Letter one


Ronald P. O’hanley

Chairman and CEO
Ronald O'Hanley
A message to our shareholders

The value
of resilience

Ronald P. O'Hanley
Chairman and CEO
April 6, 2021

For us at state street, we came together like never before in the service of our clients, our employees, the global financial markets, and our communities.

With the possible exception of world wars, no year has affected the lives of more people than 2020. It is impossible to focus on the performance of our business in isolation from the pandemic, economic shutdown, historic market volatility, the radical shift in working and living conditions, and the racial and social inequities that challenged all of us. And no other year better illustrates the interconnectedness of our stakeholders — shareholders, clients, employees, vendors, policymakers, and communities. The multiple crises of 2020 highlighted both strengths and weaknesses in the public and private sectors and underscored the value of resilience in everything we do.

I begin with thanks and remembrance. Thanks to all those front-line and essential workers who risked their health and lives for the rest of us. And thanks to my State Street colleagues — some of whom shifted to remote work and others who needed to remain in the office — who each worked tirelessly and met numerous challenges to continue servicing our clients in an extraordinary investment environment. Remembrance for all of those who lost their lives or lost loved ones, losses that continue to this day.

For us at State Street, the execution requirements to serve our clients, our employees, the global financial markets, our communities, and our shareholders came together as never before.

These crises demanded an accelerated delivery against our strategic priorities:

  • Become an essential partner when our clients needed our counsel, responsiveness, inventiveness, and operational support most;
  • Identify better and deeper ways for us to take on more of our clients’ front-, middle-, and back-office needs, underpinned by the State Street AlphaSM platform;
  • Provide global technology scale and operational resilience amid lockdown conditions and record transaction volumes;
  • Demonstrate and model the behaviors of a high-performing organization in anticipating and responding quickly to clients’ challenges, providing market insights, and finding innovative solutions as conditions evolved.

The health and safety of our employees, their families, and our communities were our overriding priority in 2020. Starting in China in January and the rest of the world in March, we rapidly moved more than 90% of our staff to remote work at the same time that market volumes and the needs of our clients rose to peak levels. We reconfigured office space and technology to keep our employees safe and manage these new demands.

This shift and shutdown across most economies spurred a significant and rapid contraction in the United States and around the world, which in turn triggered a broad financial market panic. With unprecedented speed, unemployment rose to 15%, while U.S. gross domestic product shrank at an annualized rate of 30%.

Policymakers around the world, many with experiences from the 2008 global financial crisis, responded rapidly. In the U.S., the federal government took unprecedented fiscal, monetary, and policy actions and intervened to attempt to blunt these crises. Massive fiscal stimulus, injections of liquidity, and interventions in the markets were undertaken to instill confidence around the globe.

Major banks acted in tandem with policymakers and used their financial strength to implement government programs and rapidly deliver stimulus payments and loans.

In March, State Street and other Global Systemically Important Banks volunteered to suspend share repurchases to signal strength and our commitment to support markets and clients. As market volatility spiked, we had daily consultations with policymakers on how to keep markets liquid and fully functioning. State Street also played a leadership role in helping to launch, administer, and support many of the various market liquidity and credit financing programs introduced by policymakers, which in turn led to the rapid stabilization of markets.

As I write, the U.S. President has just signed into law an additional $1.9 trillion in fiscal stimulus. Together with prior appropriations, Congress has committed nearly $6 trillion in response to the pandemic and its economic aftermath.

The long-term implications and outcomes of government and central bank interventions are unknown. Nonetheless, policymakers and their banking system partners deserve credit for their rapid actions that forestalled what could have been an immense economic and market collapse.

Overall, State Street adapted well to the unique operating environment of 2020. Throughout 2020, with our primary focus on health and safety, we also positioned our business for future success. Client and employee engagement scores increased, new technology came online, total fee revenue grew, and our operating expenses continued to decrease.

The past year empowered, inspired, and required all of us at State Street to simplify, accelerate decision-making, and strengthen our collaboration skills. Each of our employees lived our purpose: to help the world’s investors achieve better outcomes for the people they serve. We are better positioned than ever to deliver on our strategy and optimize the value of State Street. I have never been prouder than I am today as I reflect on the resilience, passion, and fortitude of our people.

I am also grateful to our Board of Directors. This thoughtful, diverse group of remarkable leaders helped us pivot rapidly and provided meaningful oversight and guidance throughout the year.

Year at a glance

Year at a glance Graphic

Financial Performance

Net income in 2020 was $2.42 billion compared with $2.24 billion in 2019, an increase of 7.9%. Earnings per share in 2020 were $6.32, an increase of 17.5% from 2019. Return on equity in 2020 was 10.0%. Earnings per share and return on equity improved despite no share repurchases after Q1 2020.

Assets under custody and/or administration (AUC/A) rose to a record $38.8 trillion at December 31, 2020, up 13% year over year, driven by higher market levels, net new business installations, and client flows.

State Street Global Advisors (SSGA) assets under management (AUM) rose to a record $3.5 trillion at December 31, 2020, up 11% year over year, reflecting higher markets and strong exchange traded fund (ETF) and cash net inflows, partially offset by institutional net outflows. Our ETF business had a very strong year, with total asset flows up almost 30% year on year, reflecting the important role our SPDR ETF franchise plays in providing market liquidity. Total 2020 revenue of $11.7 billion was down 0.5% (and largely flat, excluding notable items) year over year, primarily driven by the lower interest rate environment that depressed net interest income (NII).

Fee revenue of $9.5 billion in 2020 was up 3.8% year over year, partially driven by strong foreign exchange (FX) results, which were up 28.8% year over year. Our FX franchise had a strong year in 2020 as a result of higher market volatility and record client volumes. Our past investments in talent, FX capabilities, and digital platforms led to increased market share and another No. 1 ranking in 2020 among asset managers. Servicing fees and management fees also increased in 2020, up 1.8% and 3.1%, respectively, versus 2019.

Charles River Development (Charles River) demonstrated very strong revenue growth for the full year, with total stand-alone Charles River revenue up 14% year on year and Software as a Service (SaaS) and professional services revenues together growing 18% relative to 2019.

Low interest rates weighed heavily on NII in 2020, which decreased 14.3% year over year. This decline was partially offset by growth in deposits, the investment portfolio, and loan balances.

Expenses were down 1.5% year over year, excluding notable items, notwithstanding the significant new investments we made in technology, capabilities, and people, reflecting our well established expense discipline culture.

Excluding notable items, State Street delivered full-year operating leverage of 1.4 percentage points and a 50 basis point improvement in pretax margin in one of the most challenging years in recent history. We continued to transform our operating environment and are beginning to see true productivity improvements, which in turn will drive higher quality and lower unit costs.


Assets under custody
and/or administration


Assets under management
* As of December 31, 2020

Total shareholder return

Total shareholder return Graphic

Business highlights

Throughout 2020, we continued our intense efforts to innovate, with further software and operational development and delivery of the State Street Alpha front-to-back platform, which has gained traction with clients. Because of the platform’s open architecture design, we are able to rapidly increase functionality by adding a number of partnerships to our platform, unlocking new sources of revenue and enabling greater flexibility and choice for clients. In 2020, we announced partnerships with leading analytics providers (Axioma, MSCI, and Solovis), trading platforms (MarketAxess, Tradeweb, and Broadridge LTx), and data and datawarehousing providers (Snowflake and ICE).

The Alpha Data platform now allows investment teams to aggregate, normalize, and curate disparate data sources across risk models and analytics so they can act more quickly on investment insights. Charles River moved to a secure public cloud solution that is now live with clients and launched a Wealth Hub for managed account program sponsors to securely connect with their asset manager distribution partners.

We continued to integrate Charles River with other State Street technologies to bring a more seamless experience to our clients, including integrating our Global Markets offerings and developing end-to-end cash management solutions. These are important differentiators in the marketplace, as many investors continue to struggle with aged and closed systems that are difficult to integrate and coordinate and thus impair investment outcomes.

The proof point of this strategy and investment is client demand. In 2020, we signed six Alpha clients, helping to accelerate the platform’s development, and the Alpha pipeline remains strong.

While the Alpha platform is an integral part of our growth strategy, we remain laser-focused on continuous improvement within Investment Servicing, which includes Institutional Services, Global Markets, State Street AlphaSM, and Charles River Development, and is the core growth engine of our firm. By providing our clients with leading custody, accounting, and fund administration services and service quality, we continue to drive better results. As we emerge from the pandemic, we expect that our clients will focus on outsourcing more of their environment and look to us to help them modernize and improve the efficiency of their operations.

Building on the market-leading liquidity of its equity ETFs, SSGA during 2020 focused on further developing its fixed-income ETFs, which experienced strong demand as investors sought to access ETF secondary market liquidity. SSGA is the third-largest ETF provider in the world, with 11 of the top 20 most liquid ETFs in the U.S. The SPDR ETFs represented approximately 40% of all U.S. ETF trading activity from late February through early March. SPY alone — the first U.S. ETF — saw 15 consecutive days of secondary market trading of more than $50 billion, including a record high day of $113 billion. Additionally in 2020, SSGA launched five SPDR environmental, social, and governance (ESG) funds globally, three of which were fixed-income funds, expanding its already large suite of ESG offerings.

SSGA’s GLD and sector ETFs witnessed record flows in 2020, as investors sought liquidity and haven assets in turbulent and uncertain markets. Sector and industry ETFs captured $22 billion, or approximately 50% of market flows, resulting in increased market share in 2020 (41% of the combined Sector and Industry AUM). Between GLD and our low-cost gold ETF (GLDM), SSGA now holds the No. 1 and No. 3 positions, respectively, in gold ETFs. SSGA’s low-cost ETFs saw inflows in 2020 of $21 billion, and significant market share gain (8% share of flows vs. 4% share of AUM).


Of the top 20 most liquid ETFs
in the U.S. are represented
by our SPDR ETFs

Enhancing our operating model

Our Investment Servicing client base consists of asset managers, asset owners, and official institutions. While the needs of segments differ, we are able to deliver much of the core functionality from shared capabilities. In recognition of this, we streamlined our own investment servicing operating model into three divisions — Institutional Services (clients); Product, Platforms, Technology, and Operations; and Productivity and Delivery — to drive better execution and accountability.

State Street has been on a journey to transform its operating model for the past two years. In 2020, we continued to make progress on simplifying and standardizing operations across the franchise. For example, we retired more than 230 of our applications and released a new AI machine learning application that allows us to produce net asset value (NAV) benchmarks for 12,000 funds with continuous quality control during the pricing window. Since 2018, we have reduced manual touches to data by back-office servicing operations by about 20%, with automation improving client satisfaction and reducing unit costs.

We also launched a global data center consolidation plan, which will enable us to further modernize and improve the resilience of our infrastructure as we decommission sites in the coming year.

We plan to deliver further improvements during 2021 to drive costs lower, self-fund investments for the future, and transform how we compete and operate in the years ahead.

Essential partner

Being our clients’ essential partner requires us to continuously improve our capabilities to meet our clients’ growing needs. We continued to build on State Street’s capabilities, expanding from our focus on fund services to include enterprise outsourcing capabilities applicable to all investors (asset managers, asset owners, insurance companies, alternatives investors, and official institutions).

We continue to partner with clients across a full range of outsourcing capabilities to build and link the back, middle, and front office, including trading, analytics, liquidity, third-party execution venues, financing, and data.

Our differentiated front-to-back platform is fully interoperable to enable us to service other platforms and to shape how other industry platforms operate. Our services enable our clients to modernize their infrastructure, accelerate time to market for new products and new clients, expand distribution, and build resiliency into their operations, while reducing technology and operating costs.


Partners added across our Alpha
ecosystem since the acquisition
of Charles River

2021 Goals

Looking forward to 2021, we are focused on three key objectives: Grow Revenue; Transform the Way We Work; and Build a Higher Performing Organization.

I . Grow Revenue

In the coming year, we expect to deliver fee revenue growth by improving our client engagement and sales effectiveness, advancing our suite of products and capabilities, and continuing to position SSGA for growth.

A foundational element of our growth strategy is based on the loyalty and earned trust from our existing clients and evolving those relationships to strategic partnerships by delivering our full value proposition. Starting in 2018, we established our Global Clients Division to meet the needs of our most sophisticated clients. Building on this success, we are further extending this successful client service model to cover our top 350 clients.

We need to continue to service our clients exceptionally well, which includes continuous improvement; increased accuracy; accelerating delivery times; and moving clients to better and more automated solutions.

Delivering for clients delivers growth. We have created tailored value propositions and service plans by segment (asset owner, asset manager, insurers, alternatives managers, and official institutions) and by region to increase accountability for client and regional strategic objectives.

II . Transform the way we work

The pandemic highlighted many operational strengths across State Street’s organization, which we are institutionalizing to drive better results. We will continue to build on the productivity transformations that will reduce manual hand-offs and cycle times and increase accuracy. By automating repeatable processes, we are able to redeploy our people to higher value-add roles, which in turn we expect will lead to greater productivity and more innovation, as well as reducing the costs to serve our clients.

As the pandemic abates, we need to capitalize on what we have learned about work from the past year. We are leveraging the lessons of 2020 and are beginning to roll out our Workplace of the Future plan. This will include hybrid work models, new approaches to real estate, and new ways of collaborating with clients and employees.

III . Build a higher performing organization

An important objective for 2021 is building on the cultural strength and resilience we saw in our workforce in 2020 to promote an even higher performing and productive organization. We will continue to simplify the organization and incentivize behaviors that drive strong results and even higher client and employee engagement and satisfaction.

We also witnessed how the pandemic reinforced the connections between corporate resilience and the ESG issues that we have highlighted over the past few years. State Street was an early leader in ESG, both on behalf of clients and in how we run our business. While many feared that the crises of 2020 would sideline ESG issues, in fact the experience of COVID-19 underscored for all of us the importance of driving ESG deeper into our core business strategy to strengthen our long-term resilience.

Research from our State Street Associates partner, Harvard ESG expert Professor George Serafeim, demonstrated that companies with strong ESG characteristics suffered smaller stock price declines during the coronavirus crash than industry peers with weaker ESG characteristics.

In 2020, we elevated the importance of ESG by appointing new leadership to coordinate our efforts across the organization and leverage what we do externally and internally, which we expect will generate long-term value for our shareholders, clients, employees, and communities.

We are fully integrating and leveraging what we do in ESG in managing portfolios, servicing assets, analyzing data, and running our firm to help us achieve better outcomes for all stakeholders. We drive ESG action on four levels. First, in our asset servicing business, we help clients to analyze and report on their ESG attributes, especially as more jurisdictions introduce mandatory disclosure. Our capabilities in data analytics and management provide us the foundation to help our clients meet their rising ESG data needs and fully incorporate ESG into their investment risk frameworks.

Second, in our asset management business, we engage with listed companies and their boards on ESG issues that drive long-term value through our asset stewardship, which is one of the most impactful ways we can promote positive change. We continue to launch research-driven ESG strategies and help global asset owners integrate ESG value drivers across their entire investment risk frameworks.

Third, we incorporate ESG value drivers into our own business to strengthen our long-term resilience and sustainability, whether that is in the area of climate risk mitigation or improved inclusion and diversity and better human capital management. In 2020, we were proud to announce that all of our global operations became carbon-neutral, as we continue to reduce our absolute emissions on the journey to net zero.

Finally, we are also leveraging our global platform and industry associations to scale our ESG impact, driving action on the sustainability and equity issues that are central to a more resilient future, not just for us and our shareholders, but for the broader communities in which we live and work. The long-standing racial inequities exacerbated by the pandemic led us to launch State Street’s 10 Actions to Address Racism and Inequality.

Consistent with our 10-point action plan, we are examining and leveraging both our commercial and community relationships. For example, we are partnering with minority- and women-owned firms when we periodically raise capital. Through the State Street Foundation we will continue to support education and workforce development opportunities for underserved communities of color, and hold ourselves accountable for improving our own racial and ethnic diversity. We also contributed to the New Commonwealth Racial and Social Justice Fund, co-founded by Chief Diversity Officer Paul Francisco.

Small businesses have suffered disproportionately in the current economic crisis. Despite the government assistance provided over the past year, many small businesses, particularly those with 10 employees or fewer, have been unable to tap this assistance. Application requirements, lack of skills to access help, or simple lack of knowledge are among the reasons for the under-participation. In our headquarters’ state of Massachusetts and many other parts of the world, minorities and women represent a disproportionately large number of small businesses, which has been one reason why unemployment among women and racial minorities remains stubbornly high.

To help address this problem, State Street, with the help of other large companies, launched Small Business Strong to aid small businesses owned by minorities and women. The distinctive value proposition of Small Business Strong, which delivers free digital and personalized advice at scale, has assisted 1,226 businesses in Massachusetts since inception less than a year ago. We look forward to institutionalizing and extending this service.

In this year of the 26th U.N. Climate Change Conference (COP26) and heightened focus on climate action, State Street is honored to lead the Taskforce for Asset Managers and Asset Owners within His Royal Highness The Prince of Wales’ Sustainable Markets Initiative to drive sustainable investment projects that will have an outsized positive impact on the protection of people and planet. We are also a founding Guardian of the Council for Inclusive Capitalism with The Vatican, joining other global business leaders to build a more inclusive and equitable future for all of our stakeholders. At a time when we are faced with many complex challenges, State Street has a distinctive opportunity to be a force for positive change.

While many feared that covid-19 would sideline esg issues, in fact the experience underscored the importance of driving esg deeper into our core business strategy to strengthen our long-term resilience.

A resilient future

As we reflect on 2020, perhaps the most significant takeaway is the pervasive importance of resilience. For an institution like State Street, resilience is a core value. Operational resilience, technological resilience, and financial resilience are foundational to our strategy and our ability to serve our clients.

The experience of 2020 illustrates the importance of resilience across business, community, society, and government. The year also raises questions as to whether each of these segments has invested sufficiently in or paid enough attention to resilience.

After the 2008 global financial crisis, financial institutions, governments, regulators, and society determined that many financial institutions had underinvested in financial resilience. Through a comprehensive series of legislation, regulation, and governance changes, the resilience of the financial system and large banks worldwide was upgraded and strengthened. Many of these changes were expensive, and today most large financial institutions carry significantly more capital and liquidity than they had going into the global financial crisis, and have sophisticated processes to help manage and ensure their financial strength. It is undoubtedly true that the financial institutions sector is more financially resilient today than it was in 2008. Banks were part of the solution rather than the problem in 2020.

After 2020, society and business at large must ask whether we need similar investments in resilience in many other areas as we consider the following questions:

  • Why were so many developed countries so unprepared to manage the COVID-19 pandemic? What has happened to public health infrastructure and preparedness?
  • Do the shortages suffered by hospitals, governments, and households during the pandemic suggest a need to invest much more in supply chain resilience?
  • Can we continue to accept heightened health risks and poorer treatment outcomes for the most disadvantaged in our society?
  • As we see increased ravages from climate change, how much longer can we defer infrastructure resilience and carbon sequestration investments?

These questions are not simple, and the answers are even harder. But the common thread that runs through all of them is the reality that while resilience comes at a cost, the lack of resilience can come at an even greater and graver cost. As individuals, businesses, and societies, we need to confront these trade-offs and make clear, explicit decisions regarding resilience.

The past year was full of challenges, but it was also an opportunity for us to focus on what we truly value as well as better ways to create value for all we serve. Rather than returning to a pre-pandemic “normality,” we need to move forward together to a stronger future, fortified by how we came together to serve our stakeholders and achieve our financial goals. As we look to a new beginning beyond COVID-19, we will build on the lessons of 2020 around the value of engagement, partnership, inventiveness, service, and, above all, resilience.

Thank you for your continued trust in us.

Ronald Signature
Details 01/26/2021