State Street Corporation today announced fourth-quarter 2009
earnings per common share of $1.00 on revenue of $2.280 billion
compared with $0.54 per share on revenue of $2.673 billion in the
fourth quarter of 2008. Expenses in the fourth quarter of 2009 are
$1.565 billion, compared with $2.311 billion in the fourth quarter
of 2008. For the fourth quarter of 2009, return on common
shareholders’ equity was 14.0%, up from 8.4% in the fourth quarter
of 2008.
Compared to the third quarter of 2009, fourth-quarter 2009
results improved from $0.66 per share on revenue of $2.236 billion.
Expenses in the third quarter of 2009 were $1.733 billion. For the
third quarter of 2009, return on common shareholders’ equity was
10.2%.
The 2009 results included an after-tax extraordinary loss of
$(3.684) billion or $(7.77) per share related to the effect of the
May 2009 consolidation of the State Street-administered
asset-backed commercial paper conduits onto the Company’s balance
sheet. In 2009, State Street reported full-year earnings per share
of $3.46, before the extraordinary loss, on revenue of $8.640
billion compared with earnings per share of $4.30 on revenue of
$10.693 billion in 2008. Including the extraordinary loss, the
full-year 2009 loss per share was $(4.31). Return on common
shareholders’ equity was 13.2% in 2009 before the extraordinary
loss, compared with 14.8% in 2008.
In addition to presenting State Street’s financial results in
conformity with U.S. generally accepted accounting principles
(GAAP), management also presents results on an “operating basis” in
order to highlight comparable financial trends and other
characteristics with respect to State Street’s ongoing business
operations from period to period. A full reconciliation of
operating-basis results to GAAP results is included in the addendum
at the end of this press release. Also see “Additional
Information.” Net interest revenue on an operating basis for all
periods is presented on a fully taxable-equivalent basis.
Operating-basis results for 2009 exclude a pre-tax provision of
$(250) million or $(0.37) per share related to an increase in the
reserve established in 2007 to address legal exposure related to
losses incurred by investors in certain fixed-income strategies
managed by State Street Global Advisors, $(106) million or $(0.22)
per share related to repayment of the U.S. Treasury’s TARP Capital
Purchase Program investment and $(49) million, or $(0.06) per
share, of pre-tax merger and integration costs associated with the
2007 acquisition of Investors Financial Services Corp., which
includes the fourth-quarter and third-quarter 2009 effects of $(9)
million or $(0.01) per share and $(11) million or $(0.01) per
share, respectively, for pre-tax merger and integration costs
associated with that acquisition.
“Operating-basis” results for full-year 2008 exclude previously
reported net pre-tax effects of $(751) million, or $(1.31) per
share and for the fourth quarter of 2008 exclude previously
reported net pre-tax effects of $(723) million, or $(1.04) per
share. These items, including the related tax effects, are more
fully described in the reconciliations of full-year and
fourth-quarter 2008 operating-basis results in the addendum at the
end of this press release.
The table below provides a summary of selected financial
information and key ratios for the indicated periods, presented on
an operating basis where noted. The tier 1 capital and tier 1
leverage ratios are capital ratios used regularly by bank
regulatory authorities to evaluate the Company’s capital adequacy.
The tier 1 common ratio was used by the Federal Reserve in
connection with its Supervisory Capital Assessment Program. The TCE
and TCE/risk-weighted assets ratios are other capital ratios
management believes provide additional context for understanding
and assessing the Company’s capital adequacy. Unless otherwise
specified, all capital ratios referenced in this press release
refer to State Street Corporation and not State Street Bank and
Trust Company. See “Additional Information” for a further
description of these ratios and the addendum at the end of this
press release for reconciliations applicable to the TCE ratios.
Q4
2009
Q3
2009
Increase/(Decrease)
Q4
2008
Increase/(Decrease)
Selected Financial Information
and Key Ratios
(Dollars in millions) Total revenue(1) $ 2,312 $
2,267 $ 45 2.0 % $ 2,641 $ (329 ) (12.5 %) Total expenses(1) 1,556
1,472 84 5.7 % 1,528 28 1.8 % Total assets (2) 157,946 163,277
(5,331 ) (3.3
%)
173,631 (15,685 ) (9.0 %) Unrealized loss on investment
Portfolio, after-tax(2)
(2,286
)
(2,985 ) 699 23.4 % (6,316 ) 4,030 63.8 % AUCM (dollars in
billions): Assets under custody and
administration(2)(3)
$
18,795
$ 17,935 $ 860 4.8 % $ 15,907 $
2,888
18.2 % Assets under management(2) 1,911 1,735 176 10.1 % 1,444 467
32.3 % Earnings per common share(1) $ 0.99 $ 1.05 $ (0.06 )
(5.7
%)
$ 1.58 $ (0.59 ) (37.3 %) Return on common equity(1) 13.8
%
16.2 % (240) bps 24.3 % (1050) bps Tier 1 capital ratio(2) 17.5
%
15.3 % 220 bps 20.3 % (280) bps Tier 1 leverage ratio(2) 8.5
%
8.0 % 50 bps 7.8 % 70 bps Tier 1 common ratio(2) 15.3
%
13.3 % 200 bps 15.5 %
(20) bps
TCE ratio(2) 6.6
%
5.6 % 100 bps 4.6 % 200 bps TCE/RWA ratio(2) 12.6
%
10.2 % 240 bps 7.3 % 530 bps (1) Presented on an operating
basis. (2) As of period end. (3) Includes assets under custody of
$13,748 billion, $13,260 billion, and $12,041 billion, respectively
as of the end of Q4 2009, Q3 2009 and Q4 2008.
Operating-basis earnings per common share in the fourth quarter
of 2009 are $0.99 per share down 37.3% from $1.58 per share in the
fourth quarter of 2008. Operating-basis revenue of $2.312 billion
in the fourth quarter of 2009 is down 12.5% from $2.641 billion in
the fourth quarter a year ago. Operating-basis expenses of $1.556
billion in the fourth quarter of 2009 are up 1.8% from $1.528
billion in the year-ago quarter. For the fourth quarter of 2009,
operating-basis return on common shareholders’ equity is 13.8%,
down from 24.3% for the fourth quarter of 2008.
Operating-basis results for the full-year 2009 include earnings
per share of $4.11 on revenue of $8.759 billion compared with
earnings per share of $5.61 on revenue of $10.477 billion in 2008.
Operating basis expenses for the full-year 2009 are $5.667 billion
compared with $6.780 billion in 2008.
Total assets are $158 billion at December 31, 2009, compared
with $163 billion at September 30, 2009 and $174 billion at
December 31, 2008. Excluding $22 billion in excess deposits held at
the Federal Reserve and other central banks at December 31, 2009,
$22 billion at September 30, 2009, and $52 billion at December 31,
2008, the normalized balance sheet was $136 billion at December 31,
2009, compared to a normalized balance sheet of $141 billion at
September 30, 2009 and $122 billion as of December 31, 2008. State
Street’s regulatory capital ratios continue to be strong as of
December 31, 2009, with the Company’s tier 1 capital ratio at 17.5%
and leverage ratio at 8.5%. In addition, the Company’s tier 1
common ratio is 15.3%, its TCE to risk-weighted assets ratio is
12.6%, and its TCE ratio is 6.6%, well ahead of the projected TCE
ratio of 4.91% the Company targeted in February 2009 at its
Investor and Analyst Forum, which had been adjusted for
consolidation of the asset-backed commercial paper conduits. This
performance is due to organic capital generation, the successful
equity raise in May, and the improvement in unrealized losses in
the investment portfolio.
At December 31, 2009, the after-tax, unrealized mark-to-market
losses in the investment portfolio are $2.29 billion, down from
$2.98 billion at September 30, 2009, and down about 65% from $6.32
billion as of December 31, 2008.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "In 2009 we focused on strengthening our capital,
servicing our clients, and controlling expenses. For the full year,
we added $1.13 trillion in assets to be serviced as well as $248
billion in net new business in asset management. Also, on an
operating basis, we achieved full-year positive operating leverage
compared to 2008. In particular, investment manager operations
outsourcing, alternative investment servicing, as well as passive
management and ETF strategies generated new business and, based on
the current pipeline, that trend is continuing. Our core business
momentum also continues; on a quarter-over-quarter basis, we grew
our servicing fee and management fee revenue, and in the fourth
quarter we announced two proposed cash acquisitions, that of the
securities services business of Intesa Sanpaolo, a premier provider
of investment services in Italy and Luxembourg and that of Mourant
International Finance Administration, a leading servicer of
alternative investment servicing.”
Joseph L. Hooley, president and chief operating officer added,
“Given the past year’s quarterly momentum in servicing fee and
management fee revenue, we are increasingly confident in our
ability to grow revenue during 2010. However, we continue to face
headwinds from the impact of market-driven revenue and expect the
transition in market-driven revenue that began in 2009 to continue
into 2010. Including discount accretion associated with the former
conduit assets, we expect operating-basis earnings per share in
2010 to be modestly below the lower end of our 10 to 15 percent
range. However, to create more transparency and to underscore our
confidence in our core businesses, going forward, we will report
our operating-basis financial results excluding both merger and
integration costs as well as the impact of conduit discount
accretion. On this basis, 2009 operating-basis revenue would have
been $8.138 billion and operating-basis earnings per share would
have been $3.32. We expect our 2010 operating-basis earnings per
share, excluding merger and integration costs and conduit discount
accretion, to be only slightly above the level of 2009, reflecting
in part increased outstanding average shares.”
Hooley concluded, “We begin 2010 from a position of strength. We
believe we are well positioned globally and that, over economic and
market cycles, we will maintain our long-term financial goals of
operating-basis revenue growth of 8 percent to 12 percent, growth
in operating-basis earnings per share of 10 percent to 15 percent,
and operating-basis return on equity of between 14 percent and 17
percent.”
In 2009, discount accretion of $621 million, or $0.79 per share,
contributed to State Street’s capital strength, and the Company
expects about $900 million, or $1.08 per share, in 2010, and
expects about $5.3 billion in total on a pre-tax basis to accrete
into revenue over the life of the assets, based on anticipated
pre-payment speeds, credit quality and assuming the company holds
the securities to maturity.
FOURTH-QUARTER 2009 RESULTS VS.
YEAR-AGO FOURTH QUARTER
Servicing fees are up 5% to $882 million from $842 million in
last year’s fourth quarter. The increase is attributable primarily
to the increase in daily average equity valuations and new
business. Total assets under custody and administration are $18.795
trillion at December 31, 2009, up 18%, compared with $15.907
trillion at December 31, 2008. Daily average values for the S&P
500 Index are up 19% and the MSCI® EAFE IndexSM increased
approximately 28% from the fourth quarter of 2008.
Investment management fees, generated by State Street Global
Advisors, are $231 million, up 11% from $209 million in the
year-ago quarter. The increase in management fees is attributable
primarily to the increase in average month-end equity valuations,
as well as net new business, with the increase in assets partly
offset by a change in asset mix. Average month-end equity
valuations are up about 17% as measured by the S & P 500 and
are up 28% as measured by the MSCI EAFE indexSM. Total assets under
management at December 31, 2009, are $1.911 trillion, up 32%
compared to $1.444 trillion at December 31, 2008.
Trading services revenue, which includes foreign exchange
trading revenue and brokerage and other fees, is $270 million for
the fourth quarter of 2009, down 35% from $418 million in the
fourth quarter a year-ago. The 57% decrease in foreign exchange
revenue is primarily due to lower volatility and lower volumes.
Brokerage and other fees increased 47% due primarily to strength in
transition management and increases in electronic trading.
Securities finance revenue is $83 million in the quarter, down
75% from $329 million in the year-ago fourth quarter due primarily
to compressed spreads as well as lower volumes.
Processing fees and other is $60 million, down 28% from $83
million in the fourth quarter of 2008 due to several factors, none
of which is material.
Net interest revenue on an operating basis is $729 million, a
decrease of 10% from $811 million in the year-ago fourth quarter
due primarily to the impact of the continuing low interest-rate
environment, and the decline in customer balances from the
abnormally high levels in the fourth quarter of 2008, offset
partially by the impact of discount accretion from the consolidated
conduit assets. Net interest margin of 235 basis points in the
fourth quarter was up slightly from the fourth quarter of 2008;
excluding discount accretion, the net interest margin would have
been 161 basis points. The net interest margin for the full year is
220 basis points including discount accretion and would have been
169 basis points excluding discount accretion.
In the quarter, due to the improving markets, we recorded $108
million of net gains from sales of securities, partially offset by
$51 million of other-than-temporary impairment related to credit,
resulting in $57 million of net gains related to investment
securities. In addition, we recorded a $35 million provision for
loan losses, primarily related to commercial real estate
exposures.
Operating-basis expenses in the fourth quarter of 2009 increased
to $1.556 billion, up 1.8% from $1.528 billion in the year-ago
quarter, primarily as a result of a 13% increase in salaries and
benefits. In the fourth quarter of 2008, we reversed approximately
50% of previously accrued full-year incentive compensation,
resulting in a low level of salaries and benefits expense for the
quarter. Transaction processing expense of $158 million increased
9% attributable to higher volumes in the investment servicing
business, offset partially by a 7% reduction in occupancy expense,
from $124 million to $115 million. Other expenses declined 17%,
from $398 million to $329 million partially due to a lower level of
governmental fees paid in 2009 compared to 2008.
The effective tax rate on operating-basis earnings for the
fourth quarter of 2009 is 28.5%, down from 35.3% on the same basis
for the fourth quarter of 2008. The decrease in the rate is the
result of an increase in the proportion of earnings from non-U.S.
subsidiaries where the intention is to reinvest the earnings
indefinitely overseas, as well as to certain adjustments in prior
year tax accruals. The effective tax rate on operating-basis
earnings for the full year 2010 is expected to be approximately
30%.
FOURTH-QUARTER 2009 RESULTS VS.
THIRD QUARTER 2009
The following information is presented on an operating basis.
Earnings per common share in the fourth quarter of 2009 are $0.99,
a decrease of 5.7% compared with $1.05 in the third quarter of
2009. Total revenue in the fourth quarter of $2.312 billion, is up
2.0% from $2.267 billion in the third quarter of 2009. Total
expenses for the fourth quarter of 2009 are $1.556, up 5.7% from
$1.472 billion in the third quarter of 2009. Return on common
shareholders’ equity of 13.8% in the fourth quarter compares with
16.2% in the third quarter.
The table below provides the components of operating-basis
revenue:
Operating-Basis Revenue
Increase/(Decrease) (Dollars in millions)
Q4 2009
Q3 2009 $ % Servicing fees $ 882 $ 833
$ 49 5.9 % Investment management fees 231 219 12 5.5 Trading
services revenue 270 269 1 0.4 Securities finance revenue 83 105
(22 ) (21.0 ) Processing fees and other revenue 60 45 15 33.3 Net
interest revenue, fully-taxable equivalent basis(1) 729 754 (25 )
(3.3 ) Gains related to investment securities, net 57
42 15 35.7
Total Operating-Basis
Revenue $ 2,312 $ 2,267
$ 45 2.0 %
(1) The fourth quarter of 2009 and the third quarter of 2009
include $32 million and $31 million tax-equivalent adjustments,
which increased GAAP-basis net interest revenue of $697 million and
$723 million, respectively, for the periods.
Servicing fees are $882 million, up 6% from $833 million in the
third quarter due primarily to new business as well as the increase
in daily average equity valuations. Management fees are $231
million up 5% from $219 million primarily due to the increase in
the average month-end equity valuations, and net new business.
Trading services revenue is $270 million, compared to $269 million.
Securities finance revenue is $83 million, down 21% from $105
million in the prior quarter primarily due to compressed spreads,
partially offset by slightly increased volumes. Processing fees and
other revenue increased from $45 million to $60 million. Net
interest revenue on a fully taxable-equivalent basis is $729
million, down 3% from $754 million due to a lower level of discount
accretion ($230 million versus $279 million) caused by the absence
of one-time pay-downs and slower prepayment rates, offset partially
by the impact of the investment strategy which we began to execute
in the third quarter.
The table below provides the components of operating-basis
expenses:
Operating-Basis Expenses
Increase/(Decrease) (Dollars in millions)
Q4 2009
Q3 2009 $ % Salaries and employee
benefits $ 791 $ 819 $ (28 ) (3.4 ) Information systems and
communications 163 165 (2 ) (1.2 ) Transaction processing services
158 148 10 6.8 Occupancy 115 118 (3 ) (2.5 ) Other 329
222 107 48.2
Total
Operating-Basis Expenses $ 1,556 $
1,472 $ 84 5.7 %
Compared to the third quarter of 2009, salaries and employee
benefits expense decreased 3% to $791 million from $819 million
primarily due to a $50 million decrease in discretionary cash
incentive compensation accruals recorded in the fourth quarter.
Transaction processing expenses increased 7% due to higher volumes
in the investment servicing business and other expenses increased
48% to $329 million due primarily to an adverse judgment of $60
million rendered by a Netherlands court in connection with SSgA’s
appointment of Lehman Brothers as prime broker for certain
investment funds, and other securities processing costs. All other
lines were approximately flat on a quarter-to-quarter basis.
ADDITIONAL INFORMATION
All per share amounts represent fully diluted earnings per
common share. Return on common shareholders’ equity is determined
by dividing annualized net income available to common shareholders
by average common shareholders’ equity for the period. Positive
operating leverage is defined as the excess rate of growth of total
revenue over the rate of growth of total expenses, each determined
on an operating basis.
This press release includes financial information presented on a
GAAP basis as well as on an operating basis. Management measures
and compares certain financial information on an operating basis,
as it believes that this presentation supports meaningful
comparisons from period to period and the analysis of comparable
financial trends with respect to State Street’s normal ongoing
business operations. Management believes that operating-basis
financial information, which reports revenue from non-taxable
sources on a fully taxable-equivalent basis and excludes the impact
of revenue and expenses outside of the normal course of business,
facilitates an investor’s understanding and analysis of State
Street’s underlying financial performance and trends in addition to
financial information prepared in accordance with GAAP. Non-GAAP
financial measures should be considered in addition to, not as a
substitute for or superior to, financial measures determined in
accordance with GAAP. A full reconciliation of operating-basis
results to GAAP results is included in the addendum at the end of
this press release.
Management believes that the use of other non-GAAP financial
measures in the calculation of identified capital ratios is useful
to understanding State Street’s capital position and of interest to
investors. Below is a description of, and other information with
respect to, the capital ratios referenced in this press
release.
- The tier 1 risk-based
capital, or tier 1 capital, and tier 1 leverage ratios, as
applicable, are each calculated in accordance with applicable bank
regulatory requirements and, as permitted, exclude the impact of
commercial paper purchased under the Federal Reserve Bank of
Boston’s AMLF.
- The tier 1 risk-based common,
or tier 1 common, ratio is calculated by dividing (a) tier 1
capital less non-common elements including qualifying perpetual
preferred stock, qualifying minority interest in subsidiaries and
qualifying trust preferred securities, by (b) risk-weighted assets,
which assets are calculated in accordance with applicable bank
regulatory requirements. The tier 1 common ratio is not required by
GAAP or on a recurring basis by bank regulations. However, this
ratio was used by the Federal Reserve in connection with its stress
test administered to the 19 largest U.S. bank holding companies
under the Supervisory Capital Assessment Program, the results of
which were announced on May 7, 2009. Although we understand that
the Federal Reserve does not intend to prospectively require
calculation of the tier 1 common ratio, due to the recent timing of
the Supervisory Capital Assessment Program, management is currently
monitoring this ratio, along with the other capital ratios
described in this press release, in evaluating State Street’s
capital levels and believes that, at this time, the ratio may be of
interest to investors.
Reconciliations with respect to unaudited tier 1 common capital
as of December 31, 2009, September 30, 2009 and December 31, 2008
are provided in the addendum at the end of this press release.
- The ratio of tangible common
equity to adjusted tangible assets, or TCE ratio, is calculated
by dividing consolidated 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 commercial paper
purchased under the AMLF and 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.
Tangible common equity and adjusted tangible assets are non-GAAP
financial measures and should be considered in addition to, not as
a substitute for or superior to, financial measures determined in
accordance with GAAP. Reconciliations with respect to the
calculation of the unaudited TCE ratio as of December 31, 2009,
September 30, 2009, and December 31, 2008 are provided in the
addendum at the end of this press release.
- The ratio of tangible common
equity to risk-weighted assets, or TCE/RWA ratio, is calculated
by dividing total consolidated common shareholders’ equity (reduced
by goodwill and other intangible assets net of related deferred
taxes) by total risk-weighted assets (determined in accordance with
applicable bank regulatory requirements). As permitted by bank
regulations, total risk-weighted assets exclude commercial paper
purchased under the AMLF. The TCE/RWA 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/RWA ratio, our
TCE/RWA ratio is not necessarily comparable to similar capital
measures disclosed or used by other companies in the financial
services industry. Tangible common equity is a non-GAAP financial
measure and should be considered in addition to, not as a
substitute for or superior to, financial measures determined in
accordance with GAAP. Reconciliations with respect to the
calculation of the unaudited TCE/RWA ratio as of December 31, 2009,
September 30, 2009, and December 31, 2008 are included in the
addendum at the end of this press release.
INVESTOR CONFERENCE
CALL
State Street will webcast an investor conference call today,
Wednesday, January 20, 2010, 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 or +1 888/391-4233
(Conference ID #49105957). 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#49105957) ,
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 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
provider of financial services to institutional investors including
investment servicing, investment management and investment research
and trading. With $18.795 trillion in assets under custody and
administration and $1.911 trillion in assets under management at
December 31, 2009, State Street operates in 25 countries and more
than 100 geographic markets and employs 27,310 worldwide. For more
information, visit State Street’s web site at www.statestreet.com
or call +1 877/639-7788 [NEWS STT] toll-free in the United States
and Canada, or +1 678/999-4577 outside those countries.
FORWARD-LOOKING
STATEMENTS
This press release contains forward-looking statements as
defined by United States securities laws, including statements
about our 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 press release.
Important factors that may affect future results and outcomes
include, but are not limited to:
- financial market disruptions and
the economic recession, whether in the U.S. or internationally, and
monetary and other governmental actions, including regulation,
taxes and fees, designed to address or otherwise be responsive to
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 ability to complete our
announced and pending acquisitions, including the ability to obtain
regulatory approvals in multiple jurisdictions and the satisfaction
of other closing conditions;
- the risks that acquired
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, that other regulatory or
operational challenges will be experienced and that disruptions
from the transaction will harm relationships with customers,
employees or regulators;
- 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 and compensate 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, January 20, 2010, and we do not undertake efforts to
revise those forward-looking statements to reflect events after
this date.
Earnings Press Release
Addendum Consolidated Financial Highlights
December 31, 2009 Quarters Ended
% Change Q4 2009 Q4 2009 (Dollars in millions, except per share
amounts or where otherwise noted)
December 31, September 30,
December 31, vs. vs.
2009
2009 2008 Q3 2009
Q4 2008 Revenue: Fee revenue
$
1,526 $ 1,471 $ 1,881 Net interest revenue
697 723
843 Net gains from sales of available-for-sale securities
108 141 27 Losses from other-than-temporary impairment
(51 ) (99 ) (78 ) Total Revenue
2,280 2,236
2,673 2 % (15 ) % Provision for Loan Losses
35 16 -
Total Expenses: Expenses from operations
1,556 1,472
1,528 6 2 Non-operating provisions
- 250 756
(1)
Merger and integration costs
9 11 27 (18 ) (67 ) Net
Income
498 327 256 52 95 Net Income Available to
Common Shareholders
498 327 234 52 113 Diluted
Earnings Per Common Share
1.00 .66 .54 52 85 Average
Diluted Common Shares Outstanding (in thousands)
497,615
498,290 431,902 Cash Dividends Declared Per Common Share
$ .01 $ .01 $ .24 Closing Price Per Share of Common
Stock (at quarter end)
43.54 52.60 39.33 Ratios:
Return on common equity
14.0 % 10.2 % 8.4 % Net interest
margin, fully taxable-equivalent basis
2.35 2.47 2.00 Tier 1
risk-based capital
17.5
15.3 20.3 Total risk-based capital
18.8
16.5 21.6 Tier 1 leverage
8.5
8.0 7.8 Tier 1 common to risk-weighted assets (2)
15.3
13.3 15.5 Tangible common equity to tangible assets (2)
6.6
5.6 4.6 Tangible common equity to risk-weighted assets (2)
12.6
10.2 7.3 At Quarter End: Assets Under Custody and
Administration(3) (AUA) (in trillions)
$ 18.79 $
17.94 $ 15.91 Assets Under Management (AUM) (in trillions)
1.91 1.74 1.44 (1) Composed of $450 million charge
associated with SSgA Stable Value Funds and $306 million of
restructuring costs associated with reduction in workforce and
other cost initiatives. (2) Refer to accompanying reconciliation
for additional information. (3) Includes assets under custody of
$13.75 trillion, $13.26 trillion, and $12.04 trillion,
respectively. Years Ended % Change 2009
December 31, December 31, vs. (Dollars in millions, except
per share amounts)
2009
2008 2008 Revenue: Fee revenue
$ 5,935 $ 7,747 Net interest revenue
2,564
2,650 Net gains from sales of available-for-sale securities
368 68 Losses from other-than-temporary impairment
(227 ) (122 ) Gain on sale of CitiStreet interest,
net of exit and other associated costs
- 350
Total Revenue
8,640 10,693 (19 ) % Provision for Loan
Losses
149 - Total Expenses: Expenses from operations
5,917 7,736 (24 ) Merger and integration costs
49 115
(57 ) Income Before Extraordinary Loss
1,803 1,811 -
Extraordinary Loss, Net of Tax
(3,684 ) - Net Income
(Loss)
(1,881 ) 1,811 (204 ) Net Income Before
Extraordinary Loss Available to Common Shareholders
1,640
1,789 (8 ) Net Income (Loss) Available to Common Shareholders
(2,044 ) 1,789 (214 ) Diluted Earnings Per
Common Share Before Extraordinary Loss
$ 3.46 $ 4.30
(20 ) Diluted Earnings (Loss) Per Common Share
(4.31
) 4.30 (200 ) Average Diluted Common Shares
Outstanding (in thousands):
474,003 416,100 Cash
Dividends Declared Per Common Share
$ .04 $ .95 (96 )
Return on Common Equity Before Extraordinary Loss
13.2 % 14.8 % Net interest margin, fully
taxable-equivalent basis
2.19 2.08
STATE STREET
CORPORATION Earnings Press Release Addendum
SELECTED CONSOLIDATED FINANCIAL
INFORMATION Quarters and Years Ended December 31, 2009 and
December 31, 2008 Quarters Ended Years Ended
December
31, December 31,
December 31, December 31, (Dollars in
millions, except per share amounts)
2009
2008 % Change
2009
2008 % Change
Fee
Revenue: Servicing fees
$ 882 $ 842 5 %
$
3,276 $ 3,745 (13 )
%
Management fees
231 209 11
824 1,028 (20 ) Trading
services
270 418 (35 )
1,094 1,467 (25 ) Securities
finance
83 329 (75 )
570 1,230 (54 ) Processing fees
and other
60 83 (28 )
171 277 (38 ) Total fee revenue
1,526 1,881 (19 )
5,935 7,747 (23 )
Net
Interest Revenue: Interest revenue
877 1,427 (39 )
3,286 4,879 (33 ) Interest expense
180
584 (69 )
722 2,229
(68 ) Net interest revenue (1)
697 843 (17 )
2,564 2,650 (3 )
Gains (Losses) related to
investment securities, net: Net gains from sales of
available-for-sale securities
108 27
368 68 Losses
from other-than-temporary impairment
(257 ) (78 )
(1,155
) (122 ) Losses not related to credit
206
-
928
- Gains (Losses) related to investment
securities, net
57 (51 )
141 (54 ) Gain from
sale of CitiStreet interest, net of exit and other associated costs
- -
-
350 Total revenue
2,280 2,673 (15 )
8,640 10,693 (19 ) Provision for loan losses
35 -
149 -
Expenses: Salaries and
employee benefits
791 698 13
3,037 3,842 (21 )
Information systems and communications
163 163 -
656
633 4 Transaction processing services
158 145 9
583
644 (9 ) Occupancy
115 124 (7 )
475 465 2 Provision
for legal exposure
- -
250 - Provision for investment
account infusion
- 450
- 450 Restructuring chargers
- 306
- 306 Merger and integration costs
9 27
(67 )
49 115 (57 ) Other
329 398
(17 )
916 1,396 (34 )
Total expenses
1,565 2,311 (32 )
5,966 7,851 (24 ) Income before
income tax expense and extraordinary loss
680 362 88
2,525 2,842 (11 ) Income tax expense
182
106
722 1,031
Income before extraordinary loss
498 256 95
1,803 1,811 - Extraordinary loss, net of tax
-
-
(3,684 ) -
Net income (loss) $ 498 $ 256
95
$ (1,881 ) $ 1,811 (204 )
Adjustments to net income (loss): Prepayment of
preferred stock discount
$ - $ -
$ (106
) $ - Dividend on preferred stock
- (18 )
(46
) (18 ) Accretion of preferred stock discount
- (4 )
(11 ) (4 )
- (22 )
(163 )
(22 )
Net income before extraordinary loss available
to common shareholders $ 498 $ 234
113
$ 1,640 $ 1,789 (8 )
Net income (loss) available to common shareholders $
498 $ 234 113
$ (2,044 )
$ 1,789 (214 )
Earnings Per Common Share Before
Extraordinary Loss: Basic(2)
$ 1.01 $ .54 87
$ 3.50 $ 4.32 (19 ) Diluted
1.00 .54 85
3.46 4.30 (20 )
Earnings (Loss) Per Common
Share: Basic (3)
$ 1.01 $ .54 87
$
(4.32 ) $ 4.32 (200 ) Diluted
1.00 .54 85
(4.31 ) 4.30 (200 )
Average Common Shares
Outstanding (in thousands): Basic
493,459 431,042
470,602 413,182 Diluted
497,615 431,902
474,003 416,100 Selected consolidated 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 $729 million and $871 million for the quarters ended December
31, 2009 and 2008, respectively, and $2.69 billion and $2.75
billion for the years ended December 31, 2009 and 2008,
respectively. These amounts include tax-equivalent adjustments of
$32 million and $28 million for the quarters ended December 31,
2009 and 2008, respectively, and $126 million and $104 million for
the years ended December 31, 2009 and 2008 respectively.
(2) Basic earnings per common share before extraordinary
loss on distributed earnings were $.01 and $.24 for the quarters
ended December 31, 2009 and 2008, respectively, and $.27 and $.94
for the years ended December 31, 2009 and 2008, respectively. Basic
earnings per common share before extraordinary loss on
undistributed earnings were $1.00 and $.30 for the quarters ended
December 31, 2009 and 2008, respectively, and $3.23 and $3.38 for
the years ended December 31, 2009 and 2008, respectively.
(3) Basic earnings per common share on distributed earnings
were $.01 and $.24 for the quarters ended December 31, 2009 and
2008, respectively, and $.27 and $.94 for the years ended December
31, 2009 and 2008, respectively. Basic earnings per common share on
undistributed earnings were $1.00 and $.30 for the quarters ended
December 31, 2009 and 2008, respectively, and ($4.59) and $3.38 for
the years ended December 31, 2009 and 2008, respectively.
STATE STREET
CORPORATION Earnings Press Release Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION Quarters
Ended December 31, 2009 and September 30, 2009
Quarters Ended
December 31, September 30, (Dollars in
millions, except per share amounts)
2009 2009
% Change
Fee Revenue: Servicing fees
$
882 $ 833 6 % Management fees
231 219 5 Trading
services
270 269 - Securities finance
83 105 (21 )
Processing fees and other
60 45
33 Total fee revenue
1,526 1,471 4
Net Interest
Revenue: Interest revenue
877 898 (2 ) Interest expense
180 175 3 Net interest revenue
(1)
697 723 (4 )
Gains (Losses) related to
investment securities, net: Net gains from sales of
available-for-sale securities
108 141 (23 ) Losses from
other-than-temporary impairment
(257 ) (828 ) (69 )
Losses not related to credit
206 729
(72 ) Gains (Losses) related to investment securities, net
57 42 36 Total revenue
2,280 2,236 2 Provision for loan losses
35 16
119
Expenses: Salaries and employee benefits
791 819 (3 ) Information systems and communications
163 165 (1 ) Transaction processing services
158 148
7 Occupancy
115 118 (3 ) Provision for legal exposure
- 250 (100 ) Merger and integration costs
9 11 (18 )
Other
329 222 48 Total expenses
1,565 1,733 (10 ) Income before
income tax expense
680 487 40 Income tax expense
182 160 14
Net income $
498 $ 327 52
Earnings Per Common
Share:
Basic (2)
$ 1.01 $ .66 53 Diluted
1.00 .66 52
Average Common Shares Outstanding (in thousands): Basic
493,459 493,453 Diluted
497,615 498,290
Selected consolidated 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 $729 million and $754 million
for the quarters ended December 31, 2009 and September 30, 2009,
respectively. These amounts include tax-equivalent adjustments of
$32 million and $31 million for the quarters ended December 31,
2009 and September 30, 2009, respectively. (2) Basic earnings per
common share on distributed earnings were $.01 for both the
quarters ended December 31, 2009 and September 30, 2009, and on
undistributed earnings were $1.00 and $.65 for the quarters ended
December 31, 2009 and September 30, 2009, respectively.
STATE STREET CORPORATION
Earnings Press Release Addendum SELECTED
CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION Quarters
and Years Ended December 31, 2009 and December 31, 2008
Quarters Ended (1) Years Ended (1)
December 31, December 31,
December 31, December 31, (Dollars in millions, except per
share amounts)
2009 2008 % Change
2009
2008 % Change
Fee Revenue: Servicing fees
$ 882 $ 842 5 %
$ 3,276 $ 3,745 (13 )
%
Management fees
231 209 11
824 1,028 (20 ) Trading
services
270 418 (35 )
1,094 1,467 (25 ) Securities
finance
83 329 (75 )
570 1,230 (54 ) Processing fees
and other
60 83 (28 )
171
277 (38 ) Total fee revenue
1,526 1,881 (19 )
5,935 7,747 (23 )
Net Interest Revenue:
Interest revenue, operating basis
909 1,133 (20 )
3,388 4,714 (28 ) Interest expense
180
322 (44 )
705 1,930 (63 ) Net
interest revenue, operating basis
729 811 (10 )
2,683
2,784 (4 ) Gains (Losses) related to investment securities,
net
57 (51 )
141 (54 )
Total revenue, operating basis (2)
2,312 2,641 (12.46 )
8,759 10,477 (16.40 ) Provision for loan losses
35 -
149 -
Expenses: Salaries and
employee benefits
791 698 13
3,037 3,842 (21 )
Information systems and communications
163 163 -
656
633 4 Transaction processing services
158 145 9
583
644 (9 ) Occupancy
115 124 (7 )
475 465 2 Other
329 398 (17 )
916
1,196 (23 ) Total expenses, operating basis (2)
1,556 1,528 1.83
5,667
6,780 (16.42 ) Income before income tax expense, operating
basis
721 1,113 (35 )
2,943 3,697 (20 ) Income tax
expense, operating basis
197 383
811 1,236
Tax-equivalent adjustment
32 28
126 104
Net income, operating basis
$ 492 $ 702 (30 )
$ 2,006 $
2,357 (15 )
Net income available to common shareholders, operating
basis $ 492 $ 680 (28 )
$
1,949 $ 2,335 (17 )
Diluted earnings
per common share, operating basis $ .99 $ 1.58
(37 )
$ 4.11 $ 5.61 (27 )
Average diluted
common shares outstanding (in thousands) 497,615 431,902
474,003 416,100
Return on common equity, operating
basis 13.8 % 24.3 %
15.6 % 19.3 %
(1) Refer to the accompanying reconciliation of
reported results to operating-basis results. (2) For the quarter
ended December 31, 2009, negative operating leverage in the
year-over-year comparison was 1,429 basis points, based on a
decline in total operating-basis revenue of 12.46% and an increase
in total operating-basis expenses of 1.83%. For the year ended
December 31, 2009, positive operating leverage in the
year-over-year comparison was 2 basis points, based on a decline in
total operating-basis revenue of 16.40% and a decline in total
operating-basis expenses of 16.42%
STATE
STREET CORPORATION Earnings Press Release Addendum
SELECTED CONSOLIDATED
OPERATING-BASIS FINANCIAL INFORMATION Quarters Ended
December 31, 2009 and September 30, 2009 Quarters
Ended (1)
December 31, September 30, (Dollars in millions,
except per share amounts)
2009
2009 % Change
Fee
Revenue: Servicing fees
$ 882 $ 833 6 %
Management fees
231 219 5 Trading services
270 269 -
Securities finance
83 105 (21 ) Processing fees and other
60 45 33 Total fee revenue
1,526 1,471
4
Net Interest Revenue: Interest revenue, operating
basis
909 929 (2 ) Interest expense
180
175 3 Net interest revenue, operating basis
729 754 (3 )
Gains (Losses) related to investment securities, net
57 42 Total revenue, operating basis (2)
2,312
2,267 1.99 Provision for loan losses
35 16
Expenses: Salaries and employee benefits
791 819 (3 )
Information systems and communications
163 165 (1 )
Transaction processing services
158 148 7 Occupancy
115 118 (3 ) Other
329 222 48 Total
expenses, operating basis (2)
1,556 1,472 5.71
Income before income tax expense, operating basis
721 779 (7
) Income tax expense
197 225 Tax-equivalent adjustment
32 31
Net income, operating basis
$ 492 $ 523 (6 )
Diluted earnings
per common share, operating basis $ .99 $ 1.05 (6
)
Average diluted common shares outstanding (in
thousands) 497,615 498,290
Return on common
equity, operating basis 13.8 % 16.2 %
(1) Refer to the accompanying reconciliation of reported
results to operating-basis results. (2) For the quarter ended
December 31, 2009, negative operating leverage in the
quarter-over-quarter comparison was 372 basis points, based on an
increase in total operating-basis revenue of 1.99% and an increase
in total operating-basis expenses of 5.71%.
STATE STREET
CORPORATION Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO
OPERATING-BASIS RESULTS Quarter and Year Ended December 31,
2009
(Dollars in millions, except per share
amounts)
Quarter Ended December 31, 2009 Year Ended
December 31, 2009 Reported
Operating Reported Operating
Results Adjustments Results Results
Adjustments Results Fee Revenue: Servicing
fees
$ 882 $ 882 $ 3,276
$ 3,276 Management fees
231 231
824 824 Trading services
270 270
1,094 1,094 Securities finance
83 83
570 570 Processing fees and other
60
60 171 171
Total fee revenue
1,526 1,526 5,935
5,935 Net Interest Revenue: Interest revenue
877 $ 32
(1)
909 3,286 $ 102
(4)
3,388 Interest expense
180 -
180 722 (17
)
(5)
705 Net interest revenue
697 32
729 2,564 119 2,683 Gains
(Losses) related to investment securities, net
57
- 57 141
- 141 Total
revenue 2,280 32 2,312 8,640
119 8,759 Provision for loan losses
35
- 35 149 - 149
Expenses: Salaries and employee benefits
791 -
791 3,037 - 3,037 Information systems
and communications
163 - 163 656
- 656 Transaction processing services
158
- 158 583 - 583 Occupancy
115 - 115 475 - 475
Provision for legal exposure
- - - 250
(250 )
(6)
- Merger and integration costs
9 (9 )
(2)
- 49 (49 )
(2)
- Other
329 -
329 916 -
916 Total expenses
1,565
(9 ) 1,556 5,966
(299 ) 5,667 Income
before income tax expense and extraordinary loss
680
41 721 2,525 418 2,943 Income
tax expense
182 15
(3)
197 722 89
(7)
811 Tax-equivalent adjustment
-
32
(1)
32 - 126
(1)
126 Income before extraordinary loss
498 (6 )
492 1,803 203 2,006 Extraordinary loss,
net of tax
- - -
(3,684 ) 3,684
(8)
- Net income (loss) $ 498
$ (6 ) $ 492 $
(1,881 ) $ 3,887 $
2,006 Adjustments to net income (loss):
Prepayment of preferred stock discount
$ - $
- $ - $ (106 ) $
106
(9)
$ - Dividend on preferred stock
- -
- (46 ) - (46 ) Accretion
of preferred stock discount
- -
- (11 ) -
(11 ) - -
- (163 ) 106
(57 ) Net income before
extraordinary loss available to common shareholders
$ 498 $ (6 ) $ 492
$ 1,640 $ 309 $
1,949 Net income (loss) available to common
shareholders $ 498 $ (6 )
$ 492 $ (2,044 ) $
3,993 $ 1,949 Diluted
earnings per common share before extraordinary loss $
1.00 $ (.01 ) $ .99
$ 3.46 $ .65 $ 4.11
Diluted earnings (loss) per common share 1.00
(.01 ) .99 (4.31 ) 8.42
4.11 Average diluted common shares outstanding (in
thousands) 497,615 497,615 497,615
474,003 474,003 474,003 Return on
common equity before extraordinary loss 14.0 %
(0.2 ) % 13.8 % 13.2
% 2.4 % 15.6 % (1)
Represents tax-equivalent adjustment which is not included in
reported results. (2) Represents merger and integration costs
recorded in connection with the acquisition of Investors Financial.
(3) Represents $3 million and $11 million of income tax benefits
related to merger and integration costs and provision for legal
exposure associated with certain fixed-income strategies managed by
SSgA, respectively. (4) Represents tax-equivalent adjustment of
$126 million, which is not included in reported results, net of $24
million of revenue related to the AMLF. (5) Represents interest
expense related to the AMLF. (6) Represents provision for legal
exposure associated with certain fixed-income strategies managed by
SSgA. (7) Represents $3 million of income tax expense related to
the AMLF, net of $20 million and $72 million of income tax benefits
related to merger and integration costs and provision for legal
exposure associated with certain fixed-income strategies managed by
SSgA, respectively. (8) Represents extraordinary loss related to
the May 2009 consolidation of the asset-backed commercial paper
conduits onto State Street's balance sheet. (9) Represents
prepayment of the preferred stock discount in connection with the
June 2009 repayment of the U.S.Treasury's preferred stock
investment under the TARP Capital Purchase Program.
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 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 Provision for loan losses - - - - - -
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 Tax-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 tax-equivalent
adjustment of $28 million, which is not included in reported
results, and $322 million of revenue related to AMLF. (2)
Represents interest expense related to the 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.
(6) Represents $24 million of income tax expense related to the
AMLF, net of $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 associated with 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 AMLF.
(9) Represents gain on the July 2008 sale of CitiStreet interest,
net of exit and other associated costs. (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 AMLF,
$39 million of income tax expense related to the reserve for SILO's
and $140 million of income tax expense related to the gain from
sale of CitiStreet interest, net of $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 associated with
the acquisition of Investors 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 Ended September 30, 2009
(Dollars in millions, except per share amounts)
Quarter
Ended September 30, 2009 Reported
Operating Results Adjustments
Results Fee Revenue: Servicing fees $ 833 $ 833
Management fees 219 219 Trading services 269 269 Securities finance
105 105 Processing fees and other 45 45 Total fee
revenue 1,471 1,471
Net Interest Revenue: Interest
revenue 898 $ 31
(1)
929 Interest expense 175 - 175 Net
interest revenue 723 31 754 Gains (Losses) related to
investment securities, net 42 - 42
Total revenue 2,236 31 2,267 Provision for loan
losses 16 - 16
Expenses: Salaries and employee
benefits 819 - 819 Information systems and communications 165 - 165
Transaction processing services 148 - 148 Occupancy 118 - 118
Provision for legal exposure 250 (250 )
(2)
- Merger and integration costs 11 (11 )
(3)
- Other 222 - 222 Total expenses
1,733 (261 ) 1,472 Income before income tax expense
and extraordinary loss 487 292 779 Income tax expense 160 65
(4)
225 Tax-equivalent adjustment - 31
(1)
31
Net income $ 327 $ 196 $ 523
Diluted earnings per common share $ .66 $ .39 $ 1.05
Average diluted common shares outstanding (in thousands)
498,290 498,290 498,290
Return on common equity 10.2
% 6.0
%
16.2
% (1) Represents tax-equivalent
adjustment, which is not included in reported results. (2)
Represents provision for legal exposure associated with certain
fixed-income strategies managed by SSgA. (3) Represents merger and
integration costs recorded in connection with the acquisition of
Investors Financial. (4) Represents income tax benefits of $4
million and $61 million related to merger and integration costs and
provision for legal exposure associated with certain fixed-income
strategies managed by SSgA, respectively.
STATE STREET CORPORATION Earnings
Press Release Addendum TANGIBLE COMMON EQUITY AND
TIER 1 COMMON RATIOS As of Period End The table
set forth below presents the calculations of State Street's ratios
of tangible common equity to total tangible assets and to total
risk-weighted assets, and its ratios of tier 1 common capital to
total risk-weighted assets. For the periods ended
December 31, September 30, December 31, (Dollars in
millions)
2009 2009 2008
Consolidated Total Assets $
157,946
$ 163,277 $ 173,631 Less: Goodwill
4,550 4,554 4,527 Other
intangible assets
1,810 1,845 1,851 AMLF investment
securities
- - 6,087 Excess reserves held at central banks
21,731 22,125 51,739
Adjusted assets
129,855
134,753 109,427 Plus: Deferred tax liability
521
524 560 Total tangible assets
A $
130,376
$ 135,277 $ 109,987
Consolidated Total Common Shareholders' Equity $
14,491 $ 13,440 $ 10,891 Less: Goodwill
4,550 4,554
4,527 Intangible assets
1,810 1,845
1,851 Adjusted equity
8,131 7,041 4,513
Plus deferred tax liability
521
524 560 Total tangible common
equity
B $
8,652
$ 7,565 $ 5,073 Tangible common equity
ratio
B/A
6.6
%
5.6
%
4.6
% Ratio of tangible common equity to total risk-weighted
assets
B/D
12.6
%
10.2
%
7.3
%
Tier 1 capital $
12,005
$ 11,271 $ 14,090 Less: Trust preferred securities
1,450
1,450 1,450 TARP preferred stock
- -
1,883 Tier 1 common capital
C $
10,555
$ 9,821 $ 10,757
Total risk-weighted
assets D
68,786
73,823 69,585 Ratio of tier 1 common capital to total
risk-weighted assets
C/D
15.3
%
13.3
%
15.5
%
STATE STREET CORPORATION Earnings Press Release
Addendum
OPERATING-BASIS RESULTS ADJUSTED FOR
ACCRETION Quarter and Year Ended December 31, 2009
(Dollars in millions, except per share
amounts)
Quarter Ended December 31, 2009 Year
Ended December 31, 2009 Adjusted Adjusted
Operating Operating Operating Operating
Results Accretion Results
Results Accretion Results Fee Revenue:
Servicing fees
$ 882 $ 882 $
3,276 $ 3,276 Management fees
231
231 824 824 Trading services
270
270 1,094 1,094 Securities finance
83
83 570 570 Processing fees and other
60 60 171
171 Total fee revenue
1,526 1,526
5,935 5,935 Net Interest Revenue:
Interest revenue
909 $ (230 )
(1)
679 3,388 $ (621 )
(1)
2,767 Interest expense
180 -
180 705 -
705 Net interest revenue
729
(230 ) 499 2,683 (621 )
2,062 Gains (Losses) related to investment
securities, net
57 -
57 141 -
141 Total revenue 2,312 (230
) 2,082 8,759 (621 )
8,138 Income before income tax expense
721
(230 ) 491 2,943 (621 )
2,322 Income tax expense (benefit)
197 (91
) 106 811 (246 ) 565
Tax-equivalent adjustment
32 -
32 126 -
126 Net income $ 492
$ (139 ) $ 353 $
2,006 $ (375 ) $
1,631 Adjustments to net income:
Dividend on preferred stock
$ - $ -
$ - $ (46 ) $ -
$ (46 ) Accretion of preferred stock discount
- - -
(11 ) - (11
) - - -
(57 ) - (57
) Net income available to common shareholders
$ 492 $ (139 ) $
353 $ 1,949 $ (375
) $ 1,574 Diluted earnings
per common share $ 0.99 $ (.28
) $ .71 $ 4.11 $
(.79 ) $ 3.32 Average diluted
common shares outstanding (in thousands) 497,615
497,615 497,615 474,003 474,003
474,003
(1) Represents accretion for the
period of a portion of the aggregate difference between the fair
value and the par value of the asset-backed commercial paper
conduits' investment securities on the date of consolidation of the
conduits onto the balance sheet.
STATE STREET CORPORATION
Earnings Press Release Addendum OPERATING-BASIS
RESULTS ADJUSTED FOR ACCRETION Quarter Ended September 30,
2009
(Dollars in millions, except per share
amounts)
Quarter Ended September 30, 2009
Adjusted Operating Operating Results
Accretion Results Fee Revenue: Servicing fees
$
833
$
833
Management fees
219
219
Trading services
269
269
Securities finance
105
105
Processing fees and other
45
45
Total fee revenue
1,471
1,471
Net Interest Revenue: Interest revenue
929
$
(279
)
(1)
650
Interest expense
175
-
175
Net interest revenue
754
(279
)
475
Gains (Losses) related to investment securities, net
42
-
42
Total revenue
2,267
(279
)
1,988
Income before income tax expense
779
(279
)
500
Income tax expense (benefit)
225
(110
)
115
Tax-equivalent adjustment
31
-
31
Net income
$
523
$
(169
)
$
354
Diluted earnings per common share
$
1.05
$
(.34
)
$
.71
Average diluted common shares outstanding (in
thousands)
498,290
498,290
498,290
(1) Represents accretion for the period of a portion
of the aggregate difference between the fair value and the par
value of the asset-backed commercial paper conduits' investment
securities on the date of consolidation of the conduits onto the
balance sheet.
STATE STREET
CORPORATION Earnings Press Release Addendum
OPERATING-BASIS RESULTS ADJUSTED FOR ACCRETION Quarter
Ended June 30, 2009
(Dollars in millions, except per
share amounts)
Quarter Ended June 30, 2009
Adjusted Operating Operating Results
Accretion Results Fee Revenue: Servicing fees
$
795
$
795
Management fees
193
193
Trading services
310
310
Securities finance
201
201
Processing fees and other
17
17
Total fee revenue
1,516
1,516
Net Interest Revenue: Interest revenue
804
$
(112
)
(1)
692
Interest expense
193
-
193
Net interest revenue
611
(112
)
499
Gains (Losses) related to investment securities, net
26
-
26
Total revenue
2,153
(112
)
2,041
Income before income tax expense
787
(112
)
675
Income tax expense (benefit)
247
(44
)
203
Tax-equivalent adjustment
31
-
31
Net income
$
509
$
(68
)
$
441
Adjustments to net income (loss): Dividend on
preferred stock
$
(21
)
$
-
$
(21
)
Accretion of preferred stock discount
(5
)
-
(5
)
(26
)
-
(26
)
Net income available to common shareholders
$
483
$
(68
)
$
415
Diluted earnings per common share
$
1.04
$
(.15
)
$
.89
Average diluted common shares outstanding (in
thousands)
465,814
465,814
465,814
(1) Represents accretion for the period of a portion
of the aggregate difference between the fair value and the par
value of the asset-backed commercial paper conduits' investment
securities on the date of consolidation of the conduits onto the
balance sheet.
STATE STREET CORPORATION Earnings
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
December
31, September 30, December 31, (Dollars in millions, except per
share amounts)
2009 2009 2008
Assets
Cash and due from banks
$ 2,641 $ 5,027 $ 3,181
Interest-bearing deposits with banks
26,632 27,479 55,733
Securities purchased under resale agreements
2,387 1,579
1,635 Trading account assets
148 150 815 Investment
securities available for sale
72,699 71,675 54,163
Investment securities held to maturity purchased under money market
liquidity facility
- - 6,087 Investment securities held to
maturity
20,877 21,267 15,767 Loans and leases (net of
allowance of $79, $53 and $18)
10,729 11,406 9,113 Premises
and equipment
1,953 1,947 2,011 Accrued income receivable
1,497 1,618 1,738 Goodwill
4,550 4,554 4,527 Other
intangible assets
1,810 1,845 1,851 Other assets
12,023
14,730 17,010 Total assets
$
157,946
$ 163,277 $ 173,631
Liabilities
Deposits: Noninterest-bearing
$
11,969
$ 13,572 $ 32,785 Interest-bearing -- U.S.
5,956 5,327 4,558
Interest-bearing -- Non-U.S.
72,137
72,869 74,882 Total deposits
90,062 91,768 112,225 Securities sold under
repurchase agreements
10,542 11,890 11,154 Federal funds
purchased
4,532 4,949 1,082 Short-term borrowings under
money market liquidity facility
- - 6,042 Other short-term
borrowings
20,200 20,724 11,555 Accrued taxes and other
liabilities
9,281
11,661 14,380 Long-term debt
8,838
8,845 4,419 Total liabilities
143,455
149,837 160,857
Shareholders' Equity Preferred stock,
no par: authorized 3,500,000; 20,000 shares issued and outstanding
- - 1,883 Common stock, $1 par: authorized 750,000,000
shares; 495,365,571, 494,652,372 and 431,976,032 shares issued
495 495 432 Surplus
9,180 9,159 6,992 Retained
earnings
7,071 6,579 9,135 Accumulated other comprehensive
loss
(2,238 ) (2,776 ) (5,650 )
Treasury stock (at cost 431,832,
429,499 and 418,354 shares)
(17 ) (17 ) (18 ) Total
shareholders' equity
14,491 13,440
12,774 Total liabilities and shareholders'
equity
$
157,946
$ 163,277 $ 173,631
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