State Street's Q2 Earnings Top as Fee Income Rises Y/Y, Stock Down

State Street’s STT second-quarter 2025 adjusted earnings of $2.53 per share surpassed the Zacks Consensus Estimate of $2.36. The bottom line also increased 17.7% from the prior-year quarter.

Results were aided by growth in fee revenues. Also, the company witnessed improvements in total assets under custody and administration (AUC/A) and assets under management (AUM) balances. However, higher adjusted expenses, a jump in provisions and lower net interest income (NII) acted as spoilsports. Shares of STT lost roughly 3.8% in pre-market trading in light of these negatives.

The results excluded certain notable items. Including those, net income available to common shareholders was $693 million, down 2.5% from the year-ago quarter. Our projection for the metric was $680.9 million.

STT’s Revenues Improve, Adjusted Expenses Rise

Total quarterly revenues of $3.45 billion increased 8.1% year over year. Moreover, the top line surpassed the Zacks Consensus Estimate of $3.38 billion.

NII was $735 million, down marginally year over year. The fall was due to lower average short-end rates and a deposit mix shift, partially offset by securities portfolio repricing and loan growth. Our estimate for the metric was $735.2 million.

Net interest margin (NIM) contracted 17 basis points year over year to 0.96%. We expected NIM to be 1.01%.

Total fee revenues increased 6.8% year over year to $2.72 billion. The growth was driven by an increase in almost all the components except lending-related and other fees. We estimated the metric to be $2.64 billion.

Non-interest expenses were $2.53 billion, up 11.5% from the prior-year quarter. The rise was mainly due to an increase in all the components except occupancy costs and amortization of other intangible assets. Excluding one-time costs, adjusted expenses rose 6.3% to $2.41 billion. Our estimate for the metric was $2.36 billion.

Provision for credit losses was $30 million, up significantly from $10 million in the prior year quarter. We had projected the metric to be $15.2 million.

The Common Equity Tier 1 ratio was 10.7% as of June 30, 2025, compared with 11.2% in the corresponding period of 2024. The return on average common equity was 10.8% compared with 11.9% in the year-ago quarter.

Asset Balances Increase for State Street

As of June 30, 2025, the total AUC/A was $49 trillion, up 10.6% year over year. The rise was driven by higher quarter-end equity market levels, client flows and the impact of currency translation. We had projected the metric to be $47.81 trillion.

AUM was $5.12 trillion, up 17.1% year over year, primarily led by higher quarter-end market levels and net inflows. Our estimate for the metric was $4.74 trillion.

STT’s Share Repurchase Update

In the reported quarter, State Street repurchased shares worth $300 million.

Our Take on STT

Relatively higher interest rates, strategic buyouts, rising AUM and solid business servicing wins are expected to keep supporting STT’s financials. However, persistently rising expenses and concentrated fee-based revenues are concerns.

State Street Corporation Price, Consensus and EPS Surprise

State Street Corporation price-consensus-eps-surprise-chart | State Street Corporation Quote

State Street currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance and Earnings Release Date of STT’s Peer Banks

The Bank of New York Mellon Corporation’s BK second-quarter 2025 adjusted earnings of $1.94 per share surpassed the Zacks Consensus Estimate of $1.74. Also, the bottom line reflected a jump of 28.5% from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

BK’s results were primarily aided by a rise in fee revenues and NII. AUC/A and AUM balance grew, driven by higher inflows. However, higher expenses and provisions were undermining factors.

Bank of America BAC is slated to report second-quarter 2025 results on July 16.
 
Over the past seven days, the Zacks Consensus Estimate for BAC’s quarterly earnings has been revised 1.1% downward to 86 cents per share.

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This article originally published on Zacks Investment Research (zacks.com).

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