Shares of State Street Corp. (STT) popped on Friday after the bank, best known as the issuer of the SPDR ETF family, reported first-quarter results that were better than anyone expected. The driver? Fees, fees, and more fees.
The company posted adjusted earnings of $2.84 per share, comfortably topping the $2.63 that analysts were looking for. Revenue came in at $3.796 billion, a 16% jump from a year ago and ahead of the Street's expectation of $3.658 billion.
The real story, though, is in the fee line. Fee revenue climbed 15% year-over-year, which the company called a record for any quarter. It wasn't just one thing driving it; strength was broad-based. Servicing fees were up 11%, management fees jumped 23%, and foreign exchange trading revenue surged 29%. Software services grew 7%, and securities finance revenue saw a modest 2% gain.
"We delivered record quarterly fee revenue, net interest income, and total revenue, generating meaningful year-over-year positive operating leverage and pretax margin expansion, excluding notable items," said CEO Ron O'Hanley. "In a dynamic operating environment, the momentum across Investment Services, Investment Management, and Markets underscores the strength of our franchise."
The assets sitting on State Street's books tell a similar story of growth. Investment Servicing assets under custody and/or administration rose 17% to $54.5 trillion by the end of the quarter. Investment Management assets under management increased 20% to $5.6 trillion. The company attributes those gains to higher market levels, client flows, and net new business. It also launched 57 new products and solutions during the quarter.
On the lending side, net interest income rose 17% to $835 million. That was driven by a 16-basis-point expansion in the net interest margin and a 1% increase in average interest-earning assets.
Not everything was pure upside. The provision for credit losses increased to $16 million from $12 million a year earlier, which the company said primarily reflects its commercial loan exposure and a shifting macroeconomic backdrop. State Street also recorded $89 million in net repositioning costs, largely tied to workforce rationalization.
The bank's standardized CET1 ratio, a key measure of capital strength, stood at 10.6%, down 40 basis points from a year ago. The company said that reflects capital returns to shareholders and higher risk-weighted assets.
Speaking of returns, State Street gave back $633 million to shareholders during the quarter. That breaks down to $400 million in share repurchases and $233 million in dividends, which works out to 84 cents per share.
So, what's next? CEO O'Hanley struck a note of cautious optimism. "Looking ahead, how the macro and geopolitical environment will evolve is uncertain. What we can control is how we run the firm — remaining disciplined, supporting our clients, and managing the company for resilience across a range of environments," he said. "We are encouraged by our momentum, appropriately mindful of risks, and confident in our ability to continue to grow and deliver even more as we move through the year."
Investors liked what they heard. State Street shares were up 4.54% at $148.34, hitting a new 52-week high.
