State Street Corporation

Good afternoon and welcome to State Street Corporation's second 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 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 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 part or in whole 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.

Thank you, Operator. Good afternoon, 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 second quarter 2025 earnings presentation, which is available for download on 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 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 should change. With that, let me turn it over to Ron.

Thank you, Liz, and good afternoon, everyone. Before we begin, I want to take a moment to acknowledge the devastating floods in Texas. Our thoughts are with those who have tragically lost their lives and with the people and communities who have been affected by this event. Now, turning to the second quarter, In a period characterized at times by significant financial market volatility driven by geopolitical and economic uncertainty, our strong 2Q results demonstrate the powerful and diversified nature of our franchise. By advancing and leveraging our deep capabilities in technology and investment services, markets, and investment management, we continue to strategically position State Street as our client's essential partner and execute it on our purpose to help create better outcomes for the world's investors and the people they serve. Disciplined execution of this strategic approach is delivering positive results, including accelerating financial performance and strong business momentum. For example, on a year-over-year basis, our 2Q results mark the fourth consecutive quarter of positive fee operating leverage and the sixth consecutive quarter of positive total operating leverage, excluding notable items. New business was strong as we generated a near record quarter for sales and investment services, surpassed $5 trillion in AUM at State Street Investment Management, and generated record FX trading volumes in 2Q. This positive momentum reflects the strong strategic operating and technology foundation we have built over the past several years to support the long-term growth of our businesses. As we work to build on this progress, we remain focused on disciplined execution against our strategy, delivering consistent growth for our shareholders, and maintaining operational excellence in the service of our clients. Turning to slide two of our investor presentation, I will cover our second quarter highlights before Mark takes you through the quarter in more detail. Beginning with our financial performance, reported earnings per share were 217 as compared to 215 in the year-ago period. Excluding notable items, which Mark will speak to, fee and total revenue increased 12% and 9% year over year, respectively. We delivered positive fee and total operating leverage, increased pre-tax margin to nearly 30%, and achieved a 19% return on tangible common equity, while EPS increased 18% year over year, all excluding notable items. Turning to our business momentum, within investment services, we delivered a very strong sales performance this quarter, securing over $1 trillion in new AUCA asset servicing wins and generated $145 million of related new servicing fee revenue wins, including two new State Street Alpha mandates. With this continued good sales performance, we remain confident in our ability to meet our full year servicing fee and a wins target of 350 to 400 million for a second consecutive year. Second quarter marked an important milestone for our asset management business, which we rebranded State Street Investment Management. This new name reflects our commitment to investing in our relationships, innovation, and in the future. Among other benefits, This new brand name reinforces our one-state street approach that aims to leverage collaboration across our firm, expand product offerings, and deepen relationships with our clients. This moment for our investment management business came as period-end AUM exceeded $5 trillion for the first time. Quarterly net inflows were over $80 billion, and we continued to gain market share in the strategically important U.S. low-cost ETF market segment. The second quarter also offered further evidence of the strength and depth of our ETF franchise as our U.S. ETFs led the industry in trading volume, surpassing $4.6 trillion in total volume for the quarter, ranking number one in equity, number one in commodities, and among the top three in fixed income. State Street Markets is seeing the results of its efforts to deepen client relationships. and in Q2 clearly demonstrated its ability to support clients through volatile periods with deep liquidity and trading expertise while also providing important diversification to our revenue profile. Amid a constructive environment for our markets business, we saw significant year-over-year increases in both FX trading and security finance revenues driven by higher client volumes. Our FX trading business recorded its best quarter since 2020, and security finance revenues rose to the highest level since 2019. Turning to our balance sheet, our strong financial position enabled over $500 million in capital return in the second quarter and over $800 million year-to-date. Our financial strength was further underscored by the results of the Federal Reserve's annual stress test in June, subsequent to which we were pleased to announce our intention to increase state's quarterly per share common stock dividend by 11% to 84 cents beginning in the third quarter, subject to approval by our board of directors. As we look ahead, we remain committed to returning capital to our shareholders, subject to market conditions and other factors. Turning to our operational efficiency, we have a well-established track record of expense discipline. This continues to be supported by a proven ability to generate productivity savings to fund investments in our business, which in turn is driving revenue growth and operating leverage. For example, over the last three years, we have generated over $1 billion of expense savings, largely from productivity initiatives, and we anticipate that number will increase to over $1.5 billion by year end as we continue to progress well against our $500 million expense savings target in 2025. Importantly, as we look further ahead, The next generation of our operating model transformation remains our priority and a key opportunity to add even more value for clients and shareholders. The charge we received in the second quarter illustrates this opportunity as we drive further operational efficiency and unlock productivity gains over time, supported by AI and continued platform scaling. To conclude, our first half results build meaningfully on 2024. The second quarter included a number of strategic and platform milestones for State Street, offering tangible proof points that our strategy is delivering, reflected in the continuing improvement in our financial performance and the strong momentum we're seeing across our businesses. These results underscore the strength of our franchise and the disciplined execution of our strategy by our teams. As we look ahead, we have strong conviction in our strategy and in our ability to serve our clients well, underpinned by our distinctive value proposition, financial strength, and the next generation of our technology and operational transformation. With that, let me hand the call over to Mark, who will take you through the quarter in more detail.