Rise in NII, Fee Income Likely to Aid State Street's Q2 Earnings

State Street STT is slated to report second-quarter 2025 results on July 15, before the opening bell. The company’s revenues and earnings are expected to have increased year over year.

In the last reported quarter, STT’s earnings outpaced the Zacks Consensus Estimate. Growth in fee revenues and lower provisions primarily aided the results. The company witnessed improvements in total assets under custody and administration, and assets under management balances. However, higher adjusted expenses and lower net interest income (NII) were spoilsports.

State Street has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a surprise of 6.5%, on average.

State Street Corporation Price and EPS Surprise

 

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

The Zacks Consensus Estimate for State Street’s second-quarter earnings of $2.39 per share has been revised marginally lower over the past seven days. The figure suggests an 11.2% rise from the year-ago quarter’s actual.

The consensus estimate for sales of $3.36 billion suggests 5.4% year-over-year growth.

STT’s Other Key Estimates for Q2

NII: Because of the uncertainty surrounding the impacts of Trump’s tariff policy on the economy, the Federal Reserve kept interest rates unchanged at 4.25-4.5% in the second quarter of 2025. Per the Fed’s latest data, the lending scenario was decent in April and May, which is expected to have resulted in an increase in overall loan balances in the quarter. Thus, amid gradually stabilizing funding costs, relatively higher rates and loan growth are expected to have positively impacted STT’s NII in the quarter.
 
The Zacks Consensus Estimate for average interest-earning assets is pegged at $291.4 billion, which implies an 11.3% rise from the prior-year quarter’s actual. Our estimate for the metric is pegged at $291.7 billion.

The Zacks Consensus Estimate for NII (on a fully taxable-equivalent or FTE basis) of $734 million indicates a marginal year-over-year decline. We project NII on an FTE basis of $736.1 million.

Fee Revenues: Because of global trade tensions and tariff-related uncertainty, there was an increase in foreign exchange (FX) trading volumes and volatility in the second quarter. This is expected to have boosted State Street’s FX trading services income. The consensus estimate for FX trading services income is pegged at $382 million, suggesting a 13.7% year-over-year rise. We expect the metric to be $364.2 million.

The consensus estimate for management fees of $559 million implies a 9.4% year-over-year rise. The Zacks Consensus Estimate for servicing fees of $1.29 billion indicates a 3.7% rise from the prior-year quarter. Our estimates for management fees and servicing fees are $553.4 million and $1.29 billion, respectively.

The consensus estimate for software and processing fees suggests a 7.9% rise to $231 million. Our estimate for the same is $230.3 million.
The Zacks Consensus Estimate for securities finance revenues of $121 million suggests a 12% rise from the year-ago quarter. Our estimate for the same is $116 million.

Overall, the Zacks Consensus Estimate for total fee revenues of $2.63 billion indicates a 6.9% year-over-year rise. We project the metric to be $2.62 billion.

Expenses: Higher information systems and communication expenses, and the company’s strategic buyouts and investments in franchises are expected to have resulted in an overall rise in total expenses in the second quarter.

Despite the company taking measures to improve operating efficiency (which will result in cost savings in 2025), its continued incremental investments in business growth, infrastructure and technology are expected to have resulted in higher costs in the to-be-reported quarter.

We anticipate total adjusted non-interest expenses to rise 3.8% year over year in the second quarter to $2.36 billion.

Key Development for State Street in Q2

In May, STT’s asset management arm, State Street Global Advisors (“SSGA”), entered an alliance with India-based smallcase to expand global market access for Indian investors and enhance SSGA's presence in the country’s fintech sector.

Smallcase is a fintech platform that offers curated portfolios of stocks and ETFs, enabling retail investors to invest in diversified themes.

The partnership is expected to provide SSGA with a distribution opportunity for its SPDR ETFs by featuring them on smallcase’s platform technology. This will enhance SSGA's global investment accessibility for investors in India through technology-driven solutions.

Here’s What the Zacks Model Reveals for STT

Per our model, the likelihood of State Street beating the Zacks Consensus Estimate this time around is high. This is because the company has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for State Street is +0.28%.

Zacks Rank: The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Banks Worth a Look

Here are a couple of other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time:

The Earnings ESP for Northern Trust Corporation NTRS is +2.44% and it carries a Zacks Rank #2 at present. The company is slated to report second-quarter 2025 results on July 23.

Over the past seven days, the Zacks Consensus Estimate for Northern Trust’s quarterly earnings has been revised upward to $2.07.

Prosperity Bancshares, Inc. PB is also scheduled to announce second-quarter 2025 results on July 23. The company has a Zacks Rank #3 at present and an Earnings ESP of +1.33%. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Quarterly earnings estimates for Prosperity Bancshares have been unchanged at $1.40 over the past week.

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

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