State Street Corporation (NYSE: STT) shares fell 3.5% on Friday, January 16, 2026, despite reporting fourth-quarter earnings that exceeded analyst expectations. Trading at $131.48 as of 10:20 AM EST, the stock dropped from its previous close of $136.20, as investors reacted negatively to significant repositioning charges and higher-than-expected 2026 expense guidance.
The custodial bank and asset management giant delivered strong operational results with record revenue and robust asset growth, but concerns about future costs overshadowed the positive earnings beat.
Q4 Beats Expectations, But Investors Fixate on Expense Line Items
State Street reported adjusted earnings per share of $2.97 for the fourth quarter, handily beating the $2.84 analyst consensus and representing growth from $2.78 in Q3 and $2.60 in the year-ago period. Revenue came in at $3.67 billion, surpassing expectations of $3.62 billion and marking a 7% year-over-year increase.
The company achieved record fee and total revenue, with fee revenue rising 8% to $2.86 billion driven by higher servicing fees (up 8%), management fees (up 15%), and foreign exchange trading services (up 13%).
However, the quarter included $226 million in net repositioning charges that weighed on investor sentiment. These charges comprised $111 million related to workforce rationalization and $69 million for real estate footprint optimization.
Net interest income grew 7% year-over-year to $802 million, exceeding the $765 million consensus estimate, while total expenses climbed to $2.74 billion from $2.43 billion in the prior quarter. Assets under custody and administration reached a record $53.8 trillion, up 16% year-over-year, with assets under management increasing 20% to $5.7 trillion.
Higher 2026 Expense Outlook Triggers a Selloff
The stock’s decline was primarily attributed to State Street’s 2026 guidance, which projected expense growth of 3-4% year-over-year, well above the 1.6% increase anticipated by Visible Alpha consensus. The company expects net interest income to grow in the low single digits for 2026, compared to analyst expectations of 3.8% growth, while fee revenue is projected to rise 4-6%.
Despite these concerns, CEO Ron O’Hanley emphasized the company’s strategic progress, noting that 2025 marked “another year of strong performance” with positive operating leverage, expanding pre-tax margin, and higher returns.
State Street maintained a robust capital position with a standardized common equity tier 1 ratio of 11.7% at quarter-end, up 0.8 percentage points from the previous year. The company reported new servicing fee revenue wins of $87 million in the quarter and has $320 million in servicing fee revenue awaiting installation in future periods.
With total net inflows of $85 billion in Q4, up from $26 billion in Q3, the company demonstrated continued momentum in attracting client assets. The stock, which has delivered a 35.49% return over the past year, trades at a forward P/E of 12.03 and maintains a dividend yield of 2.47%.