State Street Raises 2026 Revenue Outlook as Q3 EPS Rises 33%

State Street Corporation (NYSE: STT) increased its full-year 2026 outlook for fee revenue and net interest income after reporting double-digit revenue growth and record servicing and management fees in the third quarter. Diluted earnings per share rose 33% year over year to $3.69 as revenue growth outpaced higher expenses.

Total revenue increased 13% to $4.00 billion, including an 11% rise in fee revenue to $3.14 billion and a 21% increase in net interest income to $864 million. Expenses rose 8% to $2.62 billion, mainly because of higher revenue-related costs and continued strategic investments. That produced 531 basis points of operating leverage.

Net income advanced 27% to $1.09 billion, while income before taxes increased 26% to $1.39 billion. State Street’s pre-tax margin expanded 3.5 percentage points to 34.6%, and return on average tangible common equity, a non-GAAP measure, rose 4.2 percentage points to 25.1%. The company reported no notable items in the third quarter of 2026, the second quarter of 2026 or the third quarter of 2025.

Compared with the second quarter, total revenue declined 1% and fee revenue fell 2%, while net interest income was broadly unchanged. Expenses decreased 1%, and diluted EPS rose 1%.

Record servicing and management fees

Servicing fees reached a record $1.49 billion, up 10% from a year earlier and 2% sequentially. State Street attributed the growth primarily to organic expansion and higher average market levels. Assets under custody and/or administration ended the quarter at a record $59.2 trillion.

The company recorded $429 billion of new servicing assets under custody and/or administration wins, with most coming from asset owners and asset managers. New servicing fee revenue wins totaled $68 million, driven primarily by back-office and alternatives mandates. Estimated servicing fee revenue still to be installed stood at $332 million at quarter-end, although the company cautioned that mandate timing, asset values, scope and other factors can affect the revenue ultimately recognized.

State Street also announced an agreement to acquire the Santander CACEIS Latin American securities-services joint venture, subject to regulatory approvals and customary closing conditions. It separately won its first Wealth Services mandate with a large U.S. registered investment adviser.

Management fees increased 20% year over year and 3% sequentially to a record $797 million. Assets under management remained at a record $6.3 trillion, while quarterly net inflows totaled $7 billion. Long-term net inflows of $69 billion were largely offset by $62 billion of cash net outflows.

Exchange-traded funds attracted $68 billion, contributing to $67 billion of net inflows across Index Strategies and Solutions. State Street launched 38 products and solutions during the period, including an asset-allocation ETF developed with University of California Investments and backed by a $2.5 billion seed investment.

Markets, software and net interest income

Foreign-exchange trading services revenue rose 17% from a year earlier to $427 million as overall client volumes reached a record and increased 31%. Revenue declined 14% from the second quarter, however, largely because of a lower mix of emerging-markets business.

Securities-finance revenue increased 9% year over year to $151 million, supported by higher client lending balances in Agency Lending and Prime Services. Average securities on loan rose 15%.

Software-services revenue advanced 5% to $175 million, with software and data revenue up 10% because of higher go-live revenue from onboarded clients. Annual recurring revenue increased about 8% to $442 million, while new bookings totaled $14 million. Uninstalled revenue backlog was $144 million.

Net interest income rose to $864 million as the fully taxable-equivalent net interest margin increased 16 basis points from a year earlier to 1.12%. State Street attributed the margin improvement largely to a better funding mix, investment-portfolio repricing and a reduced impact from terminated hedges. Average interest-earning assets increased $10 billion to $305 billion, primarily because of higher deposit balances.

Expenses, capital and outlook

Compensation and employee benefits expense increased 8% to $1.25 billion, reflecting higher performance-based incentives, investment-related hiring and merit increases, partly offset by productivity savings. Information-systems and communications expense rose 15% to $594 million, largely due to technology, infrastructure and volume-related spending. Headcount declined 1% year over year to 51,119.

State Street returned $651 million to common shareholders during the quarter through $400 million of share repurchases and $251 million of declared dividends, representing a 63% payout ratio. Its preliminary standardized common equity Tier 1 ratio increased 0.2 percentage point sequentially to 11.0%, while the Tier 1 leverage ratio rose by the same amount to 5.5%.

For full-year 2026, management now expects fee revenue to increase about 13% to 14%, compared with its July outlook of 12% to 13%. Net interest income is expected to rise about 15% to 16%, versus the previous range of 14% to 15%. Expenses are projected to increase 8% to 8.5%, compared with the earlier expectation of approximately 8%, with operating leverage expected to exceed 500 basis points.

The outlook assumes global equity markets remain flat from current levels, continued organic growth in Investment Services and Investment Management, and interest rates broadly consistent with current forward rates. State Street said the projections remain sensitive to interest-rate changes, equity and fixed-income markets, client activity, new-business onboarding and other macroeconomic and industry conditions. The company also identified pricing pressure, technology and cybersecurity risks, regulatory changes, strategic-execution challenges and variability in assets, fee revenue and capital returns as material uncertainties.