Record Quarterly Revenue and Strong EPS Growth
Total revenue reached a record $3.8 billion, up 16% year-over-year. Reported EPS increased 22% year-over-year; EPS excluding notable items grew 39% year-over-year.
State Street
· STT
April 17th, 2026
Summary
- Earnings Call Date:
- 2026-04-17
- Change Since:
- +16.12%
- Next Earnings Date:
- 2026-07-16
Earnings Call Sentiment
PositiveThe call presented a strongly positive operational and financial performance for Q1 2026: record revenues, double-digit growth across key lines (fee revenue, NII), strong inflows and ETF leadership, meaningful operating leverage and upgraded full-year guidance. Strategic initiatives (digital assets, tokenization, AI, software/SaaS momentum) reinforce longer-term growth optionality. Challenges include higher expense growth and raised expense guidance, a modest quarter-end CET1 decline due to RWA normalization, $130 million of notable items, and some uncertainty around platform distribution fee changes and potential moderation of Markets volatility. Overall, the positives—scope, scale, upgraded guidance, and execution on strategic initiatives—materially outweigh the manageable headwinds called out by management.
Company Guidance
State Street updated full-year guidance reflecting a stronger Q1: fee revenue growth is now expected at 7–9% (up from 4–6%), net interest income (NII) growth 8–10% (vs. prior low single digits) driven largely by net interest margin (Q1 NII $835M, NIM 116 bps, a 16 bp expansion; average interest‑earning assets +1%), and expenses now expected to rise 5–6% (vs. prior 3–4%), with an effective tax rate of ~22% and a targeted total payout ratio of roughly 80% (Q1 capital return was $633M — $400M buybacks + $233M dividends, Q1 payout ~90%); Q1 underlying results that inform the guide included record total revenue $3.8B (+16% YoY), fee revenue $3.0B (+15%), expenses $2.7B (+9%), ~400 bps pretax margin expansion (and >600 bps positive operating leverage excl. notable items), ROTCE ~20% (up ~4 pts), AUCA $54.5T (+17%), AUM $5.6T (+20%) with $49B net inflows ($25B in ETFs, SPYM $27B inflows), software ARR +12% and backlog +11%, and Q1 notable items of $130M pretax ($0.35/sh after tax); CET1 was 10.6% at quarter end.
Robust Net Interest Income and NIM Expansion
Net interest income was $835 million, up 17% year-over-year. Net interest margin expanded ~16 basis points to 116 bps, with average interest-earning assets up 1%.
Fee Revenue, AUM and Net Inflows Momentum
Fee revenue totaled $3.0 billion, up 15% year-over-year. Assets under management rose 20% to $5.6 trillion. Net inflows were $49 billion for the quarter, including $25 billion into ETFs.
Outstanding ETF Performance and Distribution
SPYM attracted $27 billion of inflows in the quarter and was the largest asset-gathering ETF globally. SPY had nearly $4 trillion of notional traded (≈17% of U.S.-listed ETF volume).
Markets and FX Trading Strength
FX trading revenue grew 29% year-over-year to $435 million, driven by a 25% increase in client trading volumes. Securities finance revenue increased 2% year-over-year.
Software Services and Recurring Revenue Growth
Software services revenue increased 7% year-over-year. Annual recurring revenue grew 12% and software revenue backlog rose 11%, supporting multi-year SaaS growth momentum.
Positive Operating Leverage and Margin Expansion
Excluding notable items, the firm delivered over 600 basis points of positive operating leverage in the quarter. Pretax margin expanded ~400 basis points year-over-year and ROTCE rose roughly four percentage points to 20%.
Upgraded Full-Year Guidance
Management raised full-year guidance (ex-notable items): fee revenue growth to 7–9% (previously 4–6%), NII growth to 8–10% (from low single-digits), and now expects expenses to grow 5–6% with an effective tax rate of ~22%.
Capital Deployment and Shareholder Returns
Returned $633 million in Q1 (repurchases $400 million + dividends $233 million). Q1 payout ratio was ~90%; management continues to target roughly an 80% total payout ratio for the full year (GAAP basis).
Strategic Progress: Digital Assets, Tokenization and AI
Launched a digital asset platform with a roadmap for tokenization (tokenized funds, cash). Preparing tokenized fund launches and a tokenized liquidity sweep fund. AI initiatives include an AI Foundry with ~200 use cases (70 live) and agent-enabled service delivery planned in July.
Operator
Good morning, and welcome to State Street Corporation's First Quarter 2026 Earnings Conference Call and Webcast. Today's call will be hosted by Elizabeth Lynn, Head of Investor Relations at State Street Corporation. 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 Corporation's conference call is copyrighted, and all rights are reserved. This call may not be recorded for rebroadcast or distribution in whole or in part without the expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on the State Street Corporation 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 our call today are CEO, Ron O'Hanley, who will speak first, and then John Woods, our CFO, will take you through our first quarter 2026 earnings presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterward, we will be happy to take questions. Before we get started, I would 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...
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