01—Abstract
Summary
Summary of the 8-K filed July 16, 2026. Cited figures are marked; the original filing is the authoritative source.
State Street (STT) reported strong second-quarter 2026 results, with diluted EPS of $3.65a (up 68% year over year on a GAAP basis) and total revenue of $4.05 billion, up 17%.
Fee revenue rose 17% to $3.19 billionb, led by Management fees (+29%), Servicing fees (+13%), and FX trading services (+26%). Net interest income rose 18% to $860 million, with net interest margin up 17 basis points to 1.13%. Total expenses rose 5% on a GAAP basis to $2.66 billion, and 10% excluding notable items, which were absent in 2Q26 but present in 2Q25.
Pre-tax margin reached 34.3% and ROTCE 25.5%. Both AUC/A ($57.9 trillionc) and AUM ($6.3 trillion) hit records, supported by market gains and $114 billion of net AUM inflows. Capital and shareholder returns were also prominent.
The standardized CET1 ratio rose to 10.8%, and the company returned $631 milliond to common shareholders, including $400 million of buybacks and $231 million of dividends. Management announced a 10% increase in the third-quarter dividend to $0.92 per share. The company also updated its FY2026 outlook, now guiding to fee revenue growth of roughly 12-13%, NII growth of roughly 14-15%, and expense growth of about 8% (plus or minus), with roughly 500 basis points of operating leverage.
In addition, it introduced medium-term targets of a 35% pre-tax margin and a mid-20s percent ROTCE, framed by a transformation program expected to deliver about $1 billion of annual run-rate benefits by 2029. Investors should weigh the strong momentum against several watch items. Expense growth excluding notable items accelerated to 10% year over year, and the operating leverage metric is calculated on a basis that excludes notable items.
The medium-term targets assume stable markets and interest rates, and fee revenue remains sensitive to market levels. The 2Q26 results also benefited from a sharp rise in market-driven fee revenue and a rebound in securities finance activity. Results are furnished, not filed, under Items 2.02 and 7.01.
02—Key points
Key Highlights
- Diluted EPS of $3.65, up 68% YoY (GAAP) and 44% YoY excluding notable items; net income rose 56% YoY to $1.08 billion.
- Total revenue of $4.05 billion, up 17% YoY; fee revenue up 17% to $3.19 billion, with Management fees up 29%, Servicing fees up 13%, and FX trading services up 26%.
- Record AUC/A of $57.9 trillion (up 18% YoY) and record AUM of $6.3 trillion (up 23% YoY), with quarterly AUM net inflows of $114 billion.
- Pre-tax margin of 34.3% (up 8.5 points YoY) and ROTCE of 25.5%; operating leverage of 1,226 bps on a GAAP basis, or 645 bps excluding notable items.
- Capital return of $631 million in the quarter; standardized CET1 ratio improved to 10.8%; quarterly dividend to rise 10% to $0.92 per share for 3Q26.
- FY2026 outlook raised: fee revenue growth now about 12-13% (previously 7-9%) and NII growth about 14-15% (previously 8-10%), with expense growth of roughly 8% (plus or minus).
- New medium-term targets of a 35% pre-tax margin and a mid-20s percent ROTCE, supported by a transformation program targeting about $1 billion of annual run-rate benefits by 2029.
03—Questions
Frequently Asked Questions
What drove the strong second-quarter 2026 earnings growth?
Growth was broad-based. Revenue rose 17% YoY, driven by higher market levels lifting Management and Servicing fees, record FX trading volumes (up 25%), and an 18% rise in NII from a 17 basis point improvement in net interest margin. Expenses rose only 5% on a GAAP basis because 2Q25 included roughly $138 million of pre-tax notable items that were absent in 2Q26.
Is the underlying expense growth a concern for investors?
Expenses rose 10% YoY excluding notable items, mainly from revenue-related costs, strategic investments, and higher incentive compensation. Management attributes this to revenue-linked spending and continued investment, and states that operating leverage excluding notable items has been positive for ten consecutive quarters. Investors should monitor whether expense growth stays below revenue growth as the company pursues its transformation plan.
What changed in the FY2026 outlook and what are the medium-term targets?
The FY2026 outlook was raised substantially: fee revenue growth is now about 12-13% (from 7-9%), NII growth about 14-15% (from 8-10%), and expense growth about 8% (from 5-6%), targeting roughly 500 basis points of operating leverage. The medium-term targets (3-to-5-year horizon) are a 35% pre-tax margin and a mid-20s percent ROTCE, assuming stable markets and rates and a standardized CET1 of about 11%. These targets are forward-looking and depend on market and rate assumptions.
How much capital is State Street returning to shareholders, and is the dividend increase sustainable?
State Street returned $631 million to common shareholders in 2Q26, including $400 million of share repurchases and $231 million of dividends, for a total payout ratio of 62%. The planned 10% dividend increase to $0.92 per share follows the Federal Reserve stress test results. The CET1 ratio of 10.8% is above the roughly 11% medium-term assumption only slightly, and the company targets a total payout ratio of about 80% over the medium term, so future capital return will depend on earnings, regulatory requirements, and Board approval.
What risks or uncertainties should investors consider?
Fee revenue remains sensitive to equity and fixed income market levels, and NII depends on interest rates. Some growth in 2Q26 reflected market-driven adjustments, and management notes that medium-term targets exclude notable items and assume a stable environment. The filing also highlights pending Basel III revisions, which could change capital requirements, and cites ongoing geopolitical conflicts and cybersecurity risks. Some servicing wins and backlog figures are estimates that can change, and the company notes that these should not be used to project future revenue run rates.
04—Continue