State Street Corporation (NYSE: STT):
Unrealized Investment Portfolio
Losses Improve by $730 Million After-Tax as of January 30, 2009,
Compared to December 31, 2008
More Conservative First-Half
Reinvestment Strategy Reduces 2009 Expectations
State Street Corporation today updated its full-year 2008
earnings to reflect the impact of a plan to further strengthen its
tangible common equity ratio (TCE) in light of continued
unprecedented market disruption. The 2008 results have been updated
to reflect a $278 million pre-tax reduction in 2008 incentive
compensation as part of a plan to improve TCE. In 2009, the plan to
improve TCE includes reducing the Company�s quarterly dividend on
its common stock to $0.01 per share, a more conservative
reinvestment plan affecting assets paying down and maturing in its
investment portfolio, actions intended to increase organic capital
growth, and a reduction in the size of the company�s balance
sheet.
For 2008, GAAP earnings per share of $4.30 are up from the
previously announced $3.89 per share. Return on common
shareholders� equity in 2008 is 14.8%, up from the previously
announced 13.4%. For the fourth quarter of 2008, earnings are $0.54
per share, up from the previously announced $0.15 per share. Return
on common shareholders� equity is 8.4% in the fourth quarter of
2008, up from the previously announced 2.3%. Operating expenses for
full year and fourth quarter 2008, were $6.780 billion and $1.528
billion, respectively, down from the previously announced operating
expenses for those periods of $7.058 billion and $1.806 billion,
respectively. These expenses reflect the reduced compensation in
each period. Revenue for the full year and fourth quarter 2008 of
$10.693 billion and $2.673 billion, respectively, are unchanged
from the amounts previously announced.
Commenting on the announcement, Ronald E. Logue, State Street's
chairman and chief executive officer, said, �State Street has among
the highest regulatory capital ratios in the industry; however, we
are implementing a plan to alleviate investor concerns about our
pro forma TCE ratio, if we were to consolidate the asset-backed
commercial paper conduits that we administer. These are
extraordinary times that require swift action. Given that we are
asking our shareholders to make sacrifices through dividend
reductions, we believe that we must also be willing to make our own
sacrifices and therefore, we have eliminated the 2008 incentive
compensation for the five named executive officers and reduced it
by approximately 50% for the remainder of the company.�
Logue added, �While our tangible common equity ratio will vary
with the impact of the fixed-income markets on our investment
portfolio and the conduit assets and our actual results, we
currently anticipate that the steps we are announcing will result
in a meaningful increase in our tangible common equity ratio during
the first quarter and the full year. As of January 30, 2009, our
unrealized after-tax loss on our investment portfolio has improved
$730 million, from $6.3 billion at December 31, 2008 to $5.6
billion. Also, the unrealized loss in our conduit assets has
improved modestly.�
Logue concluded, �We are adjusting our outlook for 2009 based on
several new factors: a more conservative reinvestment plan
affecting assets paying down and maturing in our investment
portfolio; we now expect the S & P 500 to average about 900 for
the year down from our previous estimate of 1000; and we intend to
further restrain expenses in 2009. As a result, we now expect our
operating revenue to decline 8% to 12% from record levels in 2008;
our operating earnings per share to decline 12% to 16% from the
updated record level of $5.61 per share in 2008; and our return on
common equity to approach the low end of our 14% to 17% long-term
range. At our meeting with investors and analysts later today, we
will provide further detail about our TCE improvement plan and our
2009 outlook.�
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. A full reconciliation of
operating-basis results to U.S. generally accepted accounting
principals (GAAP) is included in the addendum at the end of this
press release. The following financial results are presented on an
operating basis, and are updated from our previously announced
operating results to reflect the effects of the reduced
compensation in the full year and fourth quarter 2008 and to
otherwise reflect the same adjustments between GAAP and operating,
as were previously announced.
For 2008, updated operating-basis earnings per share of $5.61
are up from the previously announced $5.21 per share.
Operating-basis return on common shareholders� equity is 19.3%, up
from the previously announced 17.9%. In the fourth quarter of 2008,
operating-basis earnings are $1.58 per share, up from the
previously announced $1.18 per share. Operating-basis return on
common shareholders� equity in the fourth quarter of 2008 is 24.3%,
up from the previously announced 18.3%. As noted above, these
results reflect the reduced salaries and employee benefits expense
in each period. Operating-basis revenue for the full year and
fourth quarter 2008 of $10.477 billion and $2.641 billion,
respectively, are unchanged from the amounts previously
announced.
The reduction in expenses results in an increase to State Street
Corporation�s Tier-1 capital ratio to 20.74% at December 31, 2008
from the previously announced 20.49% and an increase to the
leverage ratio to 7.83% from the previously announced 7.74%. The
TCE ratio at December 31, 2008, is 4.61%. The pro forma TCE ratio,
including consolidation of all assets and liabilities of the State
Street-administered asset-backed commercial paper conduits, was
1.19% as of December 31, 2008. Assuming market prices remain
constant from January through the rest of 2009 and we execute on
our plan, we expect TCE to be approximately 4.91% by the end of
2009.
ADDITIONAL INFORMATION
All per share amounts represent diluted earnings per common
share based on average common shares outstanding for the respective
period reported.
INVESTOR PRESENTATION
State Street will webcast a pre-recorded investor call today,
Thursday, February 5, 2009, at 8:00 a.m. EST, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 706/645-9291 (Conference ID#
84375390). The pre-recorded call will be available for two weeks.
This press release and additional financial information are
available on State Street�s website, at
www.statestreet.com/stockholder, under �Investor Information�Latest
News,� �Annual Reports and Financial Trends�Financial Trends� and
��Investor Events and Presentations.�
In addition, State Street Corporation will webcast a
presentation to investors and analysts by Ronald E. Logue, Chairman
of the Board and Chief Executive Officer, Edward J. Resch,
Executive Vice President and Chief Financial Officer, Joseph
(�Jay�) L. Hooley, President and Chief Operating Officer and Scott
Powers, President and CEO, State Street Global Advisors on
Thursday, February 5, 2009, at 12:30 p.m. EST. The presentation
will be accessible, in listen-only mode, on State Street�s investor
relations home page, at www.statestreet.com/stockholder, and via
telephone, at +1 ( 706 ) 679 - 5594 (Conference ID # 82862937).
Recorded replays of the presentation will be available on the web
site and by telephone +1 (706) 645-9291 (Conference ID # 82862937)
beginning at 5:30 p.m. EST that day. The telephone replay will be
available for approximately two weeks following the conference
call. This press release, presentation materials to be referred to
on today�s webcast and additional financial information will be
available prior to that webcast on State Street�s website, at
www.statestreet.com/stockholder, under �Investor Information�Latest
News,� �Annual Reports and Financial Trends�Financial Trends� and
��Investor Events and Presentations.�
State Street Corporation (NYSE: STT) is the world's leading
specialist in providing institutional investors with investment
servicing, investment management and investment research and
trading services. With $12.04 trillion in assets under custody and
$1.44 trillion in assets under management at December 31, 2008,
State Street operates in 27 countries and more than 100 geographic
markets worldwide and employs 28,475 worldwide.
FORWARD-LOOKING STATEMENTS
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements
about our goals and expectations regarding our business, financial
condition, results of operations and strategies, the financial and
market outlook, governmental and regulatory initiatives and
developments and the 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 our expectations or beliefs as of any date
subsequent to the date of this release.
Important factors that may affect future results and outcomes
include:
- global financial market
disruptions and the current, worldwide economic recession, and
monetary and other governmental actions designed to address such
disruptions and recession in the United States and
internationally;
- the financial strength of the
counterparties with which we or our clients do business and with
which we have investment or financial exposure;
- the liquidity of the U.S. and
international securities markets, particularly the markets for
fixed-income securities, 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;
- the maintenance of credit agency
ratings for our debt obligations as well as the level of
credibility of credit agency ratings;
- the possibility that changes to
accounting rules or in market conditions or asset performance may
require any off-balance sheet activities, including the
unconsolidated asset-backed commercial paper conduits we
administer, to be consolidated into our financial statements,
requiring the recognition of associated losses;
- the possibility of our customers
incurring substantial losses in investment pools where we act as
agent, and the possibility of further general reductions in the
valuation of assets;
- our ability to attract deposits
and other low-cost short-term funding;
- potential changes to the
competitive environment, including changes due to the effects of
consolidation, extensive and changing government regulation and
perceptions of State Street as a suitable service provider or
counterparty;
- the level and volatility of
interest rates and the performance and volatility of securities,
credit, currency and other markets in the United States and
internationally;
- our ability to measure the fair
value of securities in our investment securities portfolio and in
the asset-backed commercial paper conduits we sponsor;
- the results of litigation and
similar disputes and, in particular, the effect of current or
potential litigation concerning SSgA's active fixed-income
strategies, and the enactment of legislation and changes in
regulation and enforcement that impact us and our customers, as
well as the effects of legal and regulatory proceedings;
- adverse publicity or other
reputational harm;
- our ability to pursue
acquisitions, strategic alliances and divestures, finance future
business acquisitions and obtain regulatory approvals and consents
for acquisitions;
- the performance and demand for
the products and services we offer, including the level and timing
of withdrawals from our collective investment products;
- our ability to continue to grow
revenue, attract highly skilled people, control expenses and
attract the capital necessary to achieve our business goals and
comply with regulatory requirements;
- our ability to control operating
risks, information technology systems risks and outsourcing risks,
the possibility of errors in the quantitative models we use to
manage our business and the possibility that our controls will fail
or be circumvented;
- the potential for new products
and services to impose additional costs on us and expose us to
increased operational risk, and our ability to protect our
intellectual property rights;
- our ability to obtain quality
and timely services from third parties with which we contract;
- changes in accounting standards
and practices, including changes in the interpretation of existing
standards, that impact our 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 our 2007 Annual Report on Form 10-K and
our subsequent SEC filings, including, in particular, our Current
Report on Form 8-K dated January 20, 2009. We encourage investors
to read these filings, particularly the sections on Risk Factors,
and our 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, February 5,
2009, and we do not undertake efforts to revise those
forward-looking statements to reflect events after this date.
STATE STREET CORPORATION Earnings Press Release
Addendum � � � � �
Consolidated Financial Highlights
December 31, 2008 � Quarters Ended � � % Change Q4 2008 Q4
2008 (Dollars in millions, except per share amounts
December
31, September 30, December 31, vs. vs. or where otherwise
noted) �
2008 � 2008 � 2007 � Q3 2008 � Q4 2007 � Total
Revenue (1)
$ 2,673 $ 2,771 $ 2,479 (4) % 8 % Total
Expenses: Non-operating provisions, net
450 - 467
Restructuring charges
306 - - Provision for indemnification
exposure
- 200 - Merger and integration costs
27 30
57 Expenses from operations
1,528 1,695 1,649 (10) (7)
Income Tax Expense
106 369 83 Net Income
256 477 223
(46) 15 Net Income Available to Common Shareholders
234 477
223 � Diluted Earnings Per Common Share
$ .54 $ 1.09
$ .57 (50) (5) Average Diluted Common Shares Outstanding (in
thousands):
431,902 435,030 392,200 � Cash Dividends
Declared Per Common Share
$ .24 $ .24 $ .23 Closing
Price Per Share of Common Stock (at quarter end)
39.33 56.88
81.20 � Return on Common Equity
8.4 % 13.6 % 7.7 % �
At Quarter End: Assets Under Custody (AUC) (in trillions)
$
12.04 $ 14.05 $ 15.30 Assets Under Management (AUM) (in
trillions)
1.44 1.69 1.98 � � � Years Ended � % Change 2008
December 31, December 31, vs. (Dollars in millions, except
per share amounts) �
2008 � 2007 � 2007 � Total Revenue (2)
$ 10,693 $ 8,336 28 % Total Expenses: Non-operating
provisions, net
450 467 Restructuring charges
306 -
Provision for indemnification exposure
200 - Merger and
integration costs
115 198 Expenses from operations
6,780 5,768 18 Income Tax Expense
1,031 642 61 Net
Income
1,811 1,261 44 Net Income Available to Common
Shareholders
1,789 1,261 42 � Diluted Earnings Per Common
Share
$ 4.30 $ 3.45 25 Average Diluted Common Shares
Outstanding (in thousands):
416,100 365,488 � Cash Dividends
Declared Per Common Share
$ .95 $ .88 8 � Return on
Common Equity
14.8 % 13.4 % � (1) Quarter ended September
30, 2008 includes $350 million gain from sale of CitiStreet
interest, net of exit and other associated costs. (2) Year ended
December 31, 2008 includes $350 million gain from sale of
CitiStreet interest, net of exit and other associated costs.
STATE STREET CORPORATION Earnings Press Release
Addendum � � � � � �
SELECTED CONSOLIDATED FINANCIAL
INFORMATION Quarters and Years Ended December 31, 2008 and
December 31, 2007 � Quarters Ended Years Ended
December
31, December 31,
December 31, December 31, (Dollars in
millions, except per share amounts)
2008 � 2007 % Change
2008 �
2007(1)
% Change �
Fee Revenue: Servicing fees
$ 842 $
967 (13 ) %
$ 3,745 $ 3,388
11
%
Management fees
209 297 (30 )
1,028 1,141 (10 )
Trading services
418 352 19
1,467 1,152 27 Securities
finance
329 256 29
1,230 681 81 Processing fees and
other �
83 � � 55 � 51 �
277 � � 271 � 2 Total fee
revenue
1,881 1,927 (2 )
7,747 6,633 17 �
Net
Interest Revenue: Interest revenue
1,427 1,454 (2 )
4,879 5,212 (6 ) Interest expense �
584 � � 898 � (35
) �
2,229 � � 3,482 � (36 ) Net interest revenue (2)
843 556 52
2,650 1,730 53 Provision for loan losses �
- � � - � �
- � � - � Net interest revenue after
provision for loan losses
843 556 52
2,650 1,730 53 �
Gains (Losses) related to investment securities, net
(51
) (4 )
(54 ) (27 ) Gain on sale of CitiStreet
interest, net of exit and other associated costs �
- � � - �
�
350 � � - � Total revenue
2,673 2,479 7.8
10,693 8,336 28.3 �
Expenses: Salaries and employee
benefits
698 793 (12 )
3,842 3,256 18 Information
systems and communications
163 148 10
633 546 16
Transaction processing services
145 184 (21 )
644 619
4 Occupancy
124 107 16
465 408 14 Provision for legal
exposure
- 600
- 600 Provision for investment account
infusion
450 -
450 - Restructuring charges
306
-
306 - Merger and integration costs
27 57 (53 )
115 198 (42 ) Other �
398 � � 284 � 40 �
1,396
� � 806 � 73 Total expenses �
2,311 � � 2,173 � 6.4 �
7,851 � � 6,433 � 22.0 Income before income tax expense
362 306 18
2,842 1,903 49 Income tax expense �
106 � � 83 � �
1,031 � � 642 �
Net income
$ 256 � $ 223 � 15
$ 1,811 � $ 1,261 �
44 � � � � � � � �
Net income available to common
shareholders $ 234 � $ 223 � 5
$
1,789 � $ 1,261 � 42 �
Earnings Per Common Share:
Basic
$ .55 $ .58 (5 )
$ 4.33 $ 3.50 24
Diluted
.54 .57 (5 )
4.30 3.45 25 �
Average Common
Shares Outstanding (in thousands): Basic
431,042 385,200
413,182 360,675 Diluted
431,902 392,200
416,100 365,488 � Consolidated Selected Financial
Information presented above was prepared in accordance with
accounting principles generally accepted in the United States. �
(1) Year ended December 31, 2007 includes financial results of
Investors Financial business for the quarters ended September 30
and December 31, 2007. (2) Net interest revenue on a fully
taxable-equivalent basis was $811 million and $573 million for the
quarters ended December 31, 2008 and 2007, respectively, and $2.78
billion and $1.79 billion for the years ended December 31, 2008 and
2007, respectively. These amounts include taxable-equivalent
adjustments of $28 million and $17 million for the quarters ended
December 31, 2008 and 2007, respectively, and $104 million and $58
million for the years ended December 31, 2008 and 2007,
respectively.
STATE STREET CORPORATION Earnings Press
Release Addendum � � �
SELECTED CONSOLIDATED FINANCIAL
INFORMATION Quarters Ended December 31, 2008 and September
30, 2008 � � Quarters Ended
December 31, September 30,
(Dollars in millions, except per share amounts)
2008 � 2008
� % Change �
Fee Revenue: Servicing fees
$ 842
$ 966 (13) % Management fees
209 261 (20) Trading services
418 363 15 Securities finance
329 246 34 Processing
fees and other �
83 � 63 32 Total fee revenue
1,881
1,899 (1) �
Net Interest Revenue: Interest revenue
1,427 1,027 39 Interest expense �
584 � 502 16 Net
interest revenue (1)
843 525 61 Provision for loan losses �
- � - Net interest revenue after provision for loan losses
843 525 61 � Gains (Losses) related to investment
securities, net
(51) (3) Gain on sale of CitiStreet
interest, net of exit and other associated costs �
- � 350
Total revenue
2,673 2,771 (3.5) �
Expenses: Salaries
and employee benefits
698 1,022 (32) Information systems and
communications
163 151 8 Transaction processing services
145 165 (12) Occupancy
124 116 7 Provision for
investment account infusion
450 - Restructuring charges
306 - Merger and integration costs
27 30 (10) Other �
398 � 441 (10) Total expenses �
2,311 � 1,925 20.1
Income before income tax expense
362 846 (57) Income tax
expense �
106 � 369
Net income $ 256 $
477 (46) � � � �
Net income available to common shareholders
$ 234 $ 477 (51) �
Earnings Per Common Share:
Basic
$ .55 $ 1.11 (50) Diluted
.54 1.09 (50)
�
Average Common Shares Outstanding (in thousands): Basic
431,042 430,872 Diluted
431,902 435,030 �
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 $811 million and $640 million
for the quarters ended December 31, 2008 and September 30, 2008,
respectively. These amounts include taxable-equivalent adjustments
of $28 million and $25 million.
STATE STREET CORPORATION
Earnings Press Release Addendum � �
SELECTED CONSOLIDATED
OPERATING-BASIS FINANCIAL INFORMATION Quarters and Years
Ended December 31, 2008 and December 31, 2007 � Quarters Ended
(1) Years Ended (1)
December 31, December 31,
December
31, December 31, (Dollars in millions, except per share
amounts)
2008 � 2007 % Change
2008 � 2007 % Change �
Fee Revenue: Servicing fees
$ 842 $ 967 (13) %
$ 3,745 $ 3,388 11 % Management fees
209 297
(30)
1,028 1,141 (10) Trading services
418 352 19
1,467 1,152 27 Securities finance
329 256 29
1,230 681 81 Processing fees and other �
83 � 55 51 �
277 � 271 2 Total fee revenue
1,881 1,927 (2)
7,747 6,633 17 �
Net Interest Revenue: Interest
revenue, operating basis
1,133 1,471 (23)
4,714 5,270
(11) Interest expense �
322 � 898 (64) �
1,930 �
3,482 (45) Net interest revenue, operating basis
811 573 42
2,784 1,788 56 Provision for loan losses �
- � - �
- � - Net interest revenue after provision for loan losses,
operating basis
811 573 42
2,784 1,788 56 � Gains
(Losses) related to investment securities, net �
(51) � (4)
�
(54) � (27) Total revenue, operating basis (2)(3)
2,641 2,496 5.8
10,477 8,394 24.8 �
Expenses:
Salaries and employee benefits
698 934 (25)
3,842
3,397 13 Information systems and communications
163 148 10
633 546 16 Transaction processing services
145 184
(21)
644 619 4 Occupancy
124 107 16
465 408 14
Other �
398 � 276 44 �
1,196 � 798 50 Total expenses,
operating basis (2)(3) �
1,528 � 1,649 (7.3) �
6,780
� 5,768 17.5 Income before income tax expense, operating basis
1,113 847 31
3,697 2,626 41 Income tax expense,
operating basis
383 290
1,236 899 Taxable-equivalent
adjustment �
28 � 17 �
104 � 58
Net income,
operating basis $ 702 $ 540 30
$
2,357 $ 1,669 41 � � � � � � � �
Net income available to
common shareholders, operating basis $ 680 $ 540
26
$ 2,335 $ 1,669 40 � �
Diluted earnings per
common share, operating basis $ 1.58 $ 1.38 14
$ 5.61 $ 4.57 23 �
Average diluted common shares
outstanding (in thousands) 431,902 392,200
416,100 365,488 �
Return on common equity, operating
basis 24.3 % 18.7 %
19.3 % 17.7 % �
� (1) Refer to the accompanying reconciliation of reported results
to operating-basis results. (2) For the quarter ended December 31,
2008, positive operating leverage in the year-over-year comparison
was 1,310 basis points, based on growth in total operating-basis
revenue of 5.8% and a decline in total operating-basis expenses of
7.3%. � (3) For the year ended December 31, 2008, positive
operating leverage in the year-over-year comparison was 730 basis
points, based on growth in total operating-basis revenue of 24.8%
and growth in total operating-basis expenses of 17.5%. �
STATE
STREET CORPORATION Earnings Press Release Addendum �
SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION
Quarters Ended December 31, 2008 and September 30, 2008 � �
Quarters Ended (1)
December 31, September 30, (Dollars in
millions, except per share amounts)
2008 � 2008 � % Change �
Fee Revenue: Servicing fees
$ 842 $ 966 (13)
%
Management fees
209 261 (20) Trading services
418 363
15 Securities finance
329 246 34 Processing fees and other �
83 � 63 32 Total fee revenue
1,881 1,899 (1) �
Net
Interest Revenue: Interest revenue, operating basis
1,133 1,105 3 Interest expense �
322 � 465 (31) Net
interest revenue, operating basis
811 640 27 Provision for
loan losses �
- � - Net interest revenue after provision for
loan losses, operating basis
811 640 27 � Gains (Losses)
related to investment securities, net �
(51) � (3) Total
revenue, operating basis (2)
2,641 2,536 4.1 �
Expenses: Salaries and employee benefits
698 1,022
(32) Information systems and communications
163 151 8
Transaction processing services
145 165 (12) Occupancy
124 116 7 Other �
398 � 241 65 Total expenses,
operating basis (2) �
1,528 � 1,695 (9.9) Income before
income tax expense, operating basis
1,113 841 32 Income tax
expense
383 278 Taxable-equivalent adjustment �
28 �
25
Net income, operating basis $ 702 $ 538 30
� � � �
Net income available to common shareholders, operating
basis $ 680 $ 538 26 � �
Diluted earnings per
common share, operating basis $ 1.58 $ 1.24 27.4
�
Average diluted common shares outstanding (in thousands)
431,902 435,030 �
Return on common equity, operating
basis 24.3 % 15.4 % � � (1) Refer to the
accompanying reconciliation of reported results to operating-basis
results. (2) For the quarter ended December 31, 2008, positive
operating leverage in the quarter-over-quarter comparison was 1,400
basis points, based on growth in total operating-basis revenue of
4.1% and a decline in total operating-basis expenses of 9.9%.
STATE STREET CORPORATION Earnings Press Release
Addendum � �
RECONCILIATION OF REPORTED RESULTS TO
OPERATING-BASIS RESULTS Quarter and Year Ended December 31,
2008 � � � � � � � � � � � � � � � � � � � (Dollars in
millions, except per share amounts)
Quarter Ended December 31,
2008 Year Ended December 31, 2008 � �
Reported
Operating Reported Operating Results
Adjustments Results Results Adjustments
Results Fee Revenue: Servicing fees
$
842 $ 842 $ 3,745 $
3,745 Management fees
209 209 1,028
1,028 Trading services
418 418 1,467
1,467 Securities finance
329 329 1,230
1,230 Processing fees and other �
83 �
83 �
277 �
277 Total fee revenue
1,881 1,881
7,747 7,747 �
Net Interest Revenue: Interest
revenue
1,427 $ (294) (1) 1,133
4,879 $ (165) (8) 4,714 Interest
expense �
584 �
(262) (2) �
322 �
2,229 �
(299) (2) �
1,930 Net interest
revenue
843 (32) 811 2,650 134
2,784 Provision for loan losses �
- �
- �
- �
- �
- �
- Net interest revenue
after provision for loan losses
843 (32) 811
2,650 134 2,784 � Gains (Losses) related to
investment securities, net
(51) - (51)
(54) - (54) Gain on sale of CitiStreet
interest, net of exit and other associated costs � �
- �
- �
- �
350 �
(350) (9) �
- Total revenue 2,673 (32) 2,641
10,693 (216) 10,477 �
Expenses:
Salaries and employee benefits
698 - 698
3,842 - 3,842 Information systems and
communications
163 - 163 633 -
633 Transaction processing services
145 -
145 644 - 644 Occupancy
124
- 124 465 - 465 Provision for
investment account infusion
450 (450) (3)
- 450 (450) (3) - Restructuring
charges
306 (306) (4) - 306
(306) (4) - Merger and integration costs
27 (27) (5) - 115 (115)
(5) - Other �
398 �
- �
398 �
1,396 �
(200) (10) �
1,196 Total
expenses �
2,311 �
(783) �
1,528 �
7,851 �
(1,071) �
6,780 Income before income
taxes
362 751 1,113 2,842 855
3,697 Income tax expense
106 277 (6)
383 1,031 205 (11) 1,236
Taxable-equivalent adjustment �
- �
28 (7) �
28 �
- �
104 (7) �
104 Net
income $ 256 $ 446 $
702 $ 1,811 $ 546 $
2,357 � � � � � � � � � � � �
Net income available to
common shareholders $ 234 $ 446
$ 680 $ 1,789 $ 546
$ 2,335 �
Diluted earnings per common share
$ .54 $ 1.04 $ 1.58
$ 4.30 $ 1.31 $ 5.61 �
Average diluted common shares outstanding (in thousands)
431,902 431,902 431,902 416,100
416,100 416,100 �
Return on common equity
8.4 % 15.9 % 24.3 %
14.8 % 4.5 % 19.3 % � �
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 of $28 million, which is not included in reported
results and $322 million of revenue related to the Boston Federal
Reserve Bank's Asset-Backed Commercial Paper Money Market Liquidity
Facility (AMLF). (2) Represents interest expense related to the
Boston Federal Reserve Bank's AMLF. (3) Represents a charge
associated with SSgA Stable Value Funds. (4)Represents
restructuring costs associated with reduction in workforce and
other cost initiatives. (5) 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. (6) Represents $24 million of income tax expense
related to the Boston Federal Reserve Bank's AMLF, $180 million of
income tax benefit related to SSgA Stable Value Funds, $112 million
of income tax benefit related to restructuring costs, and $9
million of income tax benefit related to merger and integration
costs for the acquisition of Investors Financial. (7) Represents
taxable-equivalent adjustment, which is not included in reported
results. (8) Represents taxable-equivalent adjustment of $104
million for the year ended December 31, 2008, which is not included
in reported results, plus a $98 million charge associated with SILO
leveraged lease transactions, net of $367 million of revenue
related to the Boston Federal Reserve Bank's AMLF. (9) Represents
gain on the sale of CitiStreet interest, net of exit and other
associated costs, which State Street divested on July 1, 2008. (10)
Represents a charge to provide for estimated net exposure on an
indemnification obligation associated with collateralized
repurchase agreements. (11) Represents $27 million of income tax
expense related to the Boston Federal Reserve Bank's AMLF, $39
million of income tax expense related to the reserve for SILO's,
$140 million of income tax expense related to the gain from sale of
CitiStreet interest, $180 million of income tax benefit related to
SSgA Stable Value Funds, $112 million of income tax benefit related
to restructuring costs, $39 million of income tax benefit related
to merger and integration costs for the acquisition of Investor's
Financial and $80 million of income tax benefit related to the
provision for estimated net exposure on an indemnification
obligation associated with collateralized repurchase agreements.
STATE STREET CORPORATION Earnings Press Release
Addendum � �
RECONCILIATION OF REPORTED RESULTS TO
OPERATING-BASIS RESULTS Quarter and Year Ended December 31,
2007 � � � � � � � � � � � � � � � � � � � (Dollars in
millions, except per share amounts) Quarter Ended December 31, 2007
Year Ended December 31, 2007 � � Reported Operating Reported
Operating Results Adjustments Results Results Adjustments Results
Fee Revenue: Servicing fees $ 967 $ 967 $ 3,388 $ 3,388
Management fees 297 297 1,141 1,141 Trading services 352 352 1,152
1,152 Securities finance 256 256 681 681 Processing fees and other
� 55 � 55 � 271 � 271 Total fee revenue 1,927 1,927 6,633 6,633 �
Net Interest Revenue: Interest revenue 1,454 $ 17 (1) 1,471
5,212 $ 58 (1) 5,270 Interest expense � 898 � - � 898 � 3,482 � - �
3,482 Net interest revenue 556 17 573 1,730 58 1,788 Provision for
loan losses � - � - � - � - � - � - Net interest revenue after
provision for loan losses 556 17 573 1,730 58 1,788 � Gains
(Losses) related to investment securities, net � (4) � - � (4) �
(27) � - � (27)
Total revenue 2,479 17 2,496 8,336 58 8,394
�
Expenses: Salaries and employee benefits 793 141 (2) 934
3,256 141 (2) 3,397 Information systems and communications 148 -
148 546 - 546 Transaction processing services 184 - 184 619 - 619
Occupancy 107 - 107 408 - 408 Provision for legal exposure 600
(600) (2) - 600 (600) (2) - Merger and Integration costs 57 (57)
(3) - 198 (198) (3) - Other � 284 � (8) (2) � 276 � 806 � (8) (2) �
798 Total expenses � 2,173 � (524) � 1,649 � 6,433 � (665) � 5,768
Income before income taxes 306 541 847 1,903 723 2,626 Income tax
expense 83 207 290 642 257 899 Taxable-equivalent adjustment � - �
17 (1) � 17 � - � 58 (1) � 58
Net income $ 223 $ 317 $ 540 $
1,261 $ 408 $ 1,669 � � � � � � � � � � � �
Net income available
to common shareholders $ 223 $ 317 $ 540 $ 1,261 $ 408 $ 1,669
�
Diluted earnings per common share $ .57 $ .81 $ 1.38 $
3.45 $ 1.12 $ 4.57 �
Average diluted common shares outstanding
(in thousands) 392,200 392,200 392,200 365,488 365,488 365,488
�
Return on common equity 7.7 % 11.0 % 18.7 % 13.4 % 4.3 %
17.7 % � � 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 at 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 Earnings Press Release
Addendum �
RECONCILIATION OF REPORTED RESULTS TO
OPERATING-BASIS RESULTS Quarter Ended September 30, 2008
� � � � � � � � � � (Dollars in millions, except per share amounts)
Quarter Ended September 30, 2008 � �
Reported
Operating Results Adjustments Results
Fee Revenue: Servicing fees $ 966 $ 966 Management fees 261
261 Trading services 363 363 Securities finance 246 246 Processing
fees and other � 63 � 63 Total fee revenue 1,899 1,899 �
Net
Interest Revenue: Interest revenue 1,027 $ 78 (1) 1,105
Interest expense � 502 � (37) (2) � 465 Net interest revenue 525
115 640 Provision for loan losses � - � - � - Net interest revenue
after provision for loan losses 525 115 640 � Gains (Losses)
related to investment securities, net (3) - (3) Gain on sale of
CitiStreet interest, net of exit and other associated costs � 350 �
(350)
(3) � -
Total revenue 2,771 (235) 2,536 �
Expenses: Salaries and employee benefits 1,022 - 1,022
Information systems and communications 151 - 151 Transaction
processing services 165 - 165 Occupancy 116 - 116 Merger and
integration costs 30 (30) (4) - Other � 441 � (200) (5) � 241 Total
expenses � 1,925 � (230) � 1,695 Income before income taxes 846 (5)
841 Income tax expense 369 (91) (6) 278 Taxable-equivalent
adjustment � - � 25 (7) � 25
Net income $ 477 $ 61 $ 538 � �
� � � �
Net income available to common shareholders $ 477 $
61 $ 538 �
Diluted earnings per common share $ 1.09 $ .15 $
1.24 �
Average diluted common shares outstanding (in
thousands) 435,030 435,030 435,030 �
Return on common
equity 13.6 % 1.8 % 15.4 % � � 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 of $25 million for
the quarter ended September 30, 2008, which is not included in
reported results, plus a $98 million charge associated with SILO
leasing transactions, net of $45 million of revenue related to the
Boston Federal Reserve Bank's Asset-Backed Commercial Paper Money
Market Liquidity Facility (AMLF). (2) Represents $37 million of
interest expense related to the Boston Federal Reserve Bank's AMLF.
(3) Represents gain on the sale of CitiStreet interest, net of exit
and other associated costs, which State Street divested on July 1,
2008. (4) 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. (5)
Represents a charge to provide for estimated net exposure to
customers on an indemnification obligation associated with
collateralized repurchase agreements. (6) Represents $3 million of
income tax expense related to the Boston Federal Reserve Bank's
AMLF, $39 million of income tax expense related to the reserve for
SILO's, $140 million of income tax expense related to the gain from
sale of CitiStreet interest, $11 million of income tax benefit
related to merger and integration costs for the acquisition of
Investors Financial, and $80 million of income tax benefit related
to the provision for potential secured exposure associated with a
collateralized repurchase agreement. (7) Represents
taxable-equivalent adjustment, which is not included in reported
results.
STATE STREET CORPORATION Press Release
Addendum � � �
CONSOLIDATED STATEMENT OF CONDITION � � �
� � � � � � �
December 31, September 30, December 31,
(Dollars in millions, except per share amounts)
2008 � 2008
� 2007 �
Assets Cash and due from banks
$
3,181 $ 56,145 $ 4,041 Interest-bearing deposits with banks
55,733 20,548 6,271 Securities purchased under resale
agreements
1,635 9,598 19,133 Federal funds sold
-
1,500 4,540 Trading account assets
815 6,332 589 Investment
securities available for sale
54,163 68,881 70,326
Investment securities held to maturity purchased under money market
liquidity facility
6,087 76,660 - Investment securities held
to maturity
15,767 3,945 4,233 Loans and leases (net of
allowance of $18)
9,113 17,430 15,784 Premises and equipment
2,011 1,987 1,894 Accrued income receivable
1,738
1,915 2,096 Goodwill
4,527 4,516 4,567 Other intangible
assets
1,851 1,890 1,990 Other assets �
17,010 �
14,217 � 7,079 Total assets
$ 173,631 $ 285,564 $
142,543 �
Liabilities Deposits: Noninterest-bearing
$
32,785 $ 70,033 $ 15,039 Interest-bearing -- U.S.
4,558 9,988 14,790 Interest-bearing -- Non-U.S. �
74,882 � 70,848 � 65,960 Total deposits
112,225
150,869 95,789 � Securities sold under repurchase agreements
11,154 17,274 14,646 Federal funds purchased
1,082
1,984 425 Short-term borrowings under money market liquidity
facility
6,042 76,627 - Other short-term borrowings
11,555 4,289 5,557 Accrued taxes and other expenses
408 2,443 4,392 Other liabilities
13,972 14,908 6,799
Long-term debt �
4,419 � 4,106 � 3,636 Total liabilities
160,857 272,500 131,244 �
Shareholders' Equity
Preferred stock, no par: authorized 3,500,000; issued 20,000 shares
1,883 - - Common stock, $1 par: authorized 750,000,000
shares; issued 431,976,032, 431,950,903 and 398,366,326 shares
432 432 398 Surplus
6,992 6,793 4,630 Retained
earnings
9,135 9,002 7,745 Accumulated other comprehensive
loss
(5,650) (3,146) (575) Treasury stock (at cost 418,354,
404,943 and 12,081,863 shares) �
(18) � (17) � (899) Total
shareholders' equity �
12,774 � 13,064 � 11,299 Total
liabilities and shareholders' equity
$ 173,631 $
285,564 $ 142,543
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