State Street Corporation

Good morning and welcome to State Street Corporation's third quarter 2024 earnings conference call and webcast. Today's discussion is being broadcasted 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 for rebroadcast or distribution in whole or in part without the expressed 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 Elizabeth Lin, 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 third 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 gap or regulatory measure are available in the appendix to our presentation. In addition, today's call will include forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors, such as those referenced in our discussion today and in the 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 afternoon, everyone. Our third quarter results, which we released earlier this morning, demonstrate the accelerating financial performance and strong business momentum we are achieving this year, which in turn positions State Street well for future growth. We achieved robust fee and total revenue growth and generated positive fee and total operating leverage in 3Q, which, when combined with increased capital return quarter on quarter, drove strong earnings growth for our shareholders on both a year-over-year and sequential basis, with quarterly EPS reaching the highest on record. In addition to strong 3Q results, our year-to-date results also highlight the strength of our franchise in financial performance three-quarters of the way through the year, with solid fee and total revenue growth and good expense discipline driving better-than-expected positive fee and positive total operating leverage, as well as strong earnings growth relative to the same period in 2023 and excluding notable items. The operating environment in the third quarter was dynamic. While global equity and fixed income markets moved notably higher, the world's investors faced a number of risk-off events in 3Q, including fears of a U.S. recession, the unwinding of the carry trade, concerns over tech valuations, and continued geopolitical tensions. These events drove bouts of negative market sentiment and significant market volatility. However, these market dislocations proved to be short-lived, with markets taking comfort from a host of subsequently dovish central bank pivots, including the first rate cut from the Federal Reserve in four years, as well as improved economic data in the US. We supported clients and navigated well through this market backdrop, delivering strong business and financial performance. We remain laser focused on successfully executing against our key strategic priorities to drive better results, which I will now discuss. Turning to slide two of our investor presentation, our third quarter EPS was 226 as compared to 125 in the year-ago period. Excluding notable items, we delivered strong earnings growth of 17% year-over-year with record quarterly EPS, while 3Q ROE was a strong 12%. Relative to the year-ago quarter and excluding notable items, fee and total revenue growth was robust at 7% and 9% respectively, and in turn driving margin expansion. All areas of our business contributed to this year-over-year revenue growth, and NII was significantly higher. Q3 servicing fees increased 3% year-over-year, and we are pleased by the sales momentum we continue to see within the investment services business as we execute well against the sharpened strategy that we outlined last year. At the same time, expenses remained well-controlled despite increases in revenue-related costs. we continue to drive transformation and productivity savings, which are funding significant investments in our business this year. As a result, while 3Q expenses increased by 6% year-over-year, on a year-to-date basis, expenses increased by just 3%, excluding notable items relative to the same period in 2023. Turning to our business momentum, which you can see in the middle of the slide, we achieved a great deal in the third quarter. Our business performance indicators, including wins, clearly illustrate the effectiveness of our strategy in positioning State Street to support our clients, compete better, and gain share. Within investment services in 3Q, we generated strong AUCA wins of $466 billion, with new servicing fee revenue wins of $84 million, the highest quarter this year. 3Q provided another clear demonstration of the power of State Street Alpha, which brings together the full depth and breadth of our servicing and software solutions. Alpha is a clear competitive advantage, which strategically positions us to retain business at even higher levels, win new long-term relationships, and, as evidenced this quarter, deepen existing relationships in a meaningful way. We reported two new Alpha mandates in 3Q, with Alpha accounting for the vast majority of our AUCA wins this quarter. as State Street was awarded a significant mandate by a premier large global asset manager. This win illustrates the compelling value proposition of our front-to-back solution for clients. What started as a front office Charles River client will now extend to include a host of middle and back office services, including custody, all underpinned by our alpha data platform and data services. We are also very pleased with the momentum at Global Advisors this quarter. Our cash, ETF, and institutional businesses all had positive net flows, including record quarterly flows in cash and strong ETF flows. In aggregate, quarterly total net flows of $100 billion and quarter end assets under management of $4.7 trillion both reached record levels in 3Q. Importantly, we expanded our market share in a number of key product areas and geographies. For example, we improved our institutional money market fund rank this quarter, while SPDR also gained share in both U.S. low-cost and commodities, as well as in the EMEA region. We also continued to innovate and strategically expand Global Advisor's capabilities in client solutions. For example, Global Advisors launched 20 new ETFs in 3Q, including three actively managed digital asset-focused ETFs. We also announced a new relationship with Apollo Global Management that will aim to expand investor access to private market opportunities. Turning to our markets businesses, stronger client volumes in both FX Trading Services and Securities Finance helped to drive revenues higher, both sequentially and year-over-year. I was particularly pleased to see State Street named as a leader in the four categories by Euromoney Magazine in its 2024 FX Awards, including the world's best FX bank for client service as well as research, which underscores the value clients place in our markets franchise. Turning to our balance sheet, our year-over-year NII performance was strong, as the number of targeted management actions over the last year have helped to support NII growth. Our balance sheet is solid, enabling over 670 million of capital return in 3Q, including 450 million of share repurchases. As we look ahead, we remain committed to returning excess capital to our shareholders in the fourth quarter, subject to market conditions and other factors. Before I turn it over to Eric, we also announced this morning that Eric will be leaving State Street to pursue a new opportunity outside of banking. We have commenced a formal search process to identify as replacement, and Eric will stay on with us through mid-February to support us through this transition. I and the team have been fortunate to work closely with Eric over the last eight years. Personally, I have enjoyed and valued our partnership and want to thank Eric for his leadership and wish him well in his new role. With that, let me hand the call over to Eric, who will take you through the quarter in more detail.