State Street Corporation

Second-quarter 2026 EPS was $3.65 versus $2.17 in 2Q25. Excluding prior-year notable items, EPS growth was 44% year over year. Total revenue rose 17% year over year to a record $4.0 billion, including fee revenue of $3.2 billion, up 16%, and net interest income of $860 million, up 18%. Net interest margin increased 17 bps to 113 bps. Expenses were $2.7 billion, up 10%, pretax margin expanded 470 bps to 34%, and ROTCE was approximately 26%. AUC/A ended at a record $57.9 trillion, up 18% year over year, and AUM ended at a record $6.3 trillion, up 23% year over year. Net inflows were $114 billion, including $66 billion in index ETF and $35 billion in cash inflows. For full-year 2026, management now expects fee revenue growth of 12% to 13% (up from 7% to 9%), NII growth of 14% to 15% (up from 8% to 10%), and expenses to increase by roughly 8% (up from 5% to 6%). It continues to expect roughly 500 bps of positive operating leverage in 2026, implying a pretax margin of approximately 32%, an effective tax rate of about 22%, and a total payout ratio of roughly 80% subject to board approval. The new medium-term targets are a 35% pretax margin and ROTCE in the mid-20s, with a CET1 target of about 11% and Tier 1 leverage of about 5.25% to 5.75%.

Ron O'Hanley framed the quarter as evidence that State Street's franchise is gaining momentum, pointing to disciplined execution, deep client engagement and broad-based improvement across businesses. He emphasized the "One State Street" model and said the company is moving into a new phase of growth built around core businesses plus three strategic initiatives: alternatives, digital assets and wealth services. His tone was confident and upbeat, but he repeatedly tied the outlook to a multi-year transformation rather than a short-term spike.

John Woods focused on the financial bridge from current performance to the new targets. He cited 17% revenue growth to a record $4.0 billion, 10% expense growth to $2.7 billion, pretax margin of 34%, and 645 bps of positive operating leverage excluding prior-year notable items. He said the medium-term plan assumes 100 to 150 bps of annual positive operating leverage, low- to mid-single-digit NII growth, NIM at the upper end of a 1.10% to 1.15% range, and about $1 billion of transformation benefits by 2029, with roughly 75% from expense productivity and 25% from revenue. He also said the company returned $631 million to shareholders in the quarter, held CET1 at 10.8% and Tier 1 leverage at 5.3%, and expects about $500 million of one-time costs tied mostly to severance for the transformation program.

Analysts pressed management on how much of the medium-term upside is already in the numbers, how the $250 million revenue opportunity and $750 million cost-savings program break down, and whether the digital-assets opportunity is material enough to matter. Woods said the revenue upside is mainly tied to strategic initiatives in alternatives, digital assets and wealth, with alternatives the biggest contributor, while the cost program is roughly split between reinvestment and margin expansion. On digital assets, O'Hanley said State Street is positioning itself as infrastructure for clients' digital strategies and is focused on practical use cases like tokenized money market funds and on-/off-ramps between traditional and digital finance. Analysts also questioned whether the transformation is different from prior attempts; management answered that the current effort is backed by a stronger execution track record, lower headcount, more integrated operating teams, and tangible metrics like headcount, product cycle times and cloud migration.