BNY vs State Street Q3 2026: State Street Grew Faster, BNY Still Earns More

BNY and State Street do the same job. They hold and administer securities for pension funds, fund managers and insurers, charge fees for that work, and earn net interest income (NII) on the cash clients leave with them. NII is the gap between what a bank earns on the money it invests and what it pays out on deposits. Both banks reported Q3 2026 (quarter ended Sept. 30) in the same week, and both grew revenue by double digits on fees and NII. State Street grew faster on almost every line and raised its full-year guidance. BNY is still the more profitable of the two, but its interest income fell from the prior quarter while costs kept rising.

Both analyses are built from the companies' earnings releases. Neither 10-Q was filed at the time, so cash flow statements aren't available for either bank. Full reports: BNY Q3 2026 and State Street Q3 2026.

At a glance

• EPS growth: State Street +32.7% vs. BNY +24.5%. Buybacks helped both by a similar amount (diluted share count down 3.1% vs. 3.6%), so the gap comes from the underlying business.
• Profitability: BNY ahead, 38.5% pre-tax margin vs. 34.6%. BNY also earns a 29.0% return on tangible equity against State Street's 25.1%. State Street is closing the gap: its margin rose 3.5 points in a year, BNY's 2.1.
• Interest income vs. the prior quarter: State Street +0.5%, BNY −2%. BNY's average deposits fell 1% and it paid more on them. State Street's average deposits were flat.

Side by side

Neither bank publishes an efficiency ratio (operating costs per dollar of revenue). Both use pre-tax margin as their profitability yardstick instead: income before tax as a share of revenue. Working it out from the reported figures, expenses took 61.5% of BNY's revenue and 65.4% of State Street's. BNY's net income line is the amount left for common shareholders after preferred dividends. State Street's headline figure is total net income, so the table gives both of its numbers. The two banks' net interest margins are not measured on exactly the same basis: State Street reports on a fully taxable-equivalent (FTE) basis.

Growth: why State Street grew faster

Interest income. Both banks grew NII by double digits on the year, but for different reasons.

• State Street: NII rose 21% "reflecting an increase of 16 basis points in NIM." Interest expense fell 6.9% while interest income was roughly unchanged. In other words, cheaper funding did the work, not a bigger balance sheet.
• BNY: NII rose 15% on "the reinvestment of investment securities at higher yields and balance sheet growth, partially offset by deposit margin compression." Maturing low-yield bonds were rolled into higher-yield ones, and average loans grew 19%.

The quarter-on-quarter numbers are where the two banks really part ways. State Street called its NII "relatively flat": a longer quarter offset a 1 bp lower margin. BNY's NII fell 2% "primarily reflecting lower deposit balances." Its average deposits fell to $311.1 billion from $314.0 billion, and the rate it paid on interest-bearing deposits rose to 2.43% from 2.33% in Q2. NII is about a quarter of BNY's revenue (25%) against about a fifth at State Street (22%), so the same pressure costs BNY more.

Fees. BNY's fees grew slightly faster (+12.1% vs. +11.0%), driven by its custody and markets businesses:

• Issuer Services (corporate trust) +43%
• Clearance and collateral management +17%
• Payments and Trade +14%
• Pershing (its clearing platform for brokers and advisers) brought in $48 billion of net new assets

BNY's weak spot is asset management. Investment and Wealth Management revenue grew just 4%. Assets under management (AUM) fell 2% in the quarter on $27 billion of market losses and $12 billion of net outflows, and Investment Management revenue was flat.

State Street's mix is the reverse. Management fees were its fastest-growing line (+20%, a record), because AUM is up 16% and averaged higher in the quarter. Servicing fees, its biggest line, rose 9.9% to a record. Its weaker lines were the volatile ones: FX trading fell 14% from Q2, and "other fee revenue" fell 29%, mostly because of a $32 million swing in market-related adjustments.

Costs. Expenses grew at almost the same rate at both banks (+7.8% BNY, +7.6% State Street). State Street's slightly faster revenue growth therefore turned into wider operating leverage: 5.3 points, against 3.9 (389 bps) for BNY. Operating leverage is revenue growth minus expense growth. Against Q2, the two banks went in opposite directions:

• BNY: expenses rose 1.5% while revenue slipped 0.4%, which BNY reports as −184 bps of operating leverage.
• State Street: expenses fell 1.5%. That is partly timing: compensation dropped 3.2% on "lower performance-based incentive compensation."

Profitability and capital: BNY still leads on levels

BNY converts more of its revenue into profit. Its pre-tax margin is 38.5% against 34.6%. Its ROTCE is 29.0% against 25.1%. ROTCE (return on tangible common equity) is annual profit as a share of shareholders' equity after removing goodwill and other acquisition intangibles: it measures how hard the bank's own capital is working. BNY's highest-margin unit, Market and Wealth Services, runs at a 51.4% pre-tax margin. That is a big part of why it stays ahead.

The trend looks different. BNY's pre-tax margin was 39.8% in Q2 and slipped back this quarter. State Street's 34.6% is up from 31.1% a year ago, and its report notes it is "essentially at its 35% medium-term target already," which was set only last quarter.

Capital runs in the same direction. CET1 is a bank's core equity cushion as a share of risk-weighted assets; regulators use it as the main measure of how much loss a bank can absorb. State Street's CET1 rose 0.2 points from Q2 to 11.0%, in line with its ~11% target, and it returned 63% of quarterly common profit ($651 million). BNY's CET1 slipped to 10.9% from 11.0% in Q2 and 11.9% at the end of 2025, while it returned about $1.4 billion (85% of the quarter's common profit; 86% year to date). Our BNY report concludes that further buybacks are likely to track earnings rather than exceed them. State Street has more room to raise its payout: it is below the ~80% payout ratio in its own framework.

Quality of the numbers

Both quarters are clean:

• State Street reported no "notable items" (one-off charges or gains) in Q3 2026, Q2 2026 or Q3 2025, so its GAAP and adjusted results are the same.
• BNY's notable items were small: $23 million of severance this quarter, against $50 million of severance plus other items a year ago. Its adjusted EPS ($2.37 vs. $1.91) grew the same 24% as GAAP.

At both banks, buybacks account for roughly 4 points of EPS growth. One difference sits in the tax line. BNY's effective tax rate rose to 22.8% from about 21.3%, which held back net income, so its pre-tax income growth (+18%) is the better guide to operations. State Street's tax rate dipped (21.5% vs. 21.9%), adding only about $6 million.

Guidance

• State Street raised its full-year 2026 outlook again. Fee revenue is now expected up ~13–14% (from ~12–13%), NII up ~15–16% (from ~14–15%) and operating leverage 500+ bps. Our report notes the NII range implies a Q4 of roughly $845–875 million against $864 million in Q3: management is not counting on further NII growth either.
• BNY's release gives no numeric guidance for revenue, NII or expenses.

Verdict

State Street had the stronger quarter.

• Faster growth: revenue +12.9% vs. +11.7%, EPS +32.7% vs. +24.5%, NII +20.8% vs. +15.1%.
• Wider operating leverage: 5.3 points vs. 3.9.
• Steadier sequential trend: NII held flat from Q2 rather than falling, and deposits were stable.
• A better capital position: CET1 up from Q2 and the payout below target, against CET1 down from Q2 with an 86% year-to-date payout.
• Raised guidance, against none from BNY.

BNY is still the better business on profitability levels: a 38.5% vs. 34.6% pre-tax margin and 29.0% vs. 25.1% ROTCE. Its fee engine in corporate trust, collateral and clearing is growing at double digits. But it is the one whose earnings momentum turned this quarter.

The two banks also carry different risks into Q4:

• BNY: watch average deposits and the deposit rate it pays.
• State Street: it relies more on market levels. Its management fees rest on AUM that added only $28 billion in Q3 after a $658 billion jump in Q2, and its guidance assumes flat markets from a high starting point.

Takeaway: The two custody banks are moving in opposite directions on the same lever. Both got a large year-over-year lift from net interest income. State Street kept it flat from Q2 with stable deposits, while BNY's fell 2% as deposits shrank and cost more. That single difference turned BNY's operating leverage negative quarter-on-quarter while State Street's stayed positive. BNY's higher margins and returns give it a cushion, but State Street now has the better growth trend.