State Street Corporation

State Street's conference call is copyrighted and all rights are reserved. This call may not be recorded for rebroadcast or distribution, in whole or in part, without the express written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on the State Street website. Now, I would like to introduce Eileen Feazell-Dealer, Global Head of Investor Relations at State Street.

Good morning, and thank you all for joining us. On our call today, our CEO, Ron O'Hanley, will speak first. Then Eric Abloff, our CFO, will take you through our fourth quarter 2023 earnings slide presentation, which is available for download in the investor relations section of our website, investors.statestreet.com. Afterwards, we'll be happy to take questions. During the Q&A, please limit yourself to two questions and then re-queue. Before we get started, I would like to remind you that today's presentation will include results presented on a basis that excludes or adjusts one or more items from GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP or regulatory measure are available in the appendix to our slide presentation, also available in the IR section of our website. In addition, today's presentation will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors, such as those factors referenced in our discussion today and in our SEC filings, including the risk factors in our Form 10-K. Our forward-looking statements speak only as of today, and we disclaim any obligation to update them, even if our views change. Now, let me turn it over to Ron.

Thank you, Eileen, and good morning, everyone. Earlier today, we released our fourth quarter and full year 2023 financial results. As I reflect on 2023, the operating environment was dynamic with a complex set of challenges for the world's investors and for our industry. And I am proud of how we carefully navigated State Street through various headwinds while continuing to execute against our strategic agenda. We focused and delivered on that agenda in three key areas. Achieve strong sales wins across our businesses, drive strategic change in our investment services business, and remain disciplined on productivity, and broader cost management. Further on that last point, during 2023, we implemented key productivity actions and announced additional efficiency measures that will enable us to enhance the productivity of our operating model in 2024 in the years ahead. We took these many actions all while investing in our business and returning substantial capital to our shareholders, which helped to drive full-year earnings growth, excluding notable items. The world's investors State Street and our industry faced a host of significant market events and macroeconomic forces in 2023. In the first quarter, turmoil in the banking sector ultimately led to the resolution of several banks, which was a catalyst for some of the largest fixed income market moves seen in decades. In the second quarter, anticipation grew about the potential economic benefit from artificial intelligence, helping to drive equity markets higher. However, as we progress into the third quarter, as the Federal Reserve raised interest rates to the highest level in 2022 years in July, the prospect of higher for longer rates led to a substantial sell-off in bond markets, with the U.S. 10-year Treasury yield exceeding 5% in October for the first time since the global financial crisis. Rate uncertainty and an increasing number of geopolitical concerns caused equities to struggle. Then, during the fourth quarter, the equity market rallied vigorously as inflation receded and investors grew increasingly optimistic about a soft landing, with positive sentiment gaining further momentum in the last month as the Federal Reserve signaled a pivot to lower interest rates this year. In sum, while our full-year overall financial results benefited from higher interest rates globally last year, and despite the strong market appreciation in the fourth quarter, Daily average global equity markets only increased by low single digits in 2023, providing just a modest tailwind to our fee revenue, while client activity was muted as investors stayed on the sidelines for much of the year. And even in such an eventful year, equity and FX market volatility continued to contract, creating revenue headwinds for our trading businesses. Slide three of our investor presentation provides some of our highlights for the year. Beginning with our financial performance, full year earnings per share was 558 or 766, excluding notable items. Year over year, excluding notable items, EPS growth was supported by 3.8 billion of common share repurchases, a record level of NII, continued growth of our front office software and data business, and higher securities finance revenues, the combination of which more than offset the impact of lower servicing and management fees and underlying expense growth, which was still well controlled. We continued to build business momentum and position states for longer-term success. To that end, we achieved a number of important accomplishments in 2023, as you can see on slide three. A key highlight of today's results is the clear progress we are making on innovation and advancing product capabilities. which in turn contributes to stronger sales momentum across our broad franchise aimed at generating better fee revenue growth in the year ahead. Within the investment services business, we are intensely focused on ensuring better execution against our strategy and revenue goals. We unveiled the sharpened execution plan last year, underpinned by a number of measurable actions aimed at driving servicing opportunities across key regions and product areas. realizing the full potential of our alpha value proposition and accelerating sales and revenue growth, particularly in our core back office custody. Encouragingly, as I just noted, today's results demonstrate our proven ability to deliver the level of sales required for attractive organic servicing fee revenue growth in the future. As we built upon the 91 million of new servicing fee sales in third quarter, by recording 103 million of new servicing fee wins in 4Q, which is the highest level of quarterly new servicing fees in recent years. From its inception, we have noted that Alpha will further establish, broaden, and deepen client relationships, positioning State Street as our client's essential partner. Alpha distinctively enables us to grow and tie together the full breadth and depth of State Street's capability as a true one State Street solution for our clients. from front to back. 2023 was an important year for Alpha software delivery. The last two quarters of the year included the significant development of the fixed income portfolio management module, which propels CRD and Alpha capabilities and competitiveness forward. In 3Q, we recorded our first Alpha for private markets client. And in the fourth quarter, we continued Alpha's momentum by deepening relationships with a number of key existing mandates and recording four new Alpha wins. while our front office software and data business had a record quarter of new bookings in 4Q, both demonstrating our ability to drive stronger sales. Within our global markets business, even as low volatility created a headwind, we continued to see proof points of our very strong market position. For example, in its 2023 FX Awards, Euromoney Magazine named State Street as the winner across four important categories. including the best FX bank for real money clients. We also continue to innovate and strategically expand our product capabilities in geographic reach, including the planned acquisition of outsourced trading firm CF Global Trading. At Global Advisors, we undertook targeted strategic actions aimed at gaining market share and driving growth in the coming years. As a result, we saw encouraging business momentum, with GA setting a number of growth records in 2023. A number of key performance indicators make us optimistic as we look ahead. For example, in Q4, GA recorded the best-ever quarter of aggregate total flows, including record quarterly flows within our SPDR ETF franchise, amounting to a capture of 21 percent of total global ETF flows in Q4, and ending 2023 with a record level of total ETF assets under management. Our cash business had an exceptional year, delivering record annual flows in 2023, with institutional money market fund, AUM, also reaching a record. Overall, we gained market share in a number of key areas, including institutional money market funds and U.S. low-cost equity and fixed income ETFs. Turning to our efficiency and productivity efforts, underlying expense growth was well controlled in 2023. with full-year expenses increasing 3 percent, excluding notable items. Q4 expenses, excluding notable items, rose just 1 percent quarter-on-quarter, reflecting the impact of our ongoing expense actions. Transforming our operations to improve effectiveness and efficiency and realize productivity growth remains a key priority for us. To that end, we announced important steps in our multi-year productivity efforts aimed at improving our operating model. As we previously announced, we are streamlining our operations in India. We have now assumed control of one of our joint ventures in that country, with a second joint venture consolidation expected to close in the spring. We expect these actions will accelerate the transformation of State Street's global operations, improve service quality and client experience, and enable us to achieve productivity savings as part of our plans to deliver positive fee operating leverage in 2024. Turning to slide four of our presentation, you can see our fourth quarter financial highlights and business momentum indicators, which Eric will shortly take you through in more detail. Before I conclude my opening remarks, I would like to touch on our continuing balance sheet strength, which has enabled us to return a substantial amount of excess capital in recent quarters. For example, over the last five quarters to the end of December, we have returned $6.4 billion of capital to our shareholders. As we pivot to a more normalized level of capital return, in 2024 it is currently our intention to return approximately 100% of earnings in the form of common share dividends and share repurchases subject to market conditions. Accordingly, as we announced this morning, our Board of Directors has authorized a new common share purchase program of up to $5 billion with no set expiration date. To conclude, while 2023 was an eventful year, we finished strongly in 4Q, which creates an encouraging starting point for our businesses into 2024. This year, we remain highly focused on both the execution of our strategy and the accountability for results. Our goals are clear. We must continue the improvement in our sales performance that we demonstrated in the second half of 2023, continue to implement a set of productivity initiatives and product enhancements, that will drive longer-term improvements in our operating model efficiency and effectiveness and deliver positive fee operating leverage in 2024, all while returning capital to our shareholders. We are laser-focused on these goals. Now, let me hand the call over to Eric, who will take you through the quarter in more detail.