State Street delivered a solid start to 2024, characterized by positive fee revenue momentum, disciplined expense management, and continued capital return, even as net interest income (NII) faced pressure from deposit mix and rate dynamics. 1Q24 GAAP net income of $463 million and EPS of $1.37 (vs. $1.69 on a non-GAAP basis excluding the FDIC special assessment) reflected a quarter with meaningful items and notable items that management offsets through non-GAAP reconciliation. Total revenue was $3.138 billion, with operating income of $658 million and EBITDA of $719 million, underscoring meaningful operating leverage despite a challenging rate environment for traditional net interest income.
Asset servicing momentum remained a core driver of fee growth. AUC/A reached a record $43.9 trillion, and servicing fee revenue grew 1% year-over-year, supported by $67 million of servicing fee wins and the installation of $291 million of servicing revenue at quarter-end. Alpha platforms continued to show resilience, with two additional Alpha wins in 1Q24 and a total of 21 live mandates, signaling the potential for back-office and middle-office productivity gains to contribute meaningfully to revenue in the quarters ahead. Global Advisors revenue benefited from higher equity markets and strong cash inflows, including $9 billion of cash net inflows in the quarter. ETF assets under management hit a record $1.4 trillion, reinforcing STT’s leadership in low-cost ETFs.
Management reaffirmed a growth-oriented 2024 agenda: grow fee revenue, extend leadership across markets and fiduciary services, optimize the operating model, and differentiate with technology-enabled client solutions (e.g., Alpha, private markets). Importantly, the company guided to higher-end full-year fee revenue growth (up about 4% year over year) and a smaller decline in NII than previously anticipated (full-year NII down ~5% YoY, versus prior guidance of ~11% decline). The 2Q outlook contemplates 1.5–2% sequential growth in total fee revenue, a 2–5% decline in NII, and 2–2.5% expense growth, excluding seasonal items. State Street also reiterated its commitment to returning around 100% of earnings to shareholders for 2024, supported by a robust capital base and ongoing buyback activity.
The quarter’s results and commentary point to STT’s ongoing ability to balance growth initiatives with productivity improvements, while navigating a still-evolving rate environment and client-transition headwinds. The investment thesis rests on (1) fee growth through Alpha and back-office efficiencies, (2) a durable balance sheet with high liquidity and capital resilience, and (3) a scalable global custody and asset servicing platform that can leverage cross-sell opportunities in ETFs, defined contribution, and cash management. Near-term risks include the BlackRock client-transition headwind in servicing, persistent NII volatility tied to deposits and rate expectations, and macro-driven fee pressure in traditional servicing. Overall, STT appears well-positioned to execute its 2024 plan, albeit with execution risk tied to onboarding installed revenues and macro rate trajectories.