State Street Corporation

Good morning and welcome to State Street Corporation's first quarter 2025 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 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 hand the call over to Elizabeth Lin.

Good morning and thank you all for joining us. On our call today, our CEO, Ron O'Hanley, will speak first. Then Mark Keating, our interim CFO, will take you through our first quarter 2025 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 referenced 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 is up today, and we disclaim any obligation to update them, even if our views should change. With that, let me turn it over to Ron.

Thank you, Liz, and good morning, everyone. At present, investors are contending with notable uncertainty. While much attention is focused on U.S. trade policy, uncertainty has also arisen around other topics, such as taxes, geopolitics, interest rates, deficits, and deregulation. This wide range of uncertainties, some negative and others positive, has introduced significant volatility into global financial markets and investor sentiment. During times such as these, our purpose to create better outcomes for the world's investors and the people they serve is even more relevant. Our financial strength combined with our deep investment services, markets, software, and asset management capabilities uniquely positions us to serve as our client's essential partner. Throughout its 230-year-plus history, State Street has supported both clients and financial markets through many periods of uncertainty. By focusing on those things that we can control and preparing for those that we can't, State Street has developed a track record of financial and operational resilience and adaptability, which has enabled State Street and our clients to navigate through difficult periods. I believe as we progress through the current environment, we will strengthen our position with clients even further. Turning to slide two of our investor presentation, I will cover our first quarter highlights before Mark takes you through the quarter in more detail. During the turbulence experienced in financial, despite the turbulence experienced in financial markets in March, we delivered growth, solid financial performance, and good business momentum in Q1. Year over year, fee revenue increased by 6%, while total revenue rose by a healthy 5%. We achieved both positive fee and total operating leverage, resulting in year-over-year margin expansion, excluding notable items, with State Street's pre-tax margin reaching 30%, excluding seasonal expenses. Supported by capital return, EPS reached 204 as compared to 137 in Q1 last year, which included the impact of an FDIC special assessment. Excluding notable items, year-over-year earnings per share growth was a very strong 21%. Turning to business performance, we generated new asset servicing AUCA wins of $182 billion within investment services in the first quarter. New servicing fee revenue wins totaled $55 million, with the majority coming from back office mandates in line with our strategic aim. We recorded one new State Street Alpha mandate, demonstrating continued momentum in this unique value proposition. While the current environment presents some uncertainty, our existing pipeline in investment services is robust, and I am confident in our platform and the improvements we have made to our sales effectiveness. As a result, we are maintaining our goal of 350 to 400 million in new servicing fee revenue wins this year, while also being mindful of the potential for variability in the current environment. We continue to make significant strategic progress and growth in our investment management franchise, resulting from our focus on broadening Global Advisor's product and distribution capabilities. This has better equipped GA to capitalize on growth opportunities. Management fees increased by 10% year over year. You once saw net outflows driven by an anticipated single client event within the institutional business. At the same time, the quarter was marked by a number of significant accomplishments. For example, the importance of our strategic focus on low-cost ETFs is underscored by the fact that half of all ETF industry flows were directed towards this segment in Q1. Our SPDR US low-cost ETF suite continued to expand its market share in this fast-growing segment, capturing new flows in Q1 at a rate more than twice our industry AUM market share. with our low-cost ETF AUM reaching a record $256 billion at quarter end. Importantly, we expanded share in the U.S. low-cost fixed income segment. Further, we saw strong ETF flows in EMEA, while the commodities ETF segment gained market share, benefiting from market volatility in our industry-leading gold ETFs, which exceeded $100 billion of AUM for the first time. GA has a history of employing strategic partnerships to open new avenues for future growth. In Q1, we completed several important strategic growth initiatives, including the launch of the innovative ETFs leveraging our partnerships with both Apollo Global Management and Bridgewater Associates. We also announced the expansion of our partnership with the Saudi Arabia Public Investment Fund through the launch of the first Saudi Arabia fixed income USITS ETF in Europe. Finally, GA recently announced a strategic investment in partnership with Ethic, a leading technology provider that distinctively empowers wealth advisors to build tailored client portfolios at scale. This partnership will enable investment advisors to access our model portfolios and SPDR ETFs through Ethic's platform, reinforcing our commitment to expanding investor access to our investment capabilities and strengthening our intermediary franchise. Turning to our markets franchised, as a leading provider of trading, research, and lending solutions, coupled with innovative platforms, financing, and portfolio solutions, our markets franchise is well equipped to support clients through this volatile period with deep liquidity and trading expertise, while also providing important diversification to our revenue profile. In Q1, FX trading services and securities finance revenues both grew strongly year over year. supported by notably higher FX client volumes in average assets on loans, which increased 14% and 19% respectively, positioning us well for future growth. Our balance sheet position is robust, providing us with a strong foundation to weather the current market environment. Time and again, our resilient balance sheet has been a proven stabilizing force for our clients and markets during periods of stress. such as in 2020 and early 23. In the first quarter, our strong capital position enabled us to return $320 million to shareholders for common share repurchases and dividends, while we also built upon our already strong liquidity position. Looking forward, we will continue to support our clients with our balance sheet while also returning significant capital to our shareholders as planned, subject to market conditions and other influencing factors. Turning to expenses, we tightly managed costs in the first quarter. Year over year, expenses increased by just 3% excluding notable items, contributing to the strong fee and total operating leverage we delivered in Q1. We have established a track record of consistent expense discipline in recent years. As outlined in January, we have a comprehensive book of work underway focused on delivering significant new recurring productivity savings this year. As you would expect, we are well prepared as we look ahead with a detailed plan for a broad range of scenarios. We are laser focused on controlling expenses tightly and calibrating them in line with the revenue environment, while also continuing to make client and capabilities investments consistent with our focus on our long-term strategic priorities. Finally, I would like to provide an update on our search for a permanent CFO. The process is advanced and we expect to be in a position to make an announcement in the near term. To conclude my prepared remarks, we had a strong start to the year in Q1. However, the operating environment has changed dramatically since the end of the first quarter. As a result, the economy, financial markets, and the world's investors are navigating for a period of uncertainty. Despite the hurdles this environment may present, we have strong conviction in our strategy and in our ability to serve our clients well. underpinned by our distinctive value proposition and financial strength. We are focused on being agile in the current environment, and I firmly believe that we have the right strategy to deliver solid financial returns in both the near and long term for our shareholders. With that, let me hand the call over to Mark, who will take you through the quarter in more detail.