State Street Corporation (STT.N): 3Q26 Review - Soft Quarter but '27 and '28 Estimates Driven Higher by Fees

Citi's Take: STT underperformed on the day (down ~-4.14% vs BKX down ~-1.49%), on missed fee revenue and an overall high bar to see continued outperformance. Guidance was updated to '26 NII up 15-16% and a tweaked op lev target to 500+ bps. Noise from fair value adjustments and FX fee mix weighed on earnings even with FX volumes up 30+% YoY. We raise our '26 estimates on larger core fees driven by increased growth in servicing and trading services fees, partly offset by larger expenses from information systems and communications fees. We also increased '27 and '28 on higher core fees and NII growth, offset by higher compensation and employee benefits cost. We lower our PT to $190 on a higher cost of equity as result of raised interest rates. Maintain Buy. Our 2026E EPS increases 5c to $13.30 (vs. FactSet consensus of $13.77), 2027E EPS increases 25c to $15.65 (vs. FactSet consensus of $15.45), and 2028E EPS increases 20c to $17.00. Price US$167.60, Target price US$190.00 (down from US$