State Street Corporation announced today first-quarter earnings per
share of $1.35, up 45% from earnings per share of $0.93 in last
year�s first quarter. Earnings per share in the first quarter of
2008 includes $17 million of after-tax merger and integration costs
associated with the July 2007 acquisition of Investors Financial
Services Corp. (�Investors Financial�), or $0.04 per share.
Excluding these costs, operating earnings per share of $1.39 would
have been up 49% compared to $.93 in the first quarter of 2007.
Revenue of $2.577 billion in the first quarter of 2008,
representing a State Street record for a quarter, is up 52% from
$1.696 billion compared to the year-ago quarter and includes $220
million in revenue from the acquired Investors Financial business.
Total expenses in the first quarter of 2008 of $1.774 billion are
up 46.2% from $1.213 billion compared to the year-ago quarter and
excluding the merger and integration costs would be $1.748 billion,
up 44.1%. Excluding the results of Investors Financial and the
merger and integration costs, revenue would be up 39% and expenses
would be up 31.1%. On an operating basis, excluding the merger and
integration costs, State Street achieved positive operating
leverage of approximately 810 basis points. For the first quarter
of 2008, return on shareholders� equity was 18.7% and was 19.4%,
excluding the merger and integration costs, up from 17.4% in the
first quarter of 2007. Ronald E. Logue, State Street's chairman and
chief executive officer, said, "I am extremely pleased with this
record revenue performance, particularly in today�s challenging
environment. The momentum we have achieved over the past 12 months
continues, despite the negative equity markets. The neutral
earnings-per-share result for the acquired Investors Financial
business demonstrates our success in consolidating this business.
In the first quarter, we grew our revenue and operating earnings
per share and generated operating return on equity above our
financial goals. Compared to the year-ago quarter, we experienced
growth in nearly all lines of our income statement and recorded
positive operating leverage for the fourteenth consecutive quarter
when measured on a year-over-year basis. Servicing fee revenue was
up 34% and asset management fee revenue grew 7% from the prior
year�s first quarter. We won $600 billion of assets in new business
in servicing and $69 billion of net new business in asset
management. Growth outside the U.S. continues to provide momentum.
Growth in revenue was particularly strong in our trading business
and our securities finance business in this volatile business
environment. Growth in net interest revenue is due to a favorable
U.S. rate environment as well as the successful execution of our
balance sheet strategy.� Logue continued, �During the first
quarter, we strengthened our regulatory capital position with
strong net income of more than $500 million and the issuance of
$500 million of tier-1 qualified regulatory capital.� Logue
concluded, �Given the continued unsettled economic environment, for
now we continue to expect to achieve in the middle of the ranges we
established for this year. Excluding the impact of the
fourth-quarter 2007 charge and the impact of merger and integration
costs in both 2007 and 2008, these ranges reflect an increase in
operating earnings per share of between 10 and 15 percent; an
increase in revenue of 14 to 17 percent; and operating return on
equity of 14 to 17 percent.� In reporting its financial results for
the first quarter of 2008, State Street has prepared information in
four categories: �Baseline� results are results on an operating
basis excluding the �Investors Financial� results described below
and are presented on a fully taxable-equivalent basis. �Investors
Financial� results are the revenue and expenses, including
financing costs and amortization of intangibles, attributable to
the Investors Financial business acquired on July 2, 2007, but
excluding merger and integration costs, all presented on a fully
taxable-equivalent basis. Per-share amounts reflect the effect of
the acquisition on outstanding shares. �Operating-basis� results
are �reported� results excluding the merger and integration costs.
They are presented on a fully taxable-equivalent basis. �Reported�
results are in accordance with U.S. generally accepted accounting
principles (GAAP). Management believes that providing separate
Investors Financial results and baseline financial information
further assists investors and analysts in understanding the effect
of that acquisition. Management presents results on an operating
basis in order to provide financial information that is comparable
from period to period and to present comparable financial trends
with respect to our ongoing business operations. Management
believes such presentation facilitates an investor�s understanding
and analysis of our underlying performance and trends in addition
to financial information prepared in accordance with GAAP. $ in
millions except per share data For the three months ended March 31,
2008 � � Baseline (a) � Investors Financial � Operating � Reported
� � � � � � � � � Fee Revenue � $1,772 � $189 � $1,961 � $1,961 All
other revenue � 596 � 43 � 639 � 616 Total revenue � 2,368 � 232 �
2,600 � 2,577 Total expenses � 1,590 � 158 � 1,748 � 1,774 Income
taxes � 272 � 33 � 305 � 273 Net income � $506 � $41 � $547 � $530
Diluted EPS � $1.39 � $0.00 � $1.39 � $1.35 � (a) represents State
Street results on an �operating basis,� further adjusted to exclude
the �Investors Financial� results described in the adjoining
column, all presented on a fully taxable equivalent basis. FIRST
QUARTER 2008 RESULTS VS. YEAR-AGO QUARTER Servicing fees are up 34%
to $960 million from $718 million in last year�s first quarter. The
increase is attributable to business from Investors Financial as
well as new business from existing and new customers in 2008. Total
assets under custody are $14.900 trillion at March 31, 2008, up
21%, compared with $12.331 trillion at March 31, 2007. Daily
average values for the S&P 500 Index are down 5% from the first
quarter of 2007; daily average values for the MSCI� EAFE IndexSM
are down 3%. Investment management fees, generated by State Street
Global Advisors, are $278 million, up 7% from $261 million in the
year-ago quarter. Growth in management fees reflects continued net
new business, offset partially by a decrease in performance fees
and in average month-end equity market valuations. Total assets
under management at March 31, 2008, are $1.955 trillion, up 6%,
compared to $1.849 trillion at March 31, 2007. Trading services
revenue, which includes foreign exchange trading revenue and
brokerage and other fees, is $366 million for the quarter, up 66%
from $220 million in the year-ago quarter. The 74% increase in
foreign exchange revenue is due to higher volatility and increased
volumes. Brokerage and other fees increased 49% due primarily to
fees from the acquired Currenex business, as well as strength in
transition management. Securities finance revenue is $303 million
in the quarter, up 209% from $98 million in the year-ago quarter,
primarily reflecting improved spreads. This unusually strong growth
reflects the recent actions by the Federal Reserve in reducing
interest rates. Processing fees and other is $54 million, down 26%
from $73 million in the first quarter of 2007 due primarily to
lower revenue from structured products. Net interest revenue on a
fully taxable-equivalent basis is $648 million, an increase of 92%
from $337 million a year ago. The increase is due primarily to the
benefit of recent cuts in U.S. rates, the benefit of the revenue
from the acquired Investors Financial business, and increased
volumes in transaction deposits from non-US customers. Expenses
increased to $1.774 billion, up 46.2% from $1.213 billion a year
ago, partially due to the acquisition of Investors Financial.
Excluding $158 million in operating costs associated with Investors
Financial and $26 million in merger and integration costs, expenses
are up 31.1% to $1.590 billion. Salaries and benefits expenses are
up 44% to $1.062 billion from $739 million, primarily as a result
of increased incentive compensation due to improved performance and
the accounting impact of stock-related compensation for
retirement-eligible employees, the impact of the Investors
Financial acquisition, and increased headcount due to new business
wins. The increase in total expenses also includes higher
transaction processing services, up 26% to $162 million from $129
million a year ago, due to higher volumes in the investment
servicing business primarily as a result of the acquisition of
Investors Financial. Expenses for information systems &
communications increased 24%, to $155 million from $125 million and
occupancy increased 17%, to $110 million from $94 million, with
both increases due primarily to the acquisition of Investors
Financial. Other expenses were up 106%, or $133 million at $259
million from $126 million due primarily to increased professional
fees and securities processing costs, as well as Investors
Financial�s costs associated with amortization of intangibles. The
effective tax rate in the first quarter of 2008 is 34.0%, down from
35.0% in the year-ago quarter. FIRST-QUARTER 2008 RESULTS VS.
FOURTH QUARTER 2007 First-quarter earnings per share of $1.35 is up
from $0.57 in the fourth quarter of 2007. Excluding the
non-operating costs of $38 million of after-tax merger and
integration costs in the fourth quarter and $17 million in the
first quarter and an after-tax charge of $279 million related to
certain active fixed-income strategies at State Street Global
Advisors (SSgA) in the fourth quarter of 2007, operating earnings
per share of $1.39 is up slightly from operating earnings per share
of $1.38 in the fourth quarter of 2007. Total revenue in the first
quarter is $2.577 billion, up 4.0% versus $2.479 billion in the
fourth quarter of 2007. Total expenses for the first quarter of
2008 are $1.774 billion versus $2.173 billion in the fourth quarter
of 2007. Excluding the fourth-quarter charge and the merger and
integration expenses, total expenses are $1.748 billion up 6.0%
versus $1.649 billion in the fourth quarter. Return on
shareholders� equity of 18.7% in the first quarter compares with
7.7% in the fourth quarter. Excluding the non-operating charges,
operating return on equity would have been 19.4% in the first
quarter of 2008 up from 18.7% in the fourth quarter of 2007.
Servicing fees are $960 million, down slightly from $967 million in
the fourth quarter due to a decline in daily equity valuations,
partially offset by business from new and existing customers.
Management fees are $278 million, down 6% from $297 million
primarily due to a 10% decline in month-end equity valuations and
lower performance fees. Trading services revenue is $366 million,
up 4% from $352 million primarily due to increased volatility in
foreign exchange markets. Securities finance revenue is $303
million, up 18% from the prior quarter due to increased spreads
reflecting the recent actions by the Federal Reserve in reducing
interest rates, offset partially by lower volumes due to a decline
in market values. Processing fees and other revenue decreased
slightly to $54 million from $55 million. Net interest revenue on a
fully taxable-equivalent basis is $648 million, up 13% from $573
million, due primarily to the impact of the recent rate cuts in the
U.S., partially offset by a slight change in customer mix. Salaries
and employee benefits expense increased 14% to $1.062 billion from
$934 million due to the impact of incentive compensation as a
result of the accounting impact of stock-related compensation for
retirement-eligible employees and improved performance, and higher
benefit costs. Transaction processing expense is down 12% from $184
million to $162 million due primarily to receipt of a depository
rebate, and Information systems and communications expense
increased 5% from $148 million to $155 million, due primarily to
costs associated with increased global infrastructure investments.
Other expenses are down 6% from $276 million to $259 million due
primarily to a decline in expenses related to Investors Financial,
as well as lower securities processing costs. ADDITIONAL
INFORMATION All per share amounts represent fully diluted earnings
per share. INVESTOR CONFERENCE CALL State Street will webcast an
investor conference call today, Tuesday, April 15, 2008, at 9:00
a.m. EDT, available at www.statestreet.com/stockholder. The
conference call will also be available via telephone, at +1
706/679-5594 (Conference ID #41974482). Recorded replays of the
conference call will be available on the web site, and by telephone
at +1 706/645-9291 (Conference ID#41974482), beginning
approximately two hours after the call�s completion. The telephone
replay will be available for two weeks following the conference
call. This press release, presentation materials referred to on the
conference call, and additional financial information are available
on State Street�s website, at www.statestreet.com/stockholder.
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 $14.900 trillion in assets under custody and
$1.955 trillion in assets under management at March 31, 2008, State
Street operates in 26 countries and more than 100 geographic
markets and employs 27,875 worldwide. 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
678/999-4577 outside those countries. FORWARD-LOOKING STATEMENTS
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements
about State Street�s goals and expectations, 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
acquisition of Investors Financial Services Corp.; 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; and economic conditions
and monetary and other governmental actions designed to address
those conditions; the liquidity of the U.S. and International
securities markets, particularly the markets for fixed-income
securities, including asset-backed commercial paper; and the
liquidity requirements of our customers; the credit quality and
credit agency ratings of the securities in our investment
securities portfolio, a deterioration or downgrade of which could
lead to other-than-temporary impairment of the respective
securities and the recognition of an impairment loss; State
Street's ability to attract non-interest bearing deposits and other
low-cost funds; the results of litigation and similar disputes and,
in particular, the effect that current or future litigation may
have on SSgA�s reputation and its ability to attract and retain
customers; and the possibility that the ultimate costs of the legal
exposure associated with certain of SSgA�s actively managed
fixed-income strategies may exceed or be below the level of the
related reserve, in view of the uncertainties of the timing and
outcome of litigation, and the amounts involved; the possibility
that changes in market conditions, asset performance or accounting
standards may require any off-balance sheet activities, including
our asset-backed commercial paper conduits, to be consolidated into
our financial statements, requiring the recognition of associated
losses, if any; the possibility of further developments of the
nature giving rise to the legal exposure associated with SSgA�s
actively managed fixed-income and other investment strategies; the
performance and demand for the investment products we offer; 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, as well as the effects
of legal and regulatory proceedings, including litigation; 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
manage systemic risks and control operating risks; State Street�s
ability to obtain quality and timely services from third parties
with which it contracts; 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 2007 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, April 15,
2008, and State Street does not undertake efforts to revise those
forward-looking statements to reflect events after this date. STATE
STREET CORPORATION Earnings Press Release Addendum � � � �
Financial Highlights March 31, 2008 � Quarters Ended � % Change Q1
2008 Q1 2008 (Dollars in millions, except per share amounts March
31, December 31, March 31, vs. vs. or where otherwise noted) � 2008
(1) � � 2007 (1) � � 2007 � � Q4 2007 � � Q1 2007 � � Total Revenue
$ 2,577 $ 2,479 $ 1,696 4 % 52 % Total Expenses (2) (3) 1,774 2,173
1,213 (18 ) 46 Net Income 530 223 314 138 69 � Diluted Earnings Per
Share (4) $ 1.35 $ .57 $ .93 137 45 � Cash Dividends Declared Per
Share $ .23 $ .23 $ .21 Closing Price Per Share of Common Stock (at
quarter end) 79.00 81.20 64.75 � Return on Equity 18.7 % � 7.7 % �
17.4 % � At Quarter End: Assets Under Custody (AUC) (in trillions)
$ 14.90 $ 15.30 $ 12.33 Assets Under Management (AUM) (in
trillions) 1.96 1.98 1.85 � � � (1) Quarters ended March 31, 2008
and December 31, 2007 include financial results of Investors
Financial, which State Street acquired on July 2, 2007. (2) Total
expenses for the quarters ended March 31, 2008 and December 31,
2007 include merger and integration costs of $26 million and $57
million, respectively, or $17 million and $38 million after-tax,
respectively, recorded in connection with the acquisition of
Investors Financial. (3) Total expenses for the quarter ended
December 31, 2007 include a net charge of $467 million, or $279
million after-tax, associated with certain active fixed-income
strategies managed by State Street Global Advisors. (4) Diluted
earnings per share for the quarters ended March 31, 2008 and
December 31, 2007 reflect the issuance of 60.8 million shares on
July 2, 2007 in connection with the completion of the acquisition
of Investors Financial. STATE STREET CORPORATION Earnings Press
Release Addendum � � � SELECTED FINANCIAL INFORMATION Quarters
Ended March 31, 2008 and March 31, 2007 � Quarters Ended March 31,
March 31, (Dollars in millions, except per share amounts) � � 2008
(1) � 2007 % Change � � Fee Revenue: Servicing fees $ 960 $ 718 34
% Management fees 278 261 7 Trading services 366 220 66 Securities
finance 303 98 209 Processing fees and other � 54 � � 73 (26 )
Total fee revenue 1,961 1,370 43 � Net Interest Revenue: Interest
revenue 1,288 1,172 10 Interest expense � 663 � � 847 (22 ) Net
interest revenue (2) 625 325 92 Provision for loan losses � - � � -
Net interest revenue after provision for loan losses 625 325 92 �
Gains (Losses) related to investment securities, net � (9 ) � 1
Total revenue 2,577 1,696 51.9 � Operating Expenses: Salaries and
employee benefits 1,062 739 44 Information systems and
communications 155 125 24 Transaction processing services 162 129
26 Occupancy 110 94 17 Merger and integration costs 26 - - Other �
259 � � 126 106 Total operating expenses � 1,774 � � 1,213 46.2
Income before income tax expense 803 483 66 Income tax expense �
273 � � 169 Net income $ 530 � $ 314 69 � Earnings Per Share: Basic
$ 1.37 $ .94 46 Diluted 1.35 .93 45 � Average Shares Outstanding
(in thousands): Basic 387,942 334,036 Diluted 393,647 338,727 �
Consolidated Selected Financial Information presented above was
prepared in accordance with accounting principles generally
accepted in the United States. � (1) Quarter ended March 31, 2008
includes financial results of Investors Financial, which State
Street acquired on July 2, 2007. (2) Net interest revenue on a
fully taxable-equivalent basis was $648 million and $337 million
for the quarters ended March 31, 2008 and 2007, respectively. These
amounts include taxable-equivalent adjustments of $23 million and
$12 million for the quarters ended March 31, 2008 and 2007,
respectively. STATE STREET CORPORATION Earnings Press Release
Addendum � � � SELECTED FINANCIAL INFORMATION Quarters Ended March
31, 2008 and December 31, 2007 � � Quarters Ended March 31,
December 31, (Dollars in millions, except per share amounts) � �
2008 � � � 2007 � � % Change � � � Fee Revenue: Servicing fees $
960 $ 967 (1 ) % Management fees 278 297 (6 ) Trading services 366
352 4 Securities finance 303 256 18 Processing fees and other (2) �
54 � � 55 � (2 ) Total fee revenue 1,961 1,927 2 � Net Interest
Revenue: Interest revenue 1,288 1,454 (11 ) Interest expense � 663
� � 898 � (26 ) Net interest revenue (1) 625 556 12 Provision for
loan losses � - � � - � Net interest revenue after provision for
loan losses 625 556 12 � Losses related to investment securities,
net (2) � (9 ) � (4 ) Total revenue 2,577 2,479 4.0 � Operating
Expenses: Salaries and employee benefits 1,062 793 34 Information
systems and communications 155 148 5 Transaction processing
services 162 184 (12 ) Occupancy 110 107 3 Provision for legal
exposure - 600 - Merger and integration costs 26 57 (54 ) Other �
259 � � 284 � (9 ) Total operating expenses � 1,774 � � 2,173 �
(18.4 ) Income before income tax expense 803 306 162 Income tax
expense � 273 � � 83 � Net income $ 530 � $ 223 � 138 � Earnings
Per Share: Basic $ 1.37 $ .58 136 Diluted 1.35 .57 137 � Average
Shares Outstanding (in thousands): Basic 387,942 385,200 Diluted
393,647 392,200 � 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 $648
million and $573 million for the quarters ended March 31, 2008 and
December 31, 2007, respectively. These amounts include
taxable-equivalent adjustments of $23 million and $17 million for
the quarters ended March 31, 2008 and December 31, 2007,
respectively. (2) Amounts for the quarter ended December 31, 2007
reflect the reclassification of $17 million of other-than-temporary
impairment adjustments from processing fees and other revenue to
losses related to investment securities, net, to conform to current
period presentation. STATE STREET CORPORATION Earnings Press
Release Addendum � � SELECTED OPERATING-BASIS FINANCIAL INFORMATION
Quarters Ended March 31, 2008 and March 31, 2007 � Quarters Ended
(1) March 31, March 31, (Dollars in millions, except per share
amounts) � � 2008 � � 2007 % Change � Fee Revenue: Servicing fees $
960 $ 718 34 % Management fees 278 261 7 Trading services 366 220
66 Securities finance 303 98 209 Processing fees and other � 54 � �
73 (26 ) Total fee revenue 1,961 1,370 43 � Net Interest Revenue:
Interest revenue, operating basis 1,311 1,184 11 Interest expense �
663 � � 847 (22 ) Net interest revenue, operating basis 648 337 92
Provision for loan losses � - � � - Net interest revenue after
provision for loan losses, operating basis 648 337 92 � Gains
(Losses) related to investment securities, net � (9 ) � 1 Total
revenue, operating basis (2) 2,600 1,708 52.2 � Operating Expenses:
Salaries and employee benefits 1,062 739 44 Information systems and
communications 155 125 24 Transaction processing services 162 129
26 Occupancy 110 94 17 Other � 259 � � 126 106 Total operating
expenses, operating basis (2) � 1,748 � � 1,213 44.1 Income before
income tax expense, operating basis 852 495 72 Income taxes,
operating basis 282 169 Taxable-equivalent adjustment � 23 � � 12
Net income, operating basis $ 547 � $ 314 74 � � Diluted earnings
per share, operating basis $ 1.39 $ .93 49 � Average diluted shares
outstanding (in thousands) 393,647 338,727 � Return on equity,
operating basis 19.4 % � 17.4 % � � (1) Refer to the accompanying
reconciliation of reported results to operating-basis results. (2)
Positive operating leverage in the year-over-year comparison was
810 basis points, based on growth in total operating-basis revenue
of 52.2% and growth in total operating-basis expenses of 44.1%.
STATE STREET CORPORATION Earnings Press Release Addendum � � �
SELECTED OPERATING-BASIS FINANCIAL INFORMATION Quarters Ended March
31, 2008 and December 31, 2007 � � Quarters Ended March 31,
December 31, (Dollars in millions, except per share amounts) � 2008
(1) � � 2007(1) � % Change � Fee Revenue: Servicing fees $ 960 $
967 (1 ) % Management fees 278 297 (6 ) Trading services 366 352 4
Securities finance 303 256 18 Processing fees and other � 54 � � 55
� (2 ) Total fee revenue 1,961 1,927 2 � Net Interest Revenue:
Interest revenue, operating basis 1,311 1,471 (11 ) Interest
expense � 663 � � 898 � (26 ) Net interest revenue, operating basis
648 573 13 Provision for loan losses � - � � - � Net interest
revenue after provision for loan losses, operating basis 648 573 13
� Losses related to investment securities, net � (9 ) � (4 ) Total
revenue, operating basis 2,600 2,496 4.2 � Operating Expenses:
Salaries and employee benefits, operating basis 1,062 934 14
Information systems and communications 155 148 5 Transaction
processing services 162 184 (12 ) Occupancy 110 107 3 Other,
operating basis � 259 � � 276 � (6 ) Total operating expenses,
operating basis � 1,748 � � 1,649 � 6.0 Income before income tax
expense, operating basis 852 847 1 Income taxes 282 290
Taxable-equivalent adjustment � 23 � � 17 � Net income, operating
basis $ 547 � $ 540 � 1 � � Diluted earnings per share, operating
basis $ 1.39 $ 1.38 1 � Average diluted shares outstanding (in
thousands) 393,647 392,200 � Return on equity, operating basis 19.4
% � 18.7 % � � � (1) Refer to the accompanying reconciliation of
reported results to operating-basis results. STATE STREET
CORPORATION Earnings Press Release Addendum � � � RECONCILIATION OF
REPORTED RESULTS TO OPERATING-BASIS RESULTS Quarters Ended March
31, 2008 and March 31, 2007 � � � � � � � � � � � � � � � � � �
(Dollars in millions, except per share amounts) Quarter Ended March
31, 2008 Quarter Ended March 31, 2007 � � Reported Operating
Reported � Operating � Results � Adjustments � Results � Results �
Adjustments � Results � Fee Revenue: Servicing fees $ 960 $ 960 $
718 � $ 718 Management fees 278 278 261 261 Trading services 366
366 220 220 Securities finance 303 303 98 98 Processing fees and
other � 54 � � 54 � � 73 � 73 Total fee revenue 1,961 1,961 1,370
1,370 � Net Interest Revenue: Interest revenue 1,288 $ 23 (1 )
1,311 1,172 $ 12 (1 ) 1,184 Interest expense � 663 � � - � � 663 �
� 847 � - � 847 Net interest revenue 625 23 648 325 12 337
Provision for loan losses � - � � - � � - � � - � - � - Net
interest revenue after provision for loan losses 625 23 648 325 12
337 � Gains (Losses) related to investment securities, net � (9 ) �
- � � (9 ) � 1 � - � 1 Total revenue 2,577 23 2,600 1,696 12 1,708
� Operating Expenses: Salaries and employee benefits 1,062 - 1,062
739 739 Information systems and communications 155 - 155 125 - 125
Transaction processing services 162 - 162 129 - 129 Occupancy 110 -
110 94 - 94 Merger and integration costs 26 (26 ) (2 ) - - - -
Other � 259 � � - � � 259 � � 126 � - � 126 Total operating
expenses � 1,774 � � (26 ) � 1,748 � � 1,213 � - � 1,213 Income
before income taxes 803 49 852 483 12 495 Income taxes 273 9 282
169 - 169 Taxable-equivalent adjustment � - � � 23 � (1 ) � 23 � �
- � 12 (1 ) � 12 Net income $ 530 � $ 17 � $ 547 � $ 314 $ - � 314
� Diluted earnings per share $ 1.35 $ .04 $ 1.39 $ .93 $ - � $ .93
� Average diluted shares outstanding (in thousands) 393,647 393,647
393,647 338,727 338,727 338,727 � Return on equity 18.7 % � 0.7 % �
19.4 % � 17.4 % - % 17.4 % Reported results reflect State Street's
Consolidated Statement of Income prepared in accordance with
accounting principles generally accepted in the United States. (1)
Represents taxable-equivalent adjustment, which is not included in
reported results. (2) Represents merger and integration costs
recorded in connection with the acquisition of Investors Financial,
which are direct and incremental costs associated with the
acquisition and do not include ongoing expenses of the combined
organization. STATE STREET CORPORATION Earnings Press Release
Addendum � � RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS
RESULTS Quarter Ended December 31, 2007 � � � � � � � � � (Dollars
in millions, except per share amounts) Quarter Ended December 31,
2007 � � Reported Operating � Results � Adjustments � Results Fee
Revenue: Servicing fees $ 967 $ 967 Management fees 297 297 Trading
services 352 352 Securities finance 256 256 Processing fees and
other � 55 � � 55 � Total fee revenue 1,927 1,927 � Net Interest
Revenue: Interest revenue 1,454 $ 17 (1 ) 1,471 Interest expense �
898 � � - � � 898 � Net interest revenue 556 17 573 Provision for
loan losses � - � � - � � - � Net interest revenue after provision
for loan losses 556 17 573 � Losses related to investment
securities, net � (4 ) � - � � (4 ) Total revenue 2,479 17 2,496 �
Operating Expenses: Salaries and employee benefits 793 141 (2 ) 934
Information systems and communications 148 - 148 Transaction
processing services 184 - 184 Occupancy 107 - 107 Provision for
legal exposure 600 (600 ) (2 ) - Merger and integration costs 57
(57 ) (3 ) - Other � 284 � � (8 ) (2 ) � 276 � Total operating
expenses � 2,173 � � (524 ) � 1,649 � Income before income taxes
306 541 847 Income taxes 83 207 290 Taxable-equivalent adjustment �
- � � 17 � (1 ) � 17 � Net income $ 223 � $ 317 � $ 540 � � Diluted
earnings per share $ .57 $ .81 $ 1.38 � Average diluted shares
outstanding (in thousands) 392,200 392,200 392,200 � Return on
equity 7.7 % � 11.0 % � 18.7 % � � Reported results reflect State
Street's Consolidated Statement of Income prepared in accordance
with accounting principles generally accepted in the United States.
(1) Represents taxable-equivalent adjustment, which is not included
in reported results. (2) Represents a net charge associated with
certain active fixed-income strategies managed by State Street
Global Advisors. (3) Represents merger and integration costs
recorded in connection with the acquisition of Investors Financial,
which are direct and incremental costs associated with the
acquisition and do not include ongoing expenses of the combined
organization. STATE STREET CORPORATION Press Release Addendum � � �
CONSOLIDATED STATEMENT OF CONDITION � � � � � � � � � � March 31,
December 31, March 31, (Dollars in millions, except per share
amounts) � 2008 � � 2007 � � 2007 � � Assets Cash and due from
banks $ 6,349 $ 4,733 $ 3,298 Interest-bearing deposits with banks
13,540 5,579 4,751 Securities purchased under resale agreements
19,958 19,133 12,158 Federal funds sold 3,290 4,540 - Trading
account assets 1,044 589 1,025 Investment securities available for
sale 68,009 70,326 63,519 Investment securities held to maturity
4,295 4,233 4,385 Loans and leases (net of allowance of $18) 14,886
15,784 10,140 Premises and equipment 1,965 1,894 1,680 Accrued
income receivable 2,090 2,096 1,627 Goodwill 4,533 4,567 1,815
Other intangible assets 1,953 1,990 596 Other assets � 12,437 � �
7,079 � � 5,009 � Total assets $ 154,349 � $ 142,543 � $ 110,003 �
� Liabilities Deposits: Noninterest-bearing $ 19,054 $ 15,039 $
9,939 Interest-bearing -- U.S. 15,070 14,790 965 Interest-bearing
-- Non-U.S. � 70,583 � � 65,960 � � 55,696 � Total deposits 104,707
95,789 66,600 � Securities sold under repurchase agreements 13,441
14,646 17,368 Federal funds purchased 1,225 425 5,007 Other
short-term borrowings 6,371 5,557 3,629 Accrued taxes and other
expenses 2,792 4,392 2,900 Other liabilities 10,845 6,799 4,419
Long-term debt � 4,162 � � 3,636 � � 2,613 � Total liabilities
143,543 131,244 102,536 � Shareholders' Equity Preferred stock, no
par: authorized 3,500,000; issued none Common stock, $1 par:
authorized 750,000,000 shares; issued 398,366,000, 398,366,000 and
337,126,000 shares 398 398 337 Surplus 4,455 4,630 311 Retained
earnings 8,185 7,745 7,046 Accumulated other comprehensive loss
(1,658 ) (575 ) (147 ) Treasury stock (at cost 8,048,000,
12,082,000 and 1,386,000 shares) � (574 ) � (899 ) � (80 ) Total
shareholders' equity � 10,806 � � 11,299 � � 7,467 � Total
liabilities and shareholders' equity $ 154,349 � $ 142,543 � $
110,003 �
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