The paragraph introduces State Street Corporation's Fourth Quarter and Full Year 2024 Earnings Conference Call and Webcast, hosted by Elizabeth Lynn, the Head of Investor Relations. The call is live on State Street's website and is being recorded for replay, with restrictions on unauthorized rebroadcasting. Elizabeth Lynn apologizes for a previous technology issue that interrupted the Q&A segment of the earnings call. Present on the call are CEO Ron O'Hanley, CFO Eric Aboaf, and EVP Mark Keating. The call will discuss results that exclude certain items from GAAP, with reconciliations available in an appendix on their website, and it will include forward-looking statements.

In this paragraph, the speaker addresses Jim Mitchell's question about the Net Interest Income (NII) guidance, highlighting both headwinds and tailwinds impacting it. The main headwinds are related to deposit mix and levels, as well as the rate environment. As for tailwinds, the speaker points to loan growth and the rollover of the investment portfolio. The speaker indicates a need to provide a comprehensive overview of the factors influencing their NII outlook and begins explaining these components, particularly focusing on deposits.

The paragraph discusses the strong finish of deposits in Q4 2024, with noninterest-bearing deposits showing an uptick after previously declining for three quarters. This mirrors a pattern also observed in Q4 2023. The company expects deposit levels to remain high in the range of $230 million to $240 million, although noninterest-bearing deposits have decreased year-over-year by about 12%. The company anticipates further declines for noninterest-bearing deposits and aims for a range between $20 billion to $25 billion. The impact of rate cuts is examined, with an assumption based on rate curves indicating two cuts in the US, five at the ECB, and three at the Bank of England, mostly expected later in the year. The company is more sensitive to changes in non-US rates, with significant financial implications from cuts in euro or sterling rates. Looking forward, the company expects continued loan growth, especially in private markets, with a similar 14% growth rate projected for 2024.

The paragraph discusses portfolio rollovers, indicating about $4 billion per quarter, which may vary due to maturities. It mentions portfolio repositionings from the last third quarter and states that the rollover pickup is about 100 to 150 basis points. The speaker hopes this provides a realistic, conservative outlook by balancing various factors and plans to update the group throughout the year. Jim Mitchell finds this information helpful but asks about deposit expectations, noting uncertainty and seasonality, and wonders about trends in January. Mark Keating replies that it's too early to determine trends just a couple of weeks into the year. The operator then introduces Mike Mayo of Wells Fargo, who asks about core organic revenue growth in fee businesses, mentioning headwinds like the BlackRock roll-off and currency issues. Mark Keating responds, suggesting he can address the question.

The paragraph discusses the company's strategy for achieving sustainable growth in its fee-based business, particularly focusing on servicing fees. Over the past few years, they have significantly increased their sales, growing from $150 million in 2019-2020 to $380 million in 2024. This growth was driven by restructuring their sales team, realigning incentives, and enhancing service quality. Additionally, 85% of the revenue comes from back office operations, which provide further cross-selling opportunities. Overall, the company has achieved a 45% increase in sales since 2022 and a 250% increase since 2020.

The paragraph discusses the company's investment in products and services, resulting in a high level of productivity and setting sales and servicing fee targets to drive organic growth despite challenges like attrition and fee compression. The revenue install backlog increased to $350 million, a 75% rise from $200 million in Q3 2023. The company has set a plan and is consistent in achieving its goals. Ron O'Hanley adds that despite servicing fees not tracking capital markets directly, they expect double-digit growth in areas like software and global advisors. The guidance provided is explained as a 5% to 7% increase, adjusted to 3% to 5% for 2025 due to factors like FX headwinds. Mike Mayo inquires about long-term core fee growth expectations for the next four to five years.

In the paragraph, Ron O'Hanley discusses the factors driving revenue growth for their company. He highlights three main contributors: improvements in their value proposition, particularly with Alpha, which is gaining broad market acceptance; enhanced service quality leading to better customer satisfaction and business growth, especially with existing clients; and an overhaul of the sales force to focus on enterprise outsourcing, which has led to significant sales and revenue growth. Overall, O'Hanley expresses confidence in sustaining a growth rate of 5% to 7% gross and 3% to 5% net, assuming stable market conditions.

In the paragraph, Eric Aboaf discusses the role of prime services in their business, highlighting a $2 billion increase in risk-weighted assets to support clients. Over the past several years, they have developed their prime brokerage by aligning capital deployment in a manner that's client- and Basel III-friendly. Prime services account for a significant portion of their securities finance revenues and support clients such as hedge funds and multi-manager clients. This service not only assists clients but also attracts more servicing fees and business opportunities like FX trading and depository services. He mentions that the business is capital-light but has experienced strong double-digit growth due to rising client demands. Glenn Schorr then shifts the topic to SSGA, asking about the factors driving its recent organic growth and its sustainability.

In this paragraph, Ron O’Hanley discusses several factors contributing to the firm's growth. He highlights the transition from being primarily an institutional player to gaining traction in the retail intermediary market by launching a set of low-cost funds. Additionally, the firm has accelerated product development, with around 60 new product launches, mainly ETFs, spanning both US and international markets like EMEA. The company has also strengthened its team by adding experts in the retail intermediary sector. Furthermore, O’Hanley mentions the strategic selection of sub-advisory partners to enhance capabilities outside its expertise. These strategies collectively drive the firm's current performance and position it for future growth.

In the paragraph, Mark Keating addresses the potential for more aggressive deposit raising strategies, indicating that the company has shown strong engagement with clients in this area and has integrated expansion initiatives into its outlook. Brian Bedell then shifts the discussion to asset management, noting an unexpected fourth-quarter performance and inquiring about fee growth expectations for SSGA. He also seeks Ron's perspective on 401(k) plans possibly adopting alternative products, acknowledging the existing challenges such as litigation, and asks if they are positioned to offer such products given Ron's extensive experience in the asset management industry.

In the paragraph, Ron O'Hanley discusses the success of SSGA, highlighting its market sensitivity and significant asset growth. He emphasizes the importance of the DC (Defined Contribution) business and mentions their innovation of incorporating annuities into target date funds, which offers longevity protection for 401(k) investors. O'Hanley notes that legal challenges have made it difficult for trustees to focus on performance in their decisions. He hopes that the Department of Labor's safe harbor rule, which sets a standard for after-fee performance, could enable DC investors to achieve better outcomes. Mark Keating offers brief agreement without additional commentary.

In the paragraph, Eric Aboaf discusses the company's loan growth strategy, emphasizing its focus on alternative and private market clients. He explains that about two-thirds or more of their loans are directed towards these markets, and highlights the company's involvement with insurance companies and asset managers. The growth is primarily driven by private market lending, which they find manageable due to their familiarity with the clients and underlying assets. Aboaf mentions specific types of loans, such as capital call financing and BDC lending, and notes that their close ties to these sectors enable them to confidently expand their loan portfolio while maintaining strong risk management.

The paragraph discusses the company's approach to risk management and the value of supporting private markets through lending. It highlights the growth in private market servicing fees and the importance of lending to clients in this sector, which is beneficial for both parties involved. The conversation then shifts to the topic of deposit betas, with Brennan Hawken asking about the recent lower-than-expected betas for the euro and pound sterling. Eric Aboaf explains that the company has provided detailed disclosures on deposit betas by currency and notes that they generally behave symmetrically as interest rates rise and fall across different deposit segments.

The paragraph discusses a financial analysis of deposit trends across different currencies, particularly focusing on the U.S. dollar, euro, and sterling. The speaker notes that U.S. dollar deposits have shown a consistent trend with betas around 60-65% in the past quarter, which was expected. While euro and sterling deposits have shown variability due to currency shifts and new clients, the U.S. dollar's large sample size makes its trends more easily observable. The speaker suggests that similar trends would be expected in euro and sterling deposits but are often overshadowed by changes in mix and volume. The paragraph ends with a question from Gerard Cassidy, asking about the role of artificial intelligence in improving service quality and how its success can be measured externally.

In the paragraph, Ron O’Hanley discusses the significant role of technology, particularly AI and machine learning, in State Street's operations. He highlights how machine learning has revolutionized tasks like fund accounting by automating transaction processing and reducing human involvement to exception handling, thereby increasing efficiency. While they are still exploring the application of AI, particularly large language models, O'Hanley anticipates rapid advancements, with initial implementations likely in routine client services. Concerns about maintaining client data privacy are being addressed through extensive testing.

The paragraph discusses the deployment of AI-powered chatbots for improving client service and handling HR inquiries within a company. The technology enables secure data handling and enhances trust by providing both answers and their source documents. The speaker highlights the ongoing transformation towards AI-powered solutions, forecasting significant AI-driven changes in the next few years. The paragraph concludes with Gerard Cassidy asking a follow-up question about the company's loan portfolio size compared to total assets and the potential benefits of providing more detailed disclosures to investors.

Eric Aboaf discusses the steady double-digit growth of their lending portfolio, highlighting that it has become an integral part of their business model, particularly in supporting private markets, asset managers, insurers, and corporates. Despite being a capital-light model, they are confident in sustaining this growth while continuing to return capital to investors. Aboaf expresses openness to providing more detailed disclosures, encouraging feedback for improved transparency. Ron O’Hanley adds that the lending growth is primarily driven by expansion in their private markets business.

In the paragraph, Ron O'Hanley and Eric Aboaf discuss their company's financial strategy concerning loan growth and shareholder returns, particularly focusing on share buybacks. Ron O'Hanley reaffirms the company's commitment to returning 80% of its earnings to investors, despite challenges such as a slightly lower Tier 1 leverage ratio and increasing tenures, which affect Other Comprehensive Income (OCI). Eric Aboaf adds that the Common Equity Tier 1 (CET1) ratio has been the primary limiting factor in their financial planning for many years. Despite these constraints, the company remains committed to its target of returning 80% of earnings to investors.

The paragraph discusses Tier 1 leverage and the company's strategy of occasionally supplementing it with preferred equity as the balance sheet grows. They focus on maintaining a comfortable capital ratio, particularly emphasizing CET1 due to its risk sensitivity, while Tier 1 leverage is tied to the balance sheet size. The paragraph also includes a dialogue between Vivek Juneja and Mark Keating, where Keating explains a recent business win from an APAC lender. This deal involves servicing products across multiple regions, including Europe and the US, and the pricing is not necessarily reflective of typical APAC business rates.

The paragraph discusses the strategic importance of Alpha, a platform that offers a comprehensive front-to-back interoperable architecture for clients. Alpha is highlighted as a significant contributor to AUCA wins, with approximately half attributed to it. The discussion involves Alpha's impact on business retention and pricing power, emphasizing its ability to solve clients’ tech and operational issues. Alpha aims to distinguish its offerings from competitors and secures longer contracts, typically seven years or more, as opposed to the typical three-year agreements, due to the extensive work involved in setting it up and its added value to clients.

The paragraph discusses a company's client base and project mandates, mentioning that they have 35 announced clients, with 25 installed. Mark Keating highlights that they completed seven mandates in 2024 and expect to do six to eight in 2025. The focus is on aligning their services with core business aspects, enhancing product offerings, and improving integration tools based on experiences with their Alpha ecosystem. David Smith and Eric Aboaf discuss US deposit rates, noting that deposit betas have fluctuated from low levels, reaching around 60-75%, varying by quarter and influenced by pricing changes and deposit mix.

The paragraph discusses the company's financial performance, specifically focusing on the deposit mix and currency distribution. It notes that US dollars and euros make up a significant portion of deposits, both at around 65%, while British pound sterling is less significant due to its smaller pool. The deposit mix shifts over time, but the company maintains discipline and thoughtfulness in pricing to build its deposit franchise. Despite pricing adjustments and changes in betas, the company achieved deposit growth, showcasing the strength of its proposition and relationships. Elizabeth Lynn concludes the call by inviting further questions through investor relations.

This summary was generated with AI and may contain some inaccuracies.