administration stood at a record $57.9tn, up 18% from a year earlier, supported by market levels, client flows and net new business. Investment management assets under management reached a record $6.3tn, rising 23%, propelled by strong net inflows. During 2Q26, State Street recorded new servicing fee revenue wins of $87m, largely from back-office activity and alternatives. New servicing AUC/A wins were $384bn, with most of the total linked to asset managers and alternatives. Servicing fee revenue scheduled for installation in future periods was $335m at quarter-end, while AUC/A yet to be installed totalled $2.9tn. The company also disclosed a tokenised fund servicing capability in Luxembourg. In software services, annual recurring revenue increased by about 14%, reflecting ongoing SaaS client implementations and conversions. Within investment management, State Street added 38 new products and solutions. It also said the SPYM ETF had been chosen as the exclusive default investment for Trump Accounts. State Street returned $631m to common shareholders in 2Q26, made up of $400m in share repurchases and $231m in declared dividends, equal to $0.84 per share. It also said integrated liquidity and financing operations contributed to a 25% rise in foreign exchange client trading volumes and a 24% increase in average securities on loan. State Street chairman and CEO Ronald P. O'Hanley said: “Our strong start to 2026 continued in the second quarter, powered by the strength of our global franchises. We achieved record total revenues, along with record AUC/A and AUM in the quarter, further underscoring our continued momentum. This drove significant positive operating leverage year-over-year in 2Q and a tenth consecutive quarter of positive operating leverage excluding notable items. “Building on this continued strong performance, we are entering our next phase of growth, defined by new medium-term financial targets. We are confident in our ability to deliver on these goals and drive sustainable growth and performance for our clients, shareholders, and employees. That confidence is grounded in our scaled global franchises, distinctive strategic growth initiatives, our ongoing technology and AI-enabled transformation, and the One State Street value proposition.” "State Street reports 56% growth in second quarter profit" was originally created and published by Private Banker International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.

This article first appeared on GuruFocus. EPS: $3.65, up from $2.17 in 2Q '25, marking a 44% year-over-year growth. Total Revenue: Increased 17% year-over-year to a record $4 billion. Fee Revenue: $3.2 billion, up 16% year-over-year. Net Interest Income (NII): $860 million, up 18% year-over-year. Net Interest Margin (NIM): Increased 17 basis points to 113 basis points. Expenses: $2.7 billion, up 10% year-over-year. Pretax Margin: Expanded 470 basis points year-over-year to 34%. Return on Tangible Common Equity (ROTCE): Increased over 6 percentage points to approximately 26%. Servicing Fees: $1.5 billion, up 13% year-over-year. Assets Under Custody/Administration (AUC/A): $57.9 trillion, up 18% year-over-year. Management Fees: $772 million, up 29% year-over-year. Assets Under Management (AUM): $6.3 trillion, up 23% year-over-year. Net Inflows: $114 billion in the quarter. FX Trading Services Revenue: $494 million, up 27% year-over-year. Securities Finance Revenue: Increased 19% year-over-year. Software Services Revenue: Declined 14% year-over-year. Common Stock Dividend: Increased by 10% to $0.92 per share. Shareholder Return: $631 million returned, including $400 million in share repurchases and $231 million in dividends. Warning! GuruFocus has detected 10 Warning Signs with STT. Is STT fairly valued? Test your thesis with our free DCF calculator. Release Date: July 16, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. State Street Corp (NYSE:STT) reported a strong second quarter with EPS of $3.65, up from $2.17 in the previous year, marking a 44% year-over-year earnings growth. The company achieved record quarterly fee revenue, including record servicing, management, and FX trading revenues, contributing to a 17% year-over-year increase in total quarterly revenue. State Street Corp (NYSE:STT) announced a 10% increase in its quarterly common stock dividend, reflecting confidence in its capital position and financial strength. The company continues to innovate, with plans to deliver a tokenized fund servicing capability by year-end and a strategic partnership with a leading European asset manager for tokenized money market funds. State Street Corp (NYSE:STT) demonstrated strong client activity in its Markets division, with record FX trading volumes and revenues, and significant growth in securities lending revenue. Software services revenue declined by 14% year-over-year, reflecting elevated on-premises renewal activity in the previous year. Expenses increased by 10% year-over-year, driven by higher revenue-related costs and continued strategic investment, which could pressure margins if not managed carefully. The company faces challenges in maintaining its momentum in FX trading services, as it anticipates some moderation in the second half of the year. There is a potential risk of pricing pressure in the ETF servicing market, as State Street Corp (NYSE:STT) launched a new product with competitive pricing. The digital assets and blockchain initiatives, while promising, are still in early stages and may take time to significantly impact revenue, posing a risk of over-reliance on future growth from these areas. Q: Can you provide more granularity on the $250 million revenue target and the expected organic growth in fee revenue? A: John Woods, CFO, explained that the $250 million revenue target is primarily driven by strategic initiatives in alternatives, digital assets, and wealth services. He emphasized that organic growth across all business segments is expected to contribute to positive operating leverage of 100 to 150 basis points over the medium term. Q: How much of the $750 million cost savings from the transformation program will be reinvested back into the business? A: John Woods stated that the transformation program aims to balance reinvestment and margin expansion. Approximately equal parts of the $750 million savings will be allocated to reinvestment in strategic initiatives and margin expansion, with a focus on productivity improvements in the investment services business. Q: What is the outlook for digital assets and their impact on revenue growth? A: CEO Ron O'Hanley highlighted that State Street is focusing on infrastructure for clients to execute digital strategies, particularly in tokenized money market funds. John Woods added that digital assets are gaining momentum, with initiatives like tokenized money market funds and stablecoin reserves funds being launched, although alternatives remain the most mature segment. Q: Why should investors believe this new phase of growth at State Street will succeed? A: Ron O'Hanley emphasized the strong foundation of consistent organic revenue growth and a productivity-focused culture. He noted the management team's strength and the deliberate choices made to strengthen the franchise, improve operating efficiency, and invest in growth areas, which have led to improved financial performance. Q: How will AI adoption impact State Street's operations and financial targets? A: John Woods explained that AI will be embedded in the operating model transformation, enhancing productivity and efficiency. AI-driven improvements are expected to contribute to the $750 million cost savings and $250 million revenue growth, with benefits seen in software development, client experience, and overall productivity. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in State Street Corporation? Here are five stocks we like better. State Street posted strong Q2 2026 results, with earnings per share of $3.65 versus $2.17 a year ago and revenue up 17% to a record $4 billion. Management highlighted record fee revenue, record net interest income, and strong performance across servicing, investment management and markets. The company raised its full-year outlook, now expecting fee revenue growth of 12% to 13% and net interest income growth of 14% to 15%. It also increased expenses guidance, but still expects about 500 basis points of positive operating leverage and a pre-tax margin near 32%. State Street set ambitious medium-term targets, including a 35% pre-tax margin and mid-20s return on tangible common equity over the cycle. Executives said growth will come from core businesses, alternatives, digital assets and wealth services, supported by a technology and AI-driven transformation program. Why State Street's Options Volume Just Sent a Bullish Signal State Street (NYSE:STT) reported sharply higher second-quarter 2026 earnings and raised its full-year outlook, as executives pointed to record fee revenue, record net interest income and continued momentum across investment servicing, investment management and markets. Chief Executive Officer Ron O'Hanley said the quarter reflected “disciplined execution, deep client engagement, and continued momentum across our businesses.” The company reported second-quarter earnings per share of $3.65, up from $2.17 in the prior-year period. Excluding prior-year notable items, earnings grew 44% year over year, according to O'Hanley. → 3 Space Stocks That Could Outshine SpaceX After Its IPO Iron Mountain Down 23% From Its 1-Year High—Is It Undervalued? Total revenue rose 17% from a year earlier to a record $4 billion. Chief Financial Officer John Woods said fee revenue increased 16% to $3.2 billion, while net interest income rose 18% to $860 million, supported by a 17-basis-point increase in net interest margin to 113 basis points. Expenses increased 10% year over year to $2.7 billion, excluding notable items, primarily due to higher revenue-related costs and continued strategic investments. The results lifted pre-tax margin by 470 basis points to 34%, while return on tangible common equity rose more than six percentage points to about 26%. → These 3 Water ETFs Could be Quiet Winners From Infrastructure Spending The Behemoth BlackRock’s Next Trillion Comes From Private Assets State Street’s investment servicing business posted second-quarter servicing fees of $1.5 billion, up 13% year over year. Woods said the increase reflected approximately 7% organic growth from client activity, flows and net new business, with additional support from higher average market levels and currency translation. Assets under custody and administration ended the quarter at a record $57.9 trillion, up 18% from a year earlier. Servicing fee sales totaled $87 million, with Woods citing continued demand across regions and strength in strategic growth areas, including alternatives. → Why ASML’s AI Monopoly Is Still Getting Stronger In investment management, fees rose 29% year over year to $772 million, supported by roughly 9% organic growth and higher average market levels. Assets under management reached a record $6.3 trillion, up 23% year over year, while net inflows totaled $114 billion. Woods said the quarter marked the fifth consecutive quarter of positive organic growth, led by $66 billion of index ETF inflows and $35 billion of cash inflows. State Street also launched 38 new products and solutions during the quarter, including a tokenized money market solution and a stablecoin reserves fund. O'Hanley highlighted that SPYM, the company’s low-cost S&P 500 ETF, was selected by the U.S. Department of the Treasury as the exclusive default ETF for Trump Accounts. Markets revenue also strengthened. FX trading services revenue increased 27% year over year, excluding a prior-year notable item, to $494 million, driven by record client volumes. Securities finance revenue rose 19% year over year on higher client lending balances. Software services revenue declined 14%, excluding a prior-year notable item, reflecting elevated on-premises renewal activity in the prior year, though Woods said software and data revenue rose 10%. State Street raised its full-year outlook, excluding notable items. The company now expects fee revenue growth of 12% to 13%, up from its prior forecast of 7% to 9%. Net interest income is expected to grow 14% to 15%, compared with a previous outlook of 8% to 10%. Woods said the improved net interest income outlook primarily reflected stronger average deposit balances. The company expects expenses to rise by roughly 8%, up from the prior 5% to 6% forecast, reflecting higher revenue-related costs and continued investment. Based on its current outlook, State Street expects roughly 500 basis points of positive operating leverage in 2026 and a pre-tax margin of approximately 32%. The company continues to expect an effective tax rate of about 22% and a total payout ratio of roughly 80%, subject to board approval and other factors. State Street’s capital position remained stable, with standardized CET1 and Tier 1 leverage ratios of 10.8% and 5.3%, respectively, at quarter end. The company returned $631 million to shareholders during the quarter through $400 million of share repurchases and $231 million in declared common dividends. Following the Federal Reserve’s stress test results, State Street announced a 10% increase in its quarterly common dividend to $0.92 per share beginning in the third quarter. Executives also outlined new medium-term financial targets, including a 35% pre-tax margin and return on tangible common equity in the mid-20s “over the cycle.” O'Hanley said the company’s next phase of growth will be driven by three strategic pillars: growth in core businesses, initiatives in alternatives, digital assets and wealth services, and a technology- and AI-enabled transformation of the operating model. Woods said investment services is expected to contribute approximately 300 basis points of enterprise margin expansion over the medium term through organic revenue growth and productivity initiatives. Investment management is expected to contribute about 200 basis points, supported by ETFs, index investing, fixed income, wealth, alternatives and tokenization. Markets is expected to add about 100 basis points through geographic expansion, product innovation and efficiency initiatives. The company expects its transformation program to deliver approximately $1 billion of run-rate benefits by 2029, with about 75% coming from expense productivity and 25% from revenue. Woods said the company anticipates about $500 million of one-time costs, mostly related to severance, as part of the transformation. During the question-and-answer session, Woods said State Street expects positive operating leverage of 100 to 150 basis points on average over the medium term, which could allow the company to reach the 35% margin target toward the earlier end of its three- to five-year framework. He said the company’s net interest income is expected to rise in the low- to mid-single digits over the medium term, supported by low-single-digit balance sheet growth and net interest margin moving toward the upper end of its 110- to 115-basis-point range. O'Hanley described State Street’s digital asset strategy as focused on serving as infrastructure for clients moving between traditional and digital finance. He said the company is “picking our spots” based on client demand, including tokenized money market funds. Woods said State Street’s digital asset platform is designed to support wallet management and the on- and off-ramps between traditional finance and on-chain activity. On artificial intelligence, Woods said AI will be embedded into State Street’s operating model, including the use of agentic capabilities in cross-functional teams. He also said the company expects AI tools to improve software developer productivity by 30% to 40%, with additional productivity gains across eligible employees through standardized AI tools. O'Hanley said the company is entering its next phase “from a position of strength,” citing the scale of its custody, asset management, ETF and markets franchises. “These are the targets that we’re aiming for,” he said. “They’re ambitious, but we’re going to hit them.” State Street Corporation is a global financial services company that provides a range of investment servicing, investment management and investment research and trading services to institutional investors. Its principal activities include custody and fund administration, securities lending, performance and risk analytics, trading and execution services, and foreign exchange. The company also offers investment management through State Street Global Advisors, a major provider of exchange-traded funds and institutional investment strategies. State Street serves a broad client base of asset managers, insurance companies, pension funds, endowments, and other institutions across North America, Europe, Asia and other global markets. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "State Street Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

State Street’s STT second-quarter 2026 earnings of $3.65 per share surpassed the Zacks Consensus Estimate of $3.30. The bottom line increased 68.2% from the prior-year quarter.Results were aided by year-over-year growth in net interest income (NII) and fee revenues, along with nil provisions. Also, the company witnessed improvements in the total assets under custody and administration (AUC/A) and assets under management (AUM) balances to record levels. However, higher expenses acted as a spoilsport.Net income available to common shareholders (GAAP basis) was $1.03 billion, surging 62.9% from the year-ago quarter. Total revenues were a record $4.05 billion, which increased 17.4% year over year. The top line surpassed the Zacks Consensus Estimate of $3.89 billion.NII was $860 million, up 18% year over year.The net interest margin expanded 17 basis points year over year to 1.13%.Total fee revenues increased 17.2% year over year to $3.19 billion. The rise was driven by an increase in all fee income components, except for software services fees.Non-interest expenses were $2.66 billion, up 5.1% from the prior-year quarter. The rise was due to an increase in all cost components, except for occupancy costs.The company did not record any provision for credit losses in the quarter, as against $30 million in the prior-year quarter.The Common Equity Tier 1 ratio was 10.8% as of June 30, 2026, compared with 10.7% in the corresponding period of 2025. The return on average common equity was 16.7% compared with 10.8% in the year-ago quarter. As of June 30, 2026, the total AUC/A was a record $57.86 trillion, up 18.1% year over year. The rise was driven by higher quarter-end equity market levels, client flows and net new business.AUM was a record $6.28 trillion, up 22.7% year over year, led by higher quarter-end market levels and net inflows. In the reported quarter, State Street repurchased shares worth $400 million. STT’s strategic buyouts, rising AUM balance and solid business servicing wins are expected to keep supporting its financials. However, persistently rising expenses and concentrated fee-based revenues are concerning. State Street Corporation price-consensus-eps-surprise-chart | State Street Corporation Quote State Street currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Bank of New York Mellon Corporation’s BNY second-quarter 2026 adjusted earnings of $2.46 per share handily surpassed the Zacks Consensus Estimate of $2.20. The bottom line increased 26.8% from the year-ago quarter.BNY’s results primarily benefited from a rise in fee revenues and NII. Also, the company recorded a provision benefit in the quarter, which was a tailwind.Bank of America’s BAC second-quarter 2026 earnings of $1.21 per share handily surpassed the Zacks Consensus Estimate of $1.13. The bottom line grew 34.4% year over year.BAC recorded an improvement in trading numbers for the 17th straight quarter. The company’s investment banking performance was solid this time as well. These, along with higher NII, drove Bank of America’s total revenues. While provisions declined in the quarter on a year-over-year basis, non-interest expenses increased, which hurt the results to some extent. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report State Street Corporation (STT) : Free Stock Analysis Report Bank of America Corporation (BAC) : Free Stock Analysis Report BNY (BNY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research