State Street Bank spent $423 million on technology and communications in the first quarter, up 5% year over year but down 3% from the Q4 2021 as the Boston-based bank continues to focus on tech infrastructure.

“Information systems and communication expenses were up 5% due to continued investment in our technology infrastructure resiliency,” Chief Financial Officer Eric Aboaf told analysts during the $296.3 billion bank’s earnings call last week.

The bank reported revenues of $3.1 billion for Q1, up 4% YoY and a 1% increase from Q4.

An investment in digital assets

The bank touted its $90 million in YoY growth while it self-funded most of its strategic investments, including technology infrastructure, broader automation, Alpha — its digital platform for investment managers, asset owners, insurers, hedge funds and wealth managers — and State Street Digital, which handles digital assets such as crypto, central bank digital currency, blockchain and tokenization.

State Street is focused on the next stage of digitization for its clients, CEO Ronald O’Hanley said during the call.

“Where we’re spending a lot of time is, firstly around enabling clients to invest in digital assets and that’s not just the trading of them, but it’s the movement of them, it’s the control of them,” O’Hanley said. “It’s the custody of them, the portfolio accounting of them.”

Implementing T+1

An analyst asked State Street whether it was prepared to implement T+1. The recommendation would shorten the standard settlement cycle for most broker-dealer securities transactions to one business day after the trade date (T+1) rather than two business days after the trade date (T+2). The implementation was proposed by the Securities and Exchange Commission in February as a way to reduce risk in the clearance and settlement of securities. The public comment period for the recommendation ended April 11. If the proposal is adopted, a T+1 cycle would be implemented by March 31, 2024.

O’Hanley compared the T+1 proposal to the LIBOR changes.

“I think that if you look back in history, everybody has resisted these moves to some degree, because it does involve some spending of money and changing and systems of all that,” O’Hanley said. “That’ll take a lot of time, take a lot of effort, but it’s certainly not something that’s going to, in our mind, sideline us or sideline other major players.”

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