State Street's Q4 2025 Earnings Show Strong Growth Amid Persistent Structural Risks

What happened

State Street Corp reported robust fourth-quarter 2025 results, with EPS growing 14% year-over-year and a pretax margin of 31% excluding notable items. Full-year 2025 EPS reached $10.30, a 19% increase from the previous year, indicating sustained momentum in earnings. This performance aligns with the DeepValue report's observation of improving ROE, which rose from 11.1% in 2024 to 13.4% in the third quarter of 2025. However, behind the headline numbers, the company continues to face structural headwinds such as fee compression, net interest income volatility, and a high proportion of uninsured deposits. Investors should scrutinize whether this growth is sustainable given ongoing regulatory pressures and competitive dynamics that cap long-term returns.

Implication

The strong Q4 results reinforce State Street's ability to deliver operating leverage and fee growth, supporting a potential upgrade in ROE expectations. However, the high pretax margin of 31% may be inflated by excluding notable items, masking underlying cost pressures or one-time benefits. Full-year EPS of $10.30 suggests management is successfully executing on strategic initiatives, but sustainability depends on converting the $3.6T mandate pipeline and managing the ETF client transition. Given the stock's significant price appreciation and trading multiples near 12x P/E, the risk/reward appears balanced, echoing the DeepValue report's 'WAIT' recommendation. Investors should monitor regulatory developments and deposit stability closely, as any adverse changes could undermine the current growth trajectory.

Thesis delta

The Q4 2025 earnings confirm the positive momentum highlighted in the DeepValue report, with EPS growth and margin improvements supporting the case for sustained ROE above 13%. However, this does not materially shift the core thesis, as structural challenges like fee compression, regulatory burdens, and high uninsured deposits persist, keeping risk/reward balanced and the 'WAIT' stance appropriate unless further evidence of durable profitability emerges.