State Street Corporation

Good morning and welcome to State Street Corporation's fourth quarter and full year 2024 earnings conference call and webcast. Today's call will be hosted by Elizabeth Lin, Head of Investor Relations at State Street. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. 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 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 hand the call over to elizabeth lynn good morning and thank you all for joining us with me today are state streets chief executive officer ron o'hannelly chief financial officer eric abeloff an investment services cfo and as we announced this morning incoming interim cfo mark keating on today's call ron will provide an overview on 2024 performance and milestones achieved Eric will then walk through the fourth quarter and full year 2024 earnings results in detail, and both Eric and Mark will provide our 2025 outlook, after which we'll be happy to take questions. Today's presentation is available on the investor relations section of our website, investors.statestreet.com. 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 referenced in our discussion today and in our SEC filings, including the risk factor section 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. With that, let me turn it over to Ron.

Thank you, Liz, and good morning, everyone. Before we begin, I want to acknowledge the terrible wildfires devastating parts of Los Angeles. Our thoughts are with all those impacted by this terrible event, including our colleagues and clients, as well as the brave first responders working to protect the impacted communities. Turning now to our quarterly investor presentation, our fourth quarter results represent a strong close to a strong year for State Street. We entered 2024 with a clear set of strategic priorities aimed at driving revenue growth, improving our sales performance, strengthening our market position, and enhancing our operating model. We executed well against these objectives, enabling us to serve our clients and deliver strong financial performance and continued business momentum for our shareholders. These results included both positive fee and full operating leverage, pre-tax margin expansion, and higher earnings growth, illustrating the power of our franchise and the effectiveness of our strategy. The foundation for our strong business performance in 2024 was laid in prior years, building upon the significant strategic investments we have made in our capabilities and our client value proposition to be our client's essential partner and lead with service excellence. These actions have positioned State Street to compete better and win. Turning to slide two and beginning with our financial highlights, I am particularly pleased with our improved revenue performance. Full year fee and total revenue increased 7% and 9% respectively. Excluding notable items, fee revenue, NII, and total revenue each increased by a solid 6% year over year in 2024. Year over year, each revenue line contributed positively, including double-digit growth in management fees, FX trading services, and front office software and data revenues, while we also delivered a second consecutive year of record NII. Full-year EPS was 8.21 as compared to 5.58 in 2023. Excluding notable items, EPS growth was up 13% year over year, Pre-tax marks expanded by more than 100 basis points, while full-year return on average tangible common equity was a robust 19%. Turning to our strong business momentum in 2024, our key business performance indicator, including wins, clearly illustrate the effectiveness of our strategy in positioning State Street to effectively serve our clients, compete better, and gain share. 2024 was an important year of business growth and significantly improved sales performance, which sets us up well as we look forward to drive further fee revenue growth in 2025 and beyond. In investment services, we generated very strong AUCA wins of over $2.3 trillion in 2024, including $1.1 trillion of wins in Q4. Full year new servicing fee revenue wins were $377 million, including 154 million in Q4. The strength of our sales performance in the fourth quarter was underpinned by a large strategic and multi-regional win with an APAC asset owner. With the strong fourth quarter sales performance, we achieved our goal of 350 to 400 million of new servicing fee revenue wins in 2024. State Street Alpha brings together the full depth and breadth of our servicing and software solutions and is a clear competitive advantage for State Street's investment services business. Our strong full-year sales performance in 2024 demonstrates the strength of this compelling value proposition. As a tangible proof point of the more than $2.3 trillion of new AUCA wins in 2024, Alpha accounted for approximately 50% of those wins. All told, we won seven new Alpha mandates in 2024, including two new mandates in Q4, achieving our goal of six to eight new alpha clients last year. Our investment management franchise had another strong year of strategic progress, with both 4Q and full-year management fees achieving record levels. We continue to strategically broaden Global Advisor's product and distribution capabilities, which has positioned the business for future growth and from which we are already realizing the early benefits of these strategic actions. We generated 146 billion of net new assets in 2024, including 64 billion in 4Q. This equates to over 3% organic AUM growth for the second year in a row, well above the 2% target we laid out early last year. ETF inflows were a record in 2024, with record flows in our strategically important U.S. low-cost ETF suite, as well as in the EMEA region, gaining market share in both. We also had the highest number of ETF launches in Global Advisors history last year and announced innovative partnerships with a number of market leaders aimed at leveraging our SPDR franchise to expand investor access to new investment opportunities. In addition, Global Advisors made a host of key strategic investments, most notably in InvestNet, the leading provider of integrated technology, data, and wealth solutions. This investment consistent with State Street's wealth services strategy, will enhance our access to the independent wealth advisory and high net worth distribution channels, driving future growth. Building on a record year of inflows in 2023, our cash business generated an aggregate $32 billion of full-year inflows, while our institutional business also has had a positive year of inflows. With U.S. defined contribution again continuing to drive inflows, with $28 billion in 2024. Turning to our markets and financing franchise, despite lower daily average FX volatility in 2024, FX trading services generated double-digit revenue growth supported by strong and growing client volumes. Turning to our balance sheet, our markets and financing franchise delivered strong loan growth in support of our clients. contributing to record NII performance in 2024 and supporting fee growth in private market servicing. Our strong balance sheet position enabled us to return $2.2 billion of capital to shareholders last year, including common share repurchases and a 10% increase in our quarterly common dividend per share. As we look ahead, we remain focused on consistently returning capital to our shareholders and are targeting a payout of about 80% of earnings in 2025, subject to market conditions and other factors. Finally, 2024 was also an important year for our transformation, as we continued to focus on core operating model improvements to enhance our client and colleague experience and generate increased productivity. We made a number of key investments in operational simplification, automation, and technology modernization. These actions contributed to the approximately $500 million of year-over-year productivity savings that we achieved in 2024, in line with our target. The majority of these savings are recurring and will enable us to continue to increase our investments in alpha, custody, private markets, and asset management distribution to drive the sales and momentum to power our next wave of growth. Further, excluding notable items, These transformation efforts supported the approximately 200 basis points of both positive fee and total operating leverage in 2024, even as underlying expenses increased by 4% year-over-year, driven in part by higher revenue-related costs. In summary, our fourth quarter results represent a strong close to a strong and important year for State Street. Good execution against a clear set of strategic priorities enabled us to support our clients better and deliver strong financial results. Our strategic actions have positioned State Street to compete better and win, as evidenced by the accelerating business momentum we generated from start to finish in 2024. As you know, last October, we announced that our CFO of eight years, Eric Avaloff, will be departing State Street in February. At that time, we launched a formal search process to identify a successor, which is progressing very well and as planned. This morning, we announced that Mark Heating, EVP and CFO for Investment Services, will serve as our interim CFO following Eric's departure next month, while our search for a permanent CFO continues. Mark is a 30-year State Street Finance veteran who has worked in almost every area of our business across three continents. As the executive finance leader within our largest segment, Mark has been instrumental in supporting our transformation efforts driving revenue growth initiatives, and he brings deep operational expertise, a partnership mindset, and team-building focus. Once again, I 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.