State Street Corporation

call and webcast. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay. State Street's conference call is copyrighted and all rights are reserved. This call may not be recorded or 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 Liz Lib, 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 second quarter 2024 earnings presentation, which is available for download on the Investor Relations section of our website, investors.statestreet.com. Afterward, we'll be happy to take questions. Before we get started, I'd 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 presentation. In addition, today's call will contain forward-looking statements Actual results may differ materially from those statements due to a variety of important factors, such as those factors in our discussion today and in our SEC filings, including the risk factor section of 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, Liz, and good morning, everyone. Before we begin today's discussion, I want to acknowledge the assassination attempt on former President Trump. It was a horrible act of violence that has no place in our democracy and must be condemned. We are relieved the former president was not seriously harmed, and we are saddened by the tragic loss of innocent life and injury that resulted from this senseless action. Each victim was a participant in our democratic process, which makes this act an affront to all. We extend our thoughts and condolences to all those impacted. At this time, we hope for unity and respect in our country. Disagreement can and must sit along civility and a commitment to an even better America. Now, turning to the second quarter, earlier today we released our financial results, which represented sustained momentum as we delivered good year-over-year fee and total revenue growth in both 2Q and for the first half of the year. along with continued expense discipline. This resulted in modest positive total operating leverage, pre-tax margin of almost 29%, and a return on equity of nearly 12% in the quarter. We also continued to take important steps in the transformation and simplification of our operating model, as we successfully consolidated our second operations joint venture in India in the quarter. These actions will enable State Street to continue to improve client experience and will unlock further productivity savings in the years ahead. In May, the transition to T plus one settlement was a significant event for global investors. Importantly, it presented State Street with an opportunity to demonstrate our position as an essential partner to our clients. Our role in successfully assisting clients through this transition reinforced our value to clients and underscored the depth of our operational capabilities. The financial market context in 2Q was mixed. While daily average global equity market levels continued to move higher and equity markets again reached new all-time highs in the second quarter, gains continued to be narrowly concentrated in a few names. Meanwhile, fixed income markets struggled in 2Q as geopolitical risk continued, economic data generally remained robust, and investors priced in more gradual cycle of rate cuts. even as the ECB delivered its first rate cut since the pandemic. Through this market backdrop, we remain focused and successfully executed against our key strategic priorities. Turning to slide two of our investor presentation, I will review our two Q highlights before Eric takes you through the quarter in more detail. Beginning with our financial performance, second quarter EPS was 215 as compared to 217 in the year-ago period. The durable nature of our business was evident in the quarter as year-over-year strength in management fees, FX trading, and NII more than offset a previously disclosed client transition that negatively impacted servicing fee revenues, helping to drive revenue growth of 3%. We also remain focused on tightly managing our cost base. While continuing to make investments in our businesses, 2Q total expenses increased by less than 3% year-over-year, supported by our ongoing productivity efforts. Turning to our business momentum, which you can see in the middle of the page, we continue to execute well against our strategy, making progress in a number of key areas aimed at generating further fee revenue growth, which gives us confidence in our positioning as we look ahead. Within asset services, we generated AUCA wins of $291 billion, which was well distributed regionally, and included more than $200 billion of faster-to-install back-office custody in line with our targeted sales strategy. Encouragingly, roughly a quarter of the AUCA wins this quarter came for an alpha mandate in the APEC region. The win is a large new client for State Street, covering a broad set of our services, including the back office. This mandate is another proof point that alpha is an attractive client value proposition globally. Alpha creates a clear competitive advantage for State Street that strategically positions us to deepen existing client relationship and, as demonstrated this quarter, win new long-term client relationships, in turn helping to drive future growth. This ongoing new business performance coupled with an anticipated increase in installations positions us well for future servicing fee growth. Servicing fee revenue wins amounted to $72 million, up from $67 million in the first quarter. This is the fourth quarter in a row of strong servicing fee revenue wins, totaling over $330 million over the last 12 months. Our pipeline is strong, and we remain confident in our ability to achieve our increased servicing fee revenue sales goal of $350 to $400 million this year. At Global Advisors, buoyed by higher average Equity markets, 2Q management fees were $511 million, an increase of 11% year-over-year, with AUM reaching a record $4.4 trillion a quarter end. While GA experienced aggregate net outflows in the quarter, it was largely driven by a limited number of client rebalancings. Encouragingly, we continue to make progress in a number of key strategic focus areas. For example, total net ETF inflows amounted to $6 billion, benefited from continued market share expansion in U.S. low-cost equity ETFs. Regionally, we also saw SPDR gain market share in EMEA. Elsewhere, global advisors announced the planned strategic investment in InvestNet, a leading provider of integrated technology, data, and wealth solutions. This investment, consistent with State Street's wealth services strategy, will enhance global advisors' access to the independent wealth advisory and high-net-worth distribution channels, driving future growth. NII performance was strong, driven by a number of targeted management actions over the last year to support NII growth. These include increased engagement with our clients to offer them financing and cash solutions, resulting in higher deposit, loan, and sponsored repo balances. while we also carefully expanded our investment portfolio in 2Q. These actions have contributed to three quarters in a row of sequential NII and revenue growth, as well as positive total operating leverage in 2Q. Our balance sheet remains strong, enabling over $400 million of capital return in the second quarter and over $700 million year to date. Our financial strength was evident with the release of the Federal Reserve's annual stress test results in June. Subsequently, and consistent with our commitment to return capital to our shareholders, we were pleased to announce our intention to increase State Street's quarterly common stock dividend by 10% to 76 cents per share beginning in the third quarter, subject to approval by our board of directors. As we look ahead, we remain committed to returning excess capital to our shareholders this year, subject to market conditions and other factors. To conclude, Our strong start to the year continued in the second quarter. We delivered both fee and total revenue growth, which supported modest total operating leverage year over year, and a return on equity of nearly 12% in the quarter, all while continuing to make significant investments in our business, controlling expenses, and returning capital to our shareholders. I am pleased with the progress we are making to drive better business momentum and sales performance as we execute against the sharpened revenue strategy. We recorded another alpha mandate win in the quarter, which demonstrated the clear advantage that strategy brings to our organization by delivering a large and completely new client relationship to State Street. We already have good line of sight into 3Q and remain confident in our ability to deliver on our goals of six to eight new alpha clients and $350 to $400 million of servicing fee revenue wins this year. And with that, let me hand the call over to Eric, who will take you through the quarter in more detail.