State Street Corporation (NYSE: STT), one of the world’s leading
providers of financial services to institutional investors,
announced today that it has signed an acquisition agreement with
Intesa Sanpaolo, one of Italy’s premier banking groups, to acquire
Intesa Sanpaolo's Securities Services (“ISPSS”) business, with
operations in Italy and Luxembourg, for approximately €1.28 billion
($1.87 billion) in cash at closing. State Street expects to support
the acquired ISPSS balance sheet with approximately €560 million
($800 million) of additional capital at the closing. ISPSS is a
leading provider of securities services in the Italian market and
has a significant presence in the Luxembourg market. State Street
would acquire the global custody, depository banking, correspondent
banking (banca corrispondente), and fund administration portions of
the ISPSS business. In addition, assuming the cash balances in the
business are consistent with levels at June 30, 2009, State Street
expects to acquire approximately €11 billion ($16 billion) in cash
deposits at closing.
Revenue in 2009 for the ISPSS businesses that would be acquired
by State Street is expected to be approximately €293 million ($427
million). The agreement also includes a long-term investment
servicing arrangement with ISP to service all of its investment
management affiliates, including Eurizon Capital, the largest fund
manager in Italy with approximately €135 billion ($197 billion) in
assets under management as of September 30, 2009.
“Today’s acquisition represents a significant milestone in State
Street’s strategy to become a truly global provider,” said Ronald
E. Logue, chairman and CEO of State Street. “With the addition of
Intesa Sanpaolo’s securities services business, we will enhance our
ability to provide high-value services to institutional investors
around the world and generate long-term value for our shareholders
and our employees.”
State Street expects to finance the acquisition through
available capital. The closing is anticipated to occur during the
second quarter of 2010, subject to regulatory approvals and
satisfaction of other closing conditions. State Street expects its
capital ratios would remain strong after closing. Based on IBES
earnings estimates and assuming there are no material factors
impacting capital other than earnings for 2010, following closing
of the transaction in the second quarter of 2010, State Street’s
total capital ratio is estimated to be approximately 16.8%, tier 1
capital ratio is estimated to be approximately 15.6%, tier 1
leverage ratio is expected to be approximately 7.4%, and tangible
common equity ratio is estimated to be approximately 5.5%. For more
information related to estimated capital ratios, see the
“Additional Information Concerning Capital Ratios” section of this
press release.
Assuming a second quarter 2010 closing, State Street expects to
incur approximately €80 million ($120 million) in pre-tax merger
and integration costs over five years, primarily occurring in the
first three years, and to achieve approximately €60 million ($90
million) in cost savings over five years, primarily from technology
and operations. With a closing during the second quarter of 2010,
the acquisition is estimated to be modestly accretive to State
Street’s operating earnings in fiscal year 2010, excluding merger
and integration costs and depending on the closing date of the
acquisition.
In the first half of 2009, ISPSS had approximately €343 billion
($500 billion) of average assets under custody, and approximately
€141 billion ($200 billion) of average assets under depository bank
services. ISPSS’ Luxembourg business, which is a leader in offshore
fund servicing, accounted for approximately 20% of ISPSS’ 2008
revenues.
With this acquisition, based on ISPSS’ expected 2009 revenue,
State Street continues to progress toward its long-term goal of
generating 50% of its revenue from outside the United States. Total
State Street revenue derived from non-US operations was 35% for
2008 and, adjusted for the proposed acquisition, would be 38%.
“This transaction is consistent with our long-term strategic
plan to increase State Street’s scale and presence in high-growth
markets outside of the United States,” said Jay Hooley, president
and chief operating officer of State Street. “It will also provide
State Street with access to a new customer base to which we can
cross-sell additional products and services and will give us
additional traction in the insurance market. Additionally, it will
build on our leadership position in the high-growth areas of fund
accounting and offshore fund servicing. Lastly, this acquisition
will provide us with a long-term servicing relationship with one of
Europe’s premier fund managers.”
Upon closing, State Street would assume approximately 555 new
employees, with approximately 420 in Italy and 135 in
Luxembourg.
Jim Phalen, executive vice president and head of international
operations for State Street’s investment servicing and investment
research and trading businesses, commented, “With attractive
savings rates and a growing pensions market in Italy, we are
confident that ISPSS will enhance our ability to deliver investment
solutions to this key market. State Street has an excellent track
record of acquiring and integrating servicing operations, and has
set a goal of retaining 90% of the revenue of the ISPSS business to
be acquired by State Street. Following the closing, we look forward
to servicing the Italian market and to ensuring a smooth transition
for ISPSS’ customers and employees.”
State Street first established its investment servicing presence
in Milan in 2003 with its acquisition of Deutsche Bank’s global
securities services business.
Hooley concluded, “We feel that our strong capital position
allowed us to take advantage of this attractive market opportunity
which will further enhance our international presence and add to
our financial profile and capital-generation capabilities. As
always, we are focused on growth opportunities such as this to
build an ever-stronger company and to enhance shareholder
value.”
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Tuesday, December 22, 2009, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 706/679-5594 or +1 888/391-4233
(Conference ID # 48341305). Recorded replays of the conference call
will be available on the web site, and by telephone at +1
706/645-9291 or +1 800/642-1687 (Conference ID # 48341305),
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 and presentation materials
referred to on the conference call 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.”
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors
including investment servicing, investment management and
investment research and trading. With $17.9 trillion in assets
under custody and administration and $1.7 trillion in assets under
management at September 30, 2009, State Street operates in 27
countries and more than 100 geographic markets worldwide. For more
information, visit State Street’s web site at
www.statestreet.com.
About Intesa Sanpaolo and ISPSS
The Intesa Sanpaolo Group (group.intesasanpaolo.com) is the leading
banking group in Italy with about 11.1 million customers and 6,100
branches and one of the top banking groups in Europe. The Group
also has commercial banking operations in 13 countries in
Central-Eastern European markets and the Mediterranean basin, where
it currently serves 8.5 million customers through about 1,900
branches. In addition, the Group is present in 34 countries through
a specialist network made up of branches, representative offices
and subsidiary banks focused on corporate banking to facilitate the
cross-border activities of its customers. The Group’s activities
are organised in six business units: domestic commercial banking,
corporate and investment banking, international commercial banking,
public finance, asset management, and financial advisory.
Additional Information Concerning Capital Ratios
Estimates of the following capital ratios are presented in this
press release.
The total capital, tier 1 capital and tier 1 leverage
ratios are calculated in accordance with applicable bank
regulatory requirements.
The ratio of tangible common equity, or TCE, ratio, is
calculated by dividing total common shareholders’ equity by
consolidated total assets, after reducing both amounts by goodwill
and other intangible assets net of related deferred taxes. Total
assets reflected in the TCE ratio also exclude cash balances on
deposit at the Federal Reserve Bank and other central banks in
excess of required reserves. The TCE ratio is not required by GAAP
or by bank regulations, but is a metric used by management to
evaluate the adequacy of State Street’s capital levels. Since there
is no authoritative requirement to calculate the TCE ratio, our TCE
ratio is not necessarily comparable to similar capital measures
disclosed or used by other companies in the financial services
industry.
The estimates of the ratios presented in this release reflect
the estimated effects of the closing of the transaction and
assumptions relating to, among other things, the size of cash
deposits acquired, amounts of incremental capital required to
support the balance sheet, return on the acquired cash deposits,
and the continued financial positions of State Street and ISPSS.
Financial information concerning ISPSS and related estimates are
based upon representations made in the acquisition agreement.
Forward-Looking Statements
This press release contains forward-looking statements as
defined by United States securities laws, including statements
about our agreement to acquire the securities services business of
ISPSS, the results and impact of that acquisition, including the
estimated impact of the acquisition on specified capital ratios and
our financial results, and related rationales, as well as about our
overall 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, as well
as representations in the acquisition agreement, 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 press release.
Important factors that may affect future results and outcomes
include, but are not limited to:
- the ability to obtain regulatory
approvals for the transaction in multiple jurisdictions and the
satisfaction of other closing conditions;
- the risks that businesses will
not be integrated successfully, or will take longer than
anticipated, that expected synergies will not be achieved or
unexpected disynergies will be experienced, that customer and
deposit retention goals will not be met, and that disruptions from
the transaction will harm relationships with customers, employees
and regulators;
- financial market disruptions and
the economic recession, whether in the U.S. or internationally, and
monetary and other governmental actions designed to address such
disruptions and recession, including actions taken in the U.S. and
internationally to address the financial and economic disruptions
that began in 2007;
- increases in the potential
volatility of, or declines in the levels of, our net interest
revenue, changes in the composition of the assets on our
consolidated balance sheet and the possibility that we may be
required to change the manner in which we fund those assets;
- the financial strength and
continuing viability of the counterparties with which we or our
customers do business and to which we have investment, credit 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, credit
agency ratings, and fair values 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 income statement recognition of an impairment
loss;
- the maintenance of credit agency
ratings for our debt and depository obligations as well as the
level of credibility of credit agency ratings;
- 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 U.S. and
internationally;
- our ability to measure the fair
value of the investment securities on our consolidated balance
sheet;
- the results of litigation,
government investigations and similar disputes and, in particular,
the effect of current or potential proceedings concerning State
Street Global Advisors’, or SSgA’s, active fixed-income strategies
and other investment products;
- the enactment of legislation and
changes in regulation and enforcement that impact us and our
customers;
- 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 grow revenue,
attract and/or retain 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;
- changes in government regulation
or new legislation, which may increase our costs, expose us to risk
related to compliance or impact our customers;
- changes in accounting standards
and practices; 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 2008 Annual Report on Form 10-K,
our Current Report on Form 8-K dated May 18, 2009, and our
subsequent SEC filings. We encourage investors to read these
filings, particularly the sections on Risk Factors, 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, December 22, 2009, and we do not undertake efforts to
revise those forward-looking statements to reflect events after
this date.
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