10-Q: State Street Q3 2025 Earnings: Revenue Up, EPS Jumps 23%

State Street Corporation reported a 9% increase in total revenue and a 23% jump in diluted earnings per share for the third quarter of 2025, driven by higher fee revenue and market levels.

Summary

• Diluted earnings per common share (EPS) for the third quarter of 2025 increased 23% to $2.78, compared to $2.26 in the same period of 2024.
• Total revenue for the third quarter of 2025 increased 9% to $3,545 million, up from $3,259 million in the third quarter of 2024.
• Total fee revenue increased 8% to $2,829 million in the third quarter of 2025, compared to $2,616 million in the prior year period.
• Net interest income (NII) decreased 1% to $715 million in the third quarter of 2025, from $723 million in the same period of 2024.
• Total expenses increased 5% to $2,434 million in the third quarter of 2025, compared to $2,308 million in the third quarter of 2024.
• The provision for credit losses was $9 million in the third quarter of 2025, a decrease from $26 million in the same period of 2024.
• Assets under custody and/or administration (AUC/A) reached $51.66 trillion as of September 30, 2025, a 10% increase from $46.759 trillion as of September 30, 2024.
• Assets under management (AUM) grew 15% to $5.45 trillion as of September 30, 2025, from $4.732 trillion as of September 30, 2024.
• The standardized CET1 capital ratio increased to 11.3% as of September 30, 2025, from 10.9% as of December 31, 2024, remaining within the target range of 10-11%.
• The Tier 1 leverage ratio was 5.6% as of September 30, 2025, up from 5.2% as of December 31, 2024, within the target range of 5.25-5.75%.
• The company returned $637 million to shareholders in Q3 2025 through common share repurchases ($400 million) and common stock dividends ($237 million).
• Newly announced asset servicing mandates totaled approximately $361 billion of AUC/A in the third quarter of 2025.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance with significant increases in revenue, net income, and EPS, alongside robust growth in AUC/A and AUM. Capital ratios remain strong and within target ranges. While NII saw a slight decline and expenses increased, the overall picture is positive, indicating effective management in a dynamic market.

Positives

• Diluted EPS increased significantly by 23% to $2.78 in Q3 2025 compared to Q3 2024.
• Total revenue grew by a robust 9% in Q3 2025, primarily driven by higher fee revenue.
• Total fee revenue increased 8% in Q3 2025, with strong contributions from servicing fees (+7%), management fees (+16%), foreign exchange trading services (+11%), and securities finance (+19%).
• AUC/A increased 10% to $51.66 trillion and AUM increased 15% to $5.45 trillion, reflecting higher market levels and positive client flows/inflows.
• The company secured approximately $361 billion in new asset servicing mandates during Q3 2025.
• Pre-tax margin improved to 31.1% in Q3 2025 from 28.4% in Q3 2024, and return on average common equity rose to 13.4% from 12.0%.
• Provision for credit losses decreased to $9 million in Q3 2025 from $26 million in Q3 2024.
• Capital ratios, including standardized CET1 (11.3%) and Tier 1 leverage (5.6%), remain strong and within or above target ranges.
• The company continued to return capital to shareholders, with $400 million in common share repurchases and an 11% increase in common stock dividends per share to $0.84 in Q3 2025.

Negatives

• Net interest income (NII) experienced a slight decrease of 1% in Q3 2025, attributed to lower average short-end rates and a deposit mix shift.
• Other fee revenue decreased by $46 million in Q3 2025, largely due to a notable gain on the sale of an equity investment in the prior year period not recurring.
• Total expenses increased by 5% in Q3 2025, driven by investments in technology and business capabilities, revenue-related costs, and currency translation impacts.
• Headcount decreased by 2% as of September 30, 2025, reflecting ongoing efforts to simplify operations, which could indicate potential for future workforce reductions.
• The company continues to experience the impact of a large asset servicing client transitioning ETF assets, with approximately two-thirds of the estimated revenue impact realized by Q3 2025 and the remainder expected through 2025.

Risks

• Intense competition in the financial services industry could negatively affect profitability.
• Significant pricing pressure and variability in financial results, AUC/A, and AUM pose ongoing challenges.
• Development and completion of new products and services, including State Street Alpha and those related to digital assets or artificial intelligence, may incur costs, depend on third parties, and expose the company to increased risks.
• Acquisitions, strategic alliances, joint ventures, and divestitures carry risks related to integration, retention, and realization of benefits.
• Competition for qualified workforce members is intense, potentially affecting the ability to attract and retain skilled personnel.
• Adverse political, geopolitical, economic, and market conditions, including liquidity/capital deficiencies in other financial institutions, changes in trade policies, ongoing conflicts (Ukraine, Middle East), central bank actions, and market volatility, could negatively impact operations.
• Significant operations and clients in global markets expose the company to local or broader disruptions.
• Changes in financial markets, governmental actions, or monetary policy, such as prevailing interest rates, could adversely affect the investment securities portfolio, NII, capital, and liquidity ratios.
• Exposure to interest rate risk is inherent in business activities.
• Significant credit risk of counterparties, including those with substantial financial dependencies on other institutions, could lead to financial loss.
• Fee revenue, a significant portion of total revenue, is subject to declines based on market and currency fluctuations, client investment activities, business mix, and timing of new business onboarding.
• Inability to effectively manage capital and liquidity could adversely affect financial condition, capital ratios, results of operations, and business prospects.
• Calculations of risk exposures, total RWA, and capital ratios rely on data inputs, formulae, models, correlations, and assumptions that are subject to change, potentially impacting these metrics materially.
• The company may need to raise additional capital or debt in the future, which might not be available or only on unfavorable terms.
• A downgrade in credit ratings or a perceived reduction in financial strength could adversely affect borrowing/capital costs, liquidity, and reputation.
• Regulatory requirements and considerations, including capital, credit, and liquidity, may adversely affect business and capital-related activities.
• Extensive and changing government regulation and supervision in various jurisdictions may increase costs and compliance risks.
• Government enforcement and litigation could adversely affect businesses.
• Increased and conflicting political, regulatory, and client scrutiny of asset management, stewardship, and ESG practices may negatively impact businesses.
• Misappropriation of confidential information could lead to significant costs, reputational damage, regulatory actions, and litigation.
• Changes in accounting standards or tax laws/regulations, or challenges to tax positions, may increase the effective tax rate.
• Potential liabilities for withholding and other non-income taxes from tax authority examinations.
• Adverse publicity or reputational harm could negatively affect businesses.
• Attacks or unauthorized access to IT systems or facilities, such as cyber-attacks, could result in significant costs and reputational damage.
• Risks associated with strategic initiatives to enhance operational effectiveness, cybersecurity, and technology infrastructure, or failure to meet client/regulator expectations.
• Risk management framework, models, and processes may not be effective in identifying or mitigating risk.
• Failure or circumvention of controls and procedures, or errors/delays in operational/transaction processing, could have an adverse effect.
• Shifting operational activities to non-U.S. jurisdictions, changing operating models, and outsourcing/insourcing expose the company to increased operational and geopolitical risk.
• Long-term contracts and customizing service delivery for clients expose the company to increased operational, pricing, and performance risk.
• Quantitative models used to manage the business may contain errors.
• Lapses in disclosure controls and procedures or internal control over financial reporting could occur.
• Inability to protect intellectual property or infringement upon third-party rights.
• Damage to reputation and business prospects if investors in collective investment pools incur substantial losses or face redemption restrictions.
• Impacts of global regulatory requirements and expectations, shifting client preferences, and disclosure requirements related to climate risks and sustainability standards could adversely affect the company.
• Losses or negative impacts from unforeseen events, including terrorist attacks, geopolitical events, natural disasters, pandemics, or a banking crisis.
• The 2023 Basel III Endgame Proposal and 2023 G-SIB Surcharge Proposal are under reconsideration, and the timing and content of any re-proposal, and its effects, remain uncertain.
• Commercial real estate loans, particularly those collateralized by office buildings, continued to observe negative effects during Q3 2025, leading to additional provisions for credit losses.
• Allowance estimates for credit losses are subject to uncertainties inherent in models and economic assumptions, and management may use qualitative adjustments, which could change if future data or forecasts deviate.

Future Outlook

The company expects the conversion of approximately $3.6 trillion of AUC/A from current asset mandates to occur mostly over the next 24 months, with about 40% in the remainder of 2025 and the balance largely throughout 2026 and 2027. The remaining revenue impact from a large asset servicing client transitioning ETF assets is expected to be largely realized through 2025. Future Net Interest Income (NII) and Net Interest Margin (NIM) will be influenced by client deposits, central bank actions, balance sheet management, interest rate changes, trade policy, and regulatory standards. The overall balance sheet remains asset sensitive, benefiting from higher rates but exposed to lower rates. The company does not anticipate a material impact on its stress capital buffer requirement from proposed rule changes, nor on its total leverage-based capital from proposed eSLR recalibrations, and expects limited implications for TLAC and LTD management.

Management Comments

• "Earnings per share (EPS) of $2.78 in the third quarter of 2025 increased 23% as compared to the same period of 2024, primarily driven by higher total revenue, partially offset by higher total expenses."
• "Total revenue increased 9% in the third quarter of 2025, compared to the same period of 2024, primarily reflecting higher fee revenue."
• "Total expenses increased 5% in the third quarter of 2025, compared to the same period of 2024, primarily driven by increases in investments to improve technology and business capabilities, revenue-related costs and the impact of currency translation."
• "Pre-tax margin of 31.1% in the third quarter of 2025 increased from 28.4% in the same period of 2024, while return on equity of 13.4% in the third quarter of 2025 increased from 12.0% in the same period of 2024. Both increases were primarily driven by higher total revenue, partially offset by higher total expenses."
• "We returned a total of $637 million to our shareholders in the form of common share repurchases and common stock dividends."
• "Our standardized CET1 capital ratio increased to 11.3% as of September 30, 2025, compared to 10.9% as of December 31, 2024, primarily due to capital generated from earnings, partially offset by continued capital return and higher RWA."
• "Our Tier 1 leverage ratio was 5.6% as of September 30, 2025, compared to 5.2% as of December 31, 2024, mainly driven by capital generated from earnings and higher preferred equity, partially offset by higher average balance sheet levels and continued capital return."
• "Our target ranges for the CET1 capital and Tier 1 leverage ratios remain at 10-11% and 5.25-5.75%, respectively."
• "Management believes that we have sufficiently accrued liabilities as of September 30, 2025 for potential tax exposures."
• "Management believes that no conditions or events have occurred since September 30, 2025 that have changed the capital categorization of State Street Bank."

Industry Context

The company operates in a highly competitive financial services industry characterized by ongoing pricing pressure and evolving client demands. Global market volatility, central bank monetary policies, and geopolitical tensions (e.g., Ukraine, Middle East, U.S. government shutdown) continue to influence the operating environment and elevate risk exposures. The company's strategic investments in technology, including artificial intelligence, and business capabilities align with broader industry trends towards digital transformation and efficiency. As a Global Systemically Important Bank (G-SIB), the company is subject to heightened and evolving regulatory requirements, including Basel III frameworks and proposed revisions, which differentiate its operating environment from many competitors.

Comparison to Industry Standards

• As a G-SIB, the company is subject to a 1.0% G-SIB surcharge and enhanced supplementary leverage (eSLR) standards (2% SLR buffer at holding company, 3% at State Street Bank), which are more stringent than for non-systemically important institutions.
• The standardized CET1 capital ratio of 11.3% as of September 30, 2025, is within the company's target range of 10-11% and comfortably above the minimum requirement of 8.0%.
• The Tier 1 leverage ratio of 5.6% as of September 30, 2025, is within the company's target range of 5.25-5.75% and above the minimum requirement of 4.0%.
• The Liquidity Coverage Ratio (LCR) for State Street Bank was approximately 142% for Q3 2025, significantly exceeding the 100% minimum requirement.
• Both the Parent Company's and State Street Bank's Net Stable Funding Ratio (NSFR) were above the 100% minimum requirement as of September 30, 2025.
• The Stress Capital Buffer (SCB) requirement remains at 2.5% for the period from October 1, 2025, through September 30, 2026, based on the 2025 supervisory stress test results, which is at the regulatory floor.
• Approximately 97% of the company's investment securities portfolio was rated AA or higher at both September 30, 2025, and December 31, 2024, indicating a high-quality, conservative credit profile compared to broader market portfolios.

Management Changes

Legal Proceedings

• Edmar Financial Company, LLC et al v. Currenex, Inc. et al: A putative civil class action lawsuit filed in August 2021 alleging antitrust violations, fraud, and a civil Racketeer Influenced and Corrupt Organization Act violation against Currenex, State Street, and others.
• Pension Risk Transfer Litigation: State Street Global Advisors Trust Company (Trust Co) is named as a defendant in purported class action complaints alleging violations of ERISA's fiduciary and prohibited transaction rules related to pension plan insurer selection.
• German Tax Matter: German tax authorities determined that State Street should have withheld certain taxes on dividends paid on securities of German issuers held as collateral in client lending transactions for the 2013-2015 period. State Street will contest these conclusions.
• State of Texas et al v. Blackrock, Inc. et al: Eleven state Attorneys General filed a complaint in November 2024 alleging antitrust violations against State Street, BlackRock, and Vanguard for conspiring to artificially suppress coal supply.
• Aggregate accruals for loss contingencies for legal, regulatory, and related matters totaled approximately $5 million as of September 30, 2025.
• The estimated aggregate reasonably possible loss (in excess of any accrued amounts) for matters where loss is reasonably possible ranges up to approximately $40 million as of September 30, 2025.

Stakeholder Impact

• Shareholders: Benefited from increased diluted EPS (+23%), higher common stock dividends (+11% per share), and ongoing common share repurchases ($400 million in Q3 2025).
• Employees: Total headcount decreased by 2% due to simplification efforts, but there was headcount growth in high-cost locations. Compensation details for a key executive (Joerg Ambrosius) were clarified.
• Clients: Benefited from newly announced asset servicing mandates totaling $361 billion AUC/A. However, a large asset servicing client is transitioning ETF assets away, impacting revenue.
• Regulators: The company continues to engage with U.S. and non-U.S. regulators regarding capital, liquidity, and resolution planning, and is subject to evolving regulatory proposals (e.g., Basel III Endgame, eSLR recalibration).
• Counterparties: The company assumes significant credit risk of counterparties in its lending and trading activities.

Next Steps

• Convert approximately $3.6 trillion of AUC/A from current asset mandates, with 40% expected in the remainder of 2025 and the balance largely throughout 2026 and 2027.
• Continue to realize the remaining revenue impact from a large asset servicing client transitioning ETF assets through 2025.
• Redeem $500 million aggregate principal amount of 5.751% fixed-to-floating rate senior notes due 2026 on November 4, 2025.
• Pay declared dividends on Series G, I, J, and K preferred stock in December 2025.
• Submit the next IDI Plan by July 1, 2026.
• Submit the next full 165(d) resolution plan by July 1, 2027.
• Continue to evaluate other accounting standards that were recently issued but not yet adopted.
• Contest German tax authorities' conclusions regarding withholding taxes in ongoing proceedings.
• Continue common share repurchases under the 2024 program, which is not expected to be executed in full during 2025.

Key Dates

Recommendation

The company delivered robust financial results for Q3 2025, with significant year-over-year increases in diluted EPS (23%), total revenue (9%), and net income (18%). The substantial growth in Assets Under Custody/Administration (10%) and Assets Under Management (15%) indicates strong client activity and favorable market conditions. Capital ratios remain healthy and within target ranges, demonstrating financial stability. While Net Interest Income saw a minor decline and expenses rose, these were offset by strong fee revenue growth and a lower provision for credit losses. The ongoing share repurchase program and increased dividends further enhance shareholder value. The positive operational leverage and improved pre-tax margin suggest efficient management. Despite some client transitions and macroeconomic uncertainties, the overall performance and strategic positioning warrant a strong buy recommendation for long-term investors.

Keywords

Financial Services, Institutional Investors, Investment Servicing, Investment Management, SEC Filing, 10-Q, State Street, AUC/A, AUM, Earnings, Revenue, Net Interest Income, Capital Ratios, Share Repurchase, Dividends, Risk Management, Regulatory Capital, Basel III, ESG, Cyber Security, Commercial Real Estate, Leveraged Loans, Preferred Stock, Debt Issuance