State Street Q3 Adjusted EPS Beats by Two Cents But Fee Revenue Miss Sends Stock Down About 8%

State Street reported third-quarter 2026 adjusted earnings per share of $3.69, beating the $3.67 consensus estimate by two cents and rising 33% year over year, but total revenue of $4.00 billion and fee revenue of $3.14 billion both missed Wall Street targets of $4.03 billion and $3.20 billion respectively. The fee shortfall, led by servicing fees of $1.49 billion coming in below the $1.52 billion estimate, sent the stock down roughly 8.3% in pre-market trading even as reported profit rose 27% from a year earlier.

Within the fee breakdown, management fees of $797 million grew 20.0% year over year, FX trading revenue of $427 million rose 17.3% on record client volumes up 31%, securities finance fees gained 9.4% to $151 million, and software fees rose 4.8% to $175 million. Net interest income of $864 million beat the $857.91 million estimate and net interest margin expanded 16 basis points year over year to 1.12%. Pre-tax margin improved 3.5 percentage points to 34.6% and return on equity rose 3.0 percentage points to 16.4%.

Assets under custody and administration reached $59.17 trillion, up 15% year over year, while assets under management of $6.31 trillion came in below the $6.38 trillion estimate. The company won new servicing fee mandates totaling $68 million and $429 billion in new AUC/A wins, with $332 million in fees and $2.98 trillion in AUC/A yet to be installed. Software services annualized recurring revenue grew approximately 8% to $442 million.

State Street returned $651 million to shareholders in the quarter, including $400 million of share repurchases and $251 million in declared dividends of $0.92 per share, with the payout ratio approaching 80%. The company updated its full-year 2026 outlook, guiding for fee revenue growth of approximately 13% to 14% year over year and net interest income growth of approximately 15% to 16%, with the top end of expense growth guidance also raised. Strategically, State Street announced an agreement to acquire the Santander CACEIS Latam Securities Services joint venture and won its first Wealth Services mandate with one of the largest registered investment advisors in the United States.