State Street stock surges 39% in a year, driven by acquisitions and fee income growth, but rising costs and fee reliance raise questions on near-term upside.
Shares of State Street $STT Corporation STT have gained 39% in the past year, outperforming the industry’s 22.7% growth and the S&P 500 Index’s 16.4% rise.
Moreover, STT’s price performance has been better than its peers, BankUnited, Inc. BKU and Fifth Third Bancorp FITB. BKU stock has gained 29.9%, whereas shares of FITB have rallied 14.8% in the same time frame.
Image Source: Zacks Investment Research
Does State Street stock have more upside left despite the recent strength in price? Let us find out.
Acquisitions & Restructuring Efforts: State Street has continuously been undertaking acquisitions and business restructuring efforts to expand scale. Last year, the company partnered with and made a minority investment in Apex Fintech Solutions to strengthen its position and capture new opportunities.
Also, it acquired its long-standing partner, PriceStats, which is a top provider of daily global inflation data. STT entered a strategic co-operation agreement with Albilad Capital to support the latter’s securities services offerings in Saudi Arabia.
It has also invested in Ethic, a portfolio-customization technology provider, formed a strategic relationship with India’s smallcase model portfolios platform, partnered with Van Lanschot Kempen Investment Management to drive European growth and made minority investments in Coller Capital (a dedicated private market secondaries manager) and India’s Groww AMC.
State Street has joined forces with Bridgewater Associates to boost its core alternative investment strategies, partnered with Apollo Global to enhance investors' accessibility to private markets, acquired a 5% stake in Australia-based Raiz Invest Limited, partnered with Taurus and completed the buyout of CF Global Trading.
These efforts are expected to result in revenue and cost benefits for the company. Over the last five years (2020-2025), STT’s revenues witnessed a compound annual growth rate (CAGR) of 3.6%.
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Fee Income Strength: Growth in State Street’s fee income has been impressive. While the company’s total fee revenues declined in 2022 and 2023, the metric saw a four-year (2021-2025) CAGR of 2.3%. This was mainly driven by higher client activity and significant market volatility.
Also, the company’s assets under custody and administration (AUC/A) and assets under management (AUM) witnessed CAGRs of 5.3% and 8.2%, respectively, in the same time period. Servicing assets yet to be installed were $3.5 trillion in 2021, $3.6 trillion in 2022, $2.3 trillion in 2023, $3 trillion in 2024 and $3 trillion in 2025 across client segments and regions.
State Street remains well-positioned for fundamental business activities, given its global exposure and a broad array of innovative products and services (including the launch of State Street Digital and State Street Alpha). The company’s business servicing wins and its inorganic growth strategy are expected to continue to aid fee revenues.
Management expects total fee revenues to increase 4-6% year over year in 2026.
Impressive Capital Distributions: Following the clearance of the 2025 stress test, State Street increased its quarterly dividend by 11% to 84 cents per share. Before this, the company had hiked annual dividends four consecutive times by 10%.
In January 2024, the company was authorized to repurchase shares worth up to $5 billion (with no expiration date). As of Dec. 31, 2025, $2.5 billion worth of authorization remained available.
The company expects the 2026 total payout ratio to be approximately 80%. Driven by a strong capital position and earnings strength, STT is expected to sustain improved capital distributions in the future.
Elevated Expense Base: While the company’s expenses declined in 2022 and 2024, total non-interest expenses witnessed a four-year (ended 2025) CAGR of 3.4%.
Over the past few years, STT has been successful in managing expenses through high-cost location workforce reduction, business consolidation and restructuring initiatives. Hence, it achieved productivity savings of $2 billion in the past five years, with more cost savings expected this year.
However, owing to steady investment in technology, total non-interest expenses are likely to remain elevated in the near term. The company’s strategic buyouts and investments in franchises will likely put pressure on expenses.
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Fee Income Concentration: State Street’s largest revenue source is fee income, which constituted 79% of total revenues in 2025. Though fee income majorly supported the company’s top line in 2024 and 2025, significant volatility in the capital markets is worrisome. A slowdown in capital markets activities may strain the metric’s future trajectory.
Also, concentration risk arising from higher dependence on fee-based revenues may significantly alter the company’s financial position if there is any change in individual investment preferences or regulatory amendments.
Solid business servicing wins, a global footprint and strategic buyouts and alliances are expected to continue to support STT’s top-line growth. The company’s rising AUM balance is another positive.
While elevated costs due to continuous investments in franchises and the company's high dependence on fee income sources are concerning, analysts seem optimistic regarding State Street’s earnings growth prospects. The Zacks Consensus Estimate for the company’s 2026 earnings has been revised upward over the past 60 days. The 2026 earnings estimate of $11.59 indicates year-over-year growth of 12.5%. The 2027 estimate of $13.03 suggests a rise of 12.4%.
Image Source: Zacks Investment Research
Thus, it seems like a wise idea to add the State Street stock to your portfolio now. Given the strength in its fundamentals and robust earnings growth prospects, the company is not likely to disappoint over the long term.
Currently, STT carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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