State Street is placing increased emphasis on plans for digital transformation, focusing on reducing its run-the-bank technology spend and transferring some funds toward its investment and strategic capabilities, Brian Franz, the bank’s global chief information officer, said this week during Morgan Stanley’s U.S. Financials, Payments & CRE Conference.
The bank’s technology spend is expected to stay level this year at around $2.4 billion, with roughly 55% of that figure going toward its run-the-bank expenses, according to company metrics shared during the conference.
Franz highlighted artificial intelligence and automation as technologies that remained “front and center” for the bank’s digital transformation. He also cited State Street’s efforts to transfer the bulk of its data management and analytics investment platform Alpha over to a public cloud-based infrastructure — but added “not everything” should be moved to such an environment. The bank is instead pursuing a hybrid strategy, looking to continue using traditional mainframes and public and private cloud solutions, depending on need, Franz said.
“We think of … what we’re processing as workload,” Franz said. “In a three to five-year time frame, we’ll have all of our workloads in their target environments.”
The bank is also working to commercialize blockchain and tokenization applications, Franz said during a presentation at the conference, looking to the technology to support digital custody for the bank’s clients.
Navigating market uncertainty
State Street’s focus on digital transformation comes as the bank — and others in the financial sector — look to navigate a macroeconomic environment that is “constantly changing,” State Street CFO Eric Aboaf said during the conference.
Aboaf pointed to the volatility of equity markets. Average global markets are set to decline 7% to 8% quarter on quarter, he said, after staying relatively flat in mid-April.
State Street expects to see its fee revenue decline 6% to 7% quarter on quarter, compared with the 2% to 3% it previously signaled in April, Aboaf said.
Estimates for the bank’s second-quarter revenue stand at approximately $3.06 billion, according to Seeking Alpha.
State Street dismisses Credit Suisse rumor
Aboaf also joined other State Street executives in dismissing reports that the Boston-based bank could acquire Credit Suisse, rejecting it as a “random market rumor” and saying articles about the alleged acquisition fell “somewhere between foolish and fact-less.”
Speculations of the potential buy were originally reported by Swiss blog Inside Paradeplatz on June 8, and prompted a rally of Credit Suisse’s stock on the day, but shares dipped after State Street and Credit Suisse executives dismissed them. Credit Suisse CEO Thomas Gottstein, for one, said reports of the potential deal were “really stupid,” according to Barron’s.
Credit Suisse signaled a weak upcoming second quarter in a statement released June 8. The bank cited the war in Ukraine, “significant tightening” by central banks due to inflation, and the lingering effects of the COVID-19 pandemic as the top reasons the bank is expected to suffer its third consecutive quarterly loss.