State Street Corporation announced today second-quarter earnings
per share of $1.07 compared to $0.68 per share for the second
quarter of 2006, which included non-cash tax adjustments of $0.25
per share, or $0.93 per share without those adjustments. Revenue of
$1.921 billion in the second quarter of 2007 represented a record
and is up 16.4%, compared to $1.651 billion in the year-ago
quarter. Total expenses in the second quarter of 2007 of $1.358
billion are up 15.5%, compared to $1.176 billion in the year-ago
quarter. As a result, the Corporation generated about 90 basis
points of positive operating leverage. For the second quarter of
2007, return on shareholders� equity is 19.2%, compared to 14.0% in
the second quarter of 2006 including the tax adjustments or 19.2%
excluding the tax adjustments. State Street�s acquisition of
Investors Financial Services Corp. closed on July 2, 2007, and
consequently, State Street�s results for the quarter do not reflect
any contribution from the acquisition. Ronald E. Logue, State
Street's chairman and chief executive officer, said, �Our strong
performance during the first six months of this year demonstrates
the successful execution of our global strategy, while we continue
to build for the future with our acquisition of Investors
Financial. The improved results are particularly significant in
view of last year�s strong second quarter. The 12 percent increase
in servicing fees this quarter highlights our ability to win new
business globally while deepening relationships with existing
customers.� Logue added, �State Street Global Advisors, which grew
22 percent from last year�s second quarter, continues to make a
larger contribution to our bottom line as it places greater
emphasis on its quantitative active strategies. We are pleased to
achieve the eleventh consecutive quarter of positive operating
leverage compared to the prior-year quarter. We also continued to
benefit from our balance sheet strategy. We achieved 1.64 percent
in net interest margin on a 44 percent improvement in fully
taxable-equivalent net interest revenue.� Logue concluded, �The
results of Investors Financial in the second quarter were strong,
like State Street�s, and so we are revising our financial goals for
2007: We now expect that revenue growth will be between 20 percent
and 22 percent; up from 16 percent to 18 percent we forecast in
February when we announced the deal. Excluding merger and
integration charges, growth in operating earnings per share will be
between 10 percent and 15 percent; and operating return on equity
will be between 14 percent and 17 percent, both of which were our
original financial goals we established more than two years ago. We
expect to achieve in the upper half of each of these ranges for
2007.� SECOND QUARTER RESULTS VS. YEAR-AGO QUARTER Total revenue
increased 16.4% to $1.9 billion in the second quarter of 2007
compared to the second quarter of 2006, and total expenses grew
15.5% to $1.4 billion over the same period. Servicing fees are up
12%, to $766 million from $683 million in last year�s second
quarter. The increase is attributable to new business from existing
and new customers in 2007 and higher equity market valuations.
Total assets under custody are $13.04 trillion at June 30, 2007, up
20%, compared with $10.86 trillion a year ago. Daily average values
for the S&P 500 Index are up 17%, for the MSCI� EAFE IndexSM
are up 22%, and for the NASDAQ are up 14%, during the second
quarter 2007 from the year-ago quarter. Investment management fees,
generated by State Street Global Advisors, are $284 million, up 22%
from $232 million a year ago. Management fees reflect continued new
business and an increase in average month-end equity valuations.
Total assets under management are $1.93 trillion at June 30, 2007,
up 26%, compared to $1.53 trillion the previous year. Trading
services revenue, which includes foreign exchange trading revenue
and brokerage and other fees, is $260 million for the quarter, up
1% from $258 million a year ago. The slight improvement was due
primarily to new revenue streams generated from our Currenex
acquisition, offset somewhat by weaker volatility in foreign
exchange. Securities finance revenue is $162 million in the
quarter, up 27% compared to $128 million in the year-ago quarter,
primarily reflecting an increase in demand. Both quarters� results
represent seasonally high activity. Processing fees and other
revenue are down 12% at $65 million, compared to $74 million
primarily due to the consolidation of tax-exempt investments onto
the balance sheet in the third quarter of 2006. Net interest
revenue on a fully taxable-equivalent basis is $397 million, an
increase of $122 million, or 44%, from $275 million a year ago. The
increase in net interest revenue is due to a favorable mix of
deposits and improved spreads. Net interest margin increased to
1.64% from 1.20% a year ago. Expenses increased from $1.176 billion
to $1.358 billion, up $182 million, or 15.5%. Salaries and benefits
expenses are up 18% to $808 million, primarily attributable to
incentive compensation due to improved performance, increased
staffing to support new business, and merit increases. Expenses for
information systems & communications decreased $1 million, to
$128 million. The increase in expenses includes higher transaction
processing services, up 5% to $141 million, due to higher volumes.
Occupancy expense increased 3%, or $3 million, to $98 million.
Other expenses increased 37% to $183 million from $134 million due
to costs associated with the acquisitions and with new business
initiatives, as well as sales promotion expenses. SECOND-QUARTER
2007 RESULTS VS. FIRST QUARTER 2007 Second-quarter earnings per
share of $1.07 is up 15%, compared to earnings per share of $0.93
in the first quarter. Total revenue in the second quarter of $1.921
billion is up 13.3% versus $1.696 billion in the first quarter.
Total expenses are $1.358 billion, up 12.0% versus $1.213 billion
in the first quarter. As a result, the Corporation generated about
130 basis points of positive operating leverage. For the second
quarter of 2007, return on shareholders� equity is 19.2% compared
with 17.4% in the first quarter. Servicing fees are up 7% to $766
million and management fees are up 9% to $284 million, both due to
new business and higher equity valuations. Trading services
increased 18% to $260 million due to strength in foreign exchange
volumes and brokerage. Securities finance revenue increased 65%,
from $98 million to $162 million, due to improved spreads and
seasonally high volumes. Processing fees and other revenue are down
from $73 million to $65 million primarily due to lower fees from
leasing and structured products. Net interest revenue on a fully
taxable-equivalent basis increased $60 million, or 18%, to $397
million, compared to $337 million in the first quarter. Salaries
and employee benefits total $808 million, an increase of $69
million, or 9%, from $739 million, attributable to the impact of
incentive compensation due to improved performance, increased
staffing to support new business, and benefit increases.
Transaction processing services increased $12 million, or 9%, to
$141 million due to an increase in volumes. Information systems and
communications expense is up 2%, or $3 million, to $128 million.
Occupancy increased $4 million or 4% to $98 million. Other expenses
are up $57 million, or 45%, from $126 million to $183 million
primarily as a result of costs associated with new business
initiatives and with the acquisitions, as well as increased
securities processing expenses. The effective tax rate for the
second quarter is 35.0%, flat with the first quarter. ADDITIONAL
INFORMATION All per share amounts represent diluted earnings per
share. INVESTOR CONFERENCE CALL State Street will webcast an
investor conference call today, Tuesday, July 17, 2007, at 9:30
a.m. EDT, available at www.statestreet.com/stockholder. The
conference call will also be available via telephone, at +1
719/457-2679 (confirmation code 2823043). Recorded replays of the
conference call will be available on the web site, and by telephone
at +1 402/220-4230, beginning at 2:00 PM today. The telephone
replay will be available for two weeks following the conference
call. This press release and additional financial information is
available on State Street�s website, at
www.statestreet.com/stockholder, under �Financial Reports.� State
Street Corporation (NYSE: STT) is the world's leading provider of
financial services to institutional investors, including investment
servicing, investment management and investment research and
trading. With $13.040 trillion in assets under custody and $1.934
trillion in assets under management at June 30, 2007, State Street
operates in 26 countries and more than 100 geographic markets
worldwide and employs 22,350 worldwide. On July 2, 2007, State
Street closed its acquisition of Investors Financial Services Corp.
As of June 30, 2007, Investors Financial held $2.4 trillion of
assets under administration of which $1.915 trillion were held in
custody. On a pro forma basis with this acquisition, State Street
has $14.96 trillion in assets under custody as of June 30, 2007.
For more information, visit State Street�s web site at
www.statestreet.com or call 877/639-7788 [NEWS STT] toll-free in
the United States and Canada, or +1 202/266-3340 outside those
countries. FORWARD-LOOKING STATEMENTS This news announcement
contains forward-looking statements as defined by United States
securities laws, including statements about the recently completed
acquisition of Investors Financial Services Corporation, as well as
about our financial goals, the financial outlook and business
environment. These statements are not guarantees of future
performance, are inherently uncertain, are based on current
assumptions that are difficult to predict and involve a number of
risks and uncertainties. Therefore, actual outcomes and results may
differ materially from what is expressed in those statements, and
those statements should not be relied upon as representing State
Street�s expectations or beliefs as of any date subsequent to the
date of this release. Important factors that may affect future
results and outcomes include: State Street�s ability to integrate
and convert acquisitions into its business, including the recently
closed acquisition of Investors Financial Services Corporation; the
level and volatility of interest rates, particularly in the U.S.
and Europe; the performance and volatility of securities, currency
and other markets in the U.S. and internationally; economic
conditions and monetary and other governmental actions designed to
address those conditions; State Street�s ability to attract
non-interest bearing deposits and other low-cost funds; the
competitive environment in which State Street operates; the
enactment of legislation and changes in regulation and enforcement
that impact State Street and its customers; State Street�s ability
to continue to grow revenue, control expenses and attract the
capital necessary to achieve its business goals and comply with
regulatory requirements; State Street�s ability to control systemic
and operating risk; trends in the globalization of investment
activity and the growth on a worldwide basis in financial assets;
trends in governmental and corporate pension plans and savings
rates; changes in accounting standards and practices, including
changes in the interpretation of existing standards, that impact
State Street�s consolidated financial statements; and changes in
tax legislation and in the interpretation of existing tax laws by
U.S. and non-U.S. tax authorities that impact the amount of taxes
due. Other important factors that could cause actual results to
differ materially from those indicated by any forward-looking
statements are set forth in State Street's 2006 Annual Report on
Form 10-K and its subsequent SEC filings. State Street encourages
investors to read its 10-K, particularly the section on Risk
Factors, and its subsequent SEC filings for additional information
with respect to any forward-looking statements and prior to making
any investment decision. The forward-looking statements contained
in this press release speak only as of the date hereof, July 17,
2007, and State Street will not undertake efforts to revise those
forward-looking statements to reflect events after this date. STATE
STREET CORPORATION Press Release Addendum � Financial Highlights
June 30, 2007 � Quarters Ended � % Change Q2 2007 Q2 2007 (Dollars
in millions, except per share amounts June 30, March 31, June 30,
vs. vs. or where otherwise noted) � 2007 � 2007 � 2006 � Q1 2007 �
Q2 2006 � Total Revenue $ 1,921 $ 1,696 $ 1,651 13 % 16 % Total
Expenses 1,358 1,213 1,176 12 15 Net Income 366 314 227 17 61 �
Diluted Earnings Per Share $ 1.07 $ .93 $ .68 15 57 � Cash
Dividends Declared Per Share $ .22 $ .21 $ .20 Closing Price Per
Share of Common Stock (at quarter end) 68.40 64.75 58.09 � Return
on Equity 19.2 % 17.4 % 14.0 % � At Quarter End: Assets Under
Custody (AUC) (in trillions) $ 13.04 $ 12.33 $ 10.86 Assets Under
Management (AUM) (in trillions) 1.93 1.85 1.53 Six Months Ended � %
Change 2007 June 30, June 30, vs. (Dollars in millions, except per
share information) � 2007 � 2006 � 2006 � � Total Revenue $ 3,617 $
3,174 14 % Total Expenses 2,571 2,272 13 Income Tax Expense 366 393
(7) Income from Continuing Operations 680 509 34 Income from
Discontinued Operations - 10 Net Income 680 519 � Diluted Earnings
Per Share: From Continuing Operations $ 2.00 $ 1.52 32 From
Discontinued Operations - .03 Net Income 2.00 1.55 � Cash Dividends
Declared Per Share .43 .39 10 � Return on Equity from Continuing
Operations 18.4 % 15.8 % Return on Equity 18.4 16.1 STATE STREET
CORPORATION Press Release Addendum � SELECTED FINANCIAL INFORMATION
Quarters ended June 30, 2007 and June 30, 2006 � Quarters Ended Six
Months Ended June 30, June 30, June 30, June 30, (Dollars in
millions, except per share amounts) � 2007 � � � 2006 % Change �
2007 � � 2006 % Change � � Fee Revenue: Servicing fees $ 766 $ 683
12 % $ 1,484 $ 1,340 11 Management fees 284 232 22 545 452 21
Trading services 260 258 1 480 488 (2 ) Securities finance 162 128
27 260 209 24 Processing fees and other � 65 � � 74 (12 ) � 138 �
146 (5 ) Total fee revenue 1,537 1,375 12 2,907 2,635 10 � Net
Interest Revenue: Interest revenue 1,203 1,034 16 2,375 1,995 19
Interest expense � 818 � � 772 6 � 1,665 � 1,467 13 Net interest
revenue (1) 385 262 47 710 528 34 Provision for loan losses � - � �
- � - � - Net interest revenue after provision for loan losses 385
262 47 710 528 34 � Gains (Losses) on sales of available-for-sale
investment securities, net � (1 ) � 14 � - � 11 Total revenue 1,921
1,651 16.4 3,617 3,174 14.0 � Operating Expenses: Salaries and
employee benefits 808 684 18 1,547 1,319 17 Information systems and
communications 128 129 (1 ) 253 261 (3 ) Transaction processing
services 141 134 5 270 254 6 Occupancy 98 95 3 192 188 2 Other �
183 � � 134 37 � 309 � 250 24 Total operating expenses � 1,358 � �
1,176 15.5 � 2,571 � 2,272 13.2 Income from continuing operations
before income tax expense 563 475 19 1,046 902 16 Income tax
expense from continuing operations � 197 � � 248 � 366 � 393 Income
from continuing operations 366 227 61 680 509 34 � Income from
discontinued operations before income tax expense - - - 16 Income
tax expense from discontinued operations � - � � - � - � 6 Income
from discontinued operations � - � � - � - � 10 Net income $ 366 �
$ 227 $ 680 $ 519 � Earnings Per Share From Continuing Operations:
Basic $ 1.09 $ .69 58 $ 2.03 $ 1.54 32 Diluted 1.07 .68 57 2.00
1.52 32 � Earnings Per Share From Discontinued Operations: Basic $
- $ - $ - $ .03 Diluted - - - .03 � Earnings Per Share: Basic $
1.09 $ .69 $ 2.03 $ 1.57 Diluted 1.07 .68 2.00 1.55 � Average
Shares Outstanding (in thousands): Basic 335,769 330,804 334,908
331,777 Diluted 341,101 335,879 339,338 336,102 � Consolidated
Selected Financial Information presented above was prepared in
accordance with accounting principles generally accepted in the
United States. � (1) Net interest revenue on a fully
taxable-equivalent basis was $397 million and $275 million for the
quarters ended June 30, 2007 and 2006, respectively, and $734
million and $552 million for the six months ended June 30, 2007 and
2006, respectively. These amounts include taxable-equivalent
adjustments of $12 million and $13 million for the quarters ended
June 30, 2007 and 2006, respectively, and $24 million for each of
the six months ended June 30, 2007 and 2006. STATE STREET
CORPORATION Press Release Addendum � SELECTED FINANCIAL INFORMATION
Quarters ended June 30, 2007 and March 31, 2007 � � Quarters Ended
June 30, March 31, (Dollars in millions, except per share amounts)
� 2007 � � � 2007 � % Change � Fee Revenue: Servicing fees $ 766 $
718 7 % Management fees 284 261 9 Trading services 260 220 18
Securities finance 162 98 65 Processing fees and other � 65 � � 73
(11 ) Total fee revenue 1,537 1,370 12 � Net Interest Revenue:
Interest revenue 1,203 1,172 3 Interest expense � 818 � � 847 (3 )
Net interest revenue (1) 385 325 18 Provision for loan losses � - �
� - Net interest revenue after provision for loan losses 385 325 18
� Gains (Losses) on sales of available-for-sale investment
securities, net � (1 ) � 1 Total revenue 1,921 1,696 13.3 �
Operating Expenses: Salaries and employee benefits 808 739 9
Information systems and communications 128 125 2 Transaction
processing services 141 129 9 Occupancy 98 94 4 Other � 183 � � 126
45 Total operating expenses � 1,358 � � 1,213 12.0 Income before
income tax expense 563 483 17 Income tax expense � 197 � � 169 Net
income $ 366 � $ 314 17 � Earnings Per Share: Basic $ 1.09 $ .94 16
Diluted 1.07 .93 15 � Average Shares Outstanding (in thousands):
Basic 335,769 334,036 Diluted 341,101 338,727 � Consolidated
Selected Financial Information presented above was prepared in
accordance with accounting principles generally accepted in the
United States. � (1) Net interest revenue on a fully
taxable-equivalent basis was $397 million and $337 million for the
quarters ended June 30, 2007 and March 31, 2007, respectively. Both
amounts included taxable-equivalent adjustments of $12 million.
STATE STREET CORPORATION Press Release Addendum � CONSOLIDATED
STATEMENT OF CONDITION � � � � � � � � � � � June 30, December 31,
June 30, (Dollars in millions, except per share amounts) 2007 � �
2006 � � 2006 � � Assets Cash and due from banks $ 4,851 $ 2,368 $
4,580 Interest-bearing deposits with banks 4,616 5,236 7,634
Securities purchased under resale agreements 10,772 14,678 10,786
Trading account assets 849 785 998 Investment securities available
for sale 62,748 60,445 55,071 Investment securities held to
maturity 4,308 4,547 4,528 Loans and leases (net of allowance of
$18) 12,050 8,928 8,690 Premises and equipment 1,725 1,560 1,541
Accrued income receivable 1,671 1,617 1,468 Goodwill 1,853 1,384
1,359 Other intangible assets 593 434 463 Other assets � 6,232 � �
5,371 � � 5,418 � Total assets $ 112,268 � $ 107,353 � $ 102,536 �
� Liabilities Deposits: Noninterest-bearing $ 12,735 $ 10,194 $
9,944 Interest-bearing -- U.S. 1,091 1,272 2,349 Interest-bearing
-- Non-U.S. � 59,210 � � 54,180 � � 51,262 � Total deposits 73,036
65,646 63,555 � Securities sold under repurchase agreements 13,089
19,147 19,393 Federal funds purchased 2,741 2,147 1,811 Other
short-term borrowings 3,500 2,835 1,351 Accrued taxes and other
expenses 3,204 3,143 2,653 Other liabilities 4,860 4,567 4,705
Long-term debt � 4,090 � � 2,616 � � 2,599 � Total liabilities
104,520 100,101 96,067 � Shareholders' Equity Preferred stock, no
par: authorized 3,500,000; issued none Common stock, $1 par:
authorized 750,000,000 shares; issued 337,126,000, 337,126,000 and
337,126,000 shares 337 337 337 Surplus 365 399 308 Retained
earnings 7,339 7,030 6,579 Accumulated other comprehensive loss
(276 ) (224 ) (377 ) Treasury stock (at cost 408,000, 4,688,000 and
6,495,000 shares) � (17 ) � (290 ) � (378 ) Total shareholders'
equity � 7,748 � � 7,252 � � 6,469 � Total liabilities and
shareholders' equity $ 112,268 � $ 107,353 � $ 102,536 �
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