SPY Issuer State Street's Q2 Beat Overshadowed By Rising Costs, Dwindling Net Interest Income

State Street Corporation STT shares are trading lower on Tuesday after reporting second-quarter results.

The company reported adjusted earnings per share of $2.53, beating the analyst consensus estimate of $2.37. Quarterly sales of $3.448 billion (+8% year over year) outpaced the Street view of $3.347 billion.

Investment Management AUM as of quarter-end increased 17% to $5.1 trillion, mainly driven by higher quarter-end market levels and net inflows.

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This figure includes the Assets Under Management of the SPY ETF, one of the company's flagship offerings. The SPY ETF, which tracks the S&P 500 index, reported an AUM of $642.13 billion as of July 14, 2025. State Street serves as the trustee of the SPDR S&P 500 ETF Trust, with PDR Services LLC acting as its sponsor.

Fee revenue increased 11%, reflecting broad-based strength across the franchise. Excluding notable items, fee revenue increased 12%.

“In second quarter, we achieved a sixth straight quarter of positive year-over-year total operating leverage, excluding notable items, generated near-record sales in Investment Services, surpassed $5 trillion in AUM at State Street Investment Management and generated record FX trading client volumes,” said CEO Ron O’Hanley.

“The results of the Federal Reserve’s stress test reaffirm our financial strength, and we were pleased to announce a planned 11% increase in our per share quarterly common stock dividend,” the CEO added.

Net interest income fell 1% year over year to $729 million, primarily driven by lower average short-end rates and deposit mix shift, partially offset by continued loan growth and securities portfolio repricing.

Total provision for credit losses was $30 million in the second quarter, mainly due to the evolving macroeconomic environment and an increase in loan loss reserves associated with certain commercial real estate loans.

Total expenses increased 11%, primarily driven by $100 million workforce rationalization and $18 million Alpha-related client rescoping notable items.

Price Action: STT shares are trading lower by 3.84% to $105.65 at last check Tuesday.

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