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What’s Expected for State Street’s Investment Servicing Business

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Assets under custody and administration

In the first quarter, State Street’s (STT) fee revenue made up a significant portion of its investment servicing revenue. Its fee revenue is mainly generated from servicing fees, which primarily depend on AUCA (assets under custody and administration). In the second quarter, the division’s AUCA are expected to increase sequentially thanks to equity market recovery.

In the first quarter, markets witnessed downward momentum. In the second quarter, a rise in AUCA could boost the investment servicing division’s servicing fees, which would improve State Street’s fee revenue sequentially.

What could impact fee revenue in Q2?

Trading service revenue, which also represents a component of the investment servicing division’s total fee revenue, is boosted by higher volatility. In the first quarter, interest rate concerns raised volatility, leading to trading service revenue of $274 million.

As volatility fell in the second quarter, aided by corporate earnings results and economic improvement, the investment servicing division’s trading service revenue might fall sequentially. On June 18, State Street’s EV (enterprise value) was -$15.4 billion, while peers’ (XLF) EVs were as follows:

  • T. Rowe Price (TROW): $28.5 billion
  • BlackRock (BLK): $82.6 billion
  • Invesco (IVZ): $15.7 billion

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