State Street Corporation today announced first-quarter 2010
earnings per common share of $0.99 on revenue of $2.296 billion
compared with $1.02 per share on revenue of $2.002 billion in the
first quarter of 2009. Expenses in the first quarter of 2010 were
$1.579 billion, compared with $1.304 billion in the first quarter
of 2009. For the first quarter of 2010, return on common
shareholders’ equity was 13.4%, down from 15.7% in the first
quarter of 2009.
Compared to the fourth quarter of 2009, first-quarter 2010
revenue, expenses and earnings per share were essentially flat. In
the fourth quarter of 2009, revenue was $2.280 billion, expenses
were $1.565 billion, and earnings per share were $1.00. For the
fourth quarter of 2009, return on common shareholders’ equity was
14.0%.
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 news release. Also see “Additional Information.”
Operating-basis net interest revenue for all periods is presented
on a fully taxable-equivalent basis and excludes discount accretion
related to the conduit assets.
As we indicated in announcing the 2009 full-year and
fourth-quarter results, we are now presenting operating-basis
results excluding the net interest revenue associated with the
discount accretion from the consolidation of the asset-backed
commercial paper conduits in the second quarter of 2009 (in
addition to the other adjustments we have historically reflected).
First-quarter 2010 GAAP results included $212 million of discount
accretion, as well as $13 million of merger and integration costs
associated with acquisitions. GAAP results in the first quarter of
2009 included $17 million of merger and integration costs
associated with Investors Financial Services Corp. (IFIN),
partially offset by net interest revenue of $7 million related to
State Street’s participation in the Federal Reserve Bank’s
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity
Facility. GAAP results in the fourth quarter of 2009 included $230
million of discount accretion and $9 million of merger and
integration costs.
Operating-basis revenue in the first quarter of 2010 was $2.116
billion, up 4.4% from $2.027 billion in the first quarter of 2009
and operating-basis expenses were $1.566 billion, up 21.7% from
$1.287 billion in the first quarter of 2009. Operating-basis
revenue in the first quarter of 2010 was up 1.6% from $2.082 in
fourth quarter of 2009 and operating-basis expenses in the first
quarter of 2010 were $1.566 billion, up 0.6% from $1.556 billion in
the fourth quarter of 2009. These first quarter 2010 revenue and
expense results represent 100 basis points of positive operating
leverage compared to the fourth quarter of 2009. Operating-basis
earnings per share in the first quarter of 2010 were $0.75 compared
to operating-basis earnings per share of $1.04 in the first quarter
of 2009 and $0.71 in the fourth quarter of 2009. On an operating
basis, return on equity of 10.0% in the first quarter of 2010
compared with 15.9% in the first quarter of 2009 and 9.9% in the
fourth quarter of 2009.
Joseph L. Hooley, State Street's president and chief executive
officer, said, "Our core business performed well, demonstrated by
the 8 percent increase in fee revenue compared to the prior-year
first quarter due to strength in servicing and asset management fee
revenue. In the quarter, our asset servicing businesses added $164
billion in assets to be serviced. Within asset management, net
customer cash flows, including customer wins and losses, were
modestly negative. This decline, however, was more than offset by
appreciation of assets under management, with total assets under
management remaining in excess of $1.9 trillion at March 31, 2010.
These new wins, our solid sales pipeline, as well as the continued
installations of large wins from last year, give us confidence that
our core business will continue to perform well. Our capital levels
remain strong and are well in excess of the regulatory “well
capitalized” requirements. We achieved 100 basis points of
operating leverage compared to the fourth quarter of 2009, as we
continued to manage expenses very carefully.”
Hooley continued, “Spread compression continue to impact
securities finance and weak cross-border customer volumes and low
volatility continue to restrain foreign exchange. These headwinds,
plus the low interest-rate environment, have shaped our view of
2010 as a transition year to a more normalized environment. We
closed the Mourant International Finance Administration acquisition
in early April and anticipate closing our proposed acquisition of
Intesa Sanpaolo’s Securities Services business later this quarter,
pending regulatory approval and satisfaction of other closing
conditions. We expect the two acquisitions to add to revenue and to
be modestly accretive to operating-basis earnings this year. As a
result, we continue to expect that our operating-basis earnings per
share will be slightly higher than the operating-basis $3.32 per
share last year, excluding discount accretion.”
Hooley concluded, “We continue to believe we are well positioned
against global growth opportunities 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.”
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 news 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 news release for
reconciliations applicable to the tier 1 common and TCE ratios.
Q1 2010
Q4 2009
Increase/(decrease)
Q1 2009
Increase/(decrease)
(dollars in millions) Total revenue(1)
$ 2,116 $ 2,082 $ 34 1.6 % $ 2,027 $ 89 4.4 % Total expenses(1)
1,566 1,556 10 0.6 % 1,287 279 21.7 % Total assets(2) 153,971
157,946 (3,975 ) (2.5 )% 142,144 11,827 8.3 % Unrealized loss on
investment portfolio, after-tax(2) (1,435 ) (2,286 ) 851 37.2 %
(5,851 ) 4,416 75.5 % AUCM (dollars in billions) Assets under
custody and administration(2)(3) $ 19,041 $ 18,795 $ 246 1.3 % $
15,035 $ 4,006 26.6 % Assets under management(2) 1,929 1,911 18 0.9
% 1,395 534 38.3 % Earnings per common share(1) $ 0.75 $ 0.71 $
0.04 5.6 % $ 1.04 $ (0.29 ) (27.9 )% Return on common equity (1)
10.0 % 9.9 % 10 bps 15.9 % (590) bps Tier 1 capital ratio(2) 18.1 %
17.7 % 40 bps 19.1 % (100) bps Tier 1 leverage ratio(2) 9.0 % 8.5 %
50 bps 10.4 % (140) bps Tier 1 common ratio(2) 15.9 % 15.6 % 30 bps
14.7 % 120 bps TCE ratio(2) 7.5 % 6.6 % 90 bps 5.9 % 160 bps
TCE/RWA ratio(2) 14.1 % 12.8 % 130 bps 8.2 % 590 bps
(1) Presented on an operating
basis. Operating-basis results for the fourth quarter of
2009 presented in this news release have been adjusted to reflect
the 2010 basis of presentation and therefore exclude discount
accretion from the consolidation of the asset-backed commercial
paper conduits. Consequently, these operating-basis
results may differ from previously disclosed operating-basis
results for the same period.
(2) As of period end.
(3) Includes assets under custody
of $14,058 billion, $13,748 billion, and $11,337 billion,
respectively, as of Q1 2010, Q4 2009, and Q1 2009.
Total assets were $154 billion at March 31, 2010, compared with
$158 billion at December 31, 2009 and $142 billion at March 31,
2009. Excluding $19 billion of excess deposits held at the Federal
Reserve and other central banks at March 31, 2010, $22 billion at
December 31, 2009, and $30 billion at March 31, 2009, the
normalized balance sheet was $135 billion at March 31, 2010,
compared to a normalized balance sheet of $136 billion at December
31, 2009 and $112 billion at March 31, 2009. State Street’s
regulatory capital ratios continue to be strong as of March 31,
2010, with the Company’s tier 1 capital ratio at 18.1% and its
leverage ratio at 9.0%. In addition, at that date, the Company’s
tier 1 common ratio was 15.9%, its TCE to risk-weighted assets
ratio was 14.1%, and its TCE ratio was 7.5%.
At March 31, 2010, the after-tax, unrealized mark-to-market
losses in the investment portfolio were $1.44 billion, down from
$2.29 billion at December 31, 2009, and down about 75% from $5.85
billion as of March 31, 2009.
In the first quarter of 2010, discount accretion of $212
million, or $0.25 per share, contributed to State Street’s capital
strength, and the Company expects a total of about $800 million of
accretion in 2010, and expects about $4.1 billion in total on a
pre-tax basis to accrete into interest revenue over the remaining
lives of the assets, based on anticipated pre-payments, credit
quality, sales-to-date, and assuming the Company holds the
securities to maturity.
FIRST-QUARTER 2010 RESULTS VS.
YEAR-AGO FIRST QUARTER
Servicing fees were up 15% to $880 million from $766 million in
last year’s first quarter. The increase was attributable primarily
to new business as well as the increase in daily average equity
valuations. Total assets under custody and administration were
$19.041 trillion at March 31, 2010, up 27%, compared with $15.035
trillion at March 31, 2009. Daily average values for the S&P
500 Index were up 39% and the MSCI® EAFE IndexSM increased
approximately 43% from the first quarter of 2009.
Investment management fees, generated by State Street Global
Advisors, were $226 million, up 25% from $181 million in the
year-ago quarter. The increase in management fees was attributable
primarily to the increase in average month-end equity valuations.
Average month-end equity valuations were up about 42% as measured
by the S & P 500 and were up 45% as measured by the MSCI EAFE
indexSM. Total assets under management at March 31, 2010, were
$1.929 trillion, up 38% compared to $1.395 trillion at March 31,
2009.
Trading services revenue, which includes foreign exchange
trading revenue and brokerage and other fees, was $242 million for
the first quarter of 2010, down slightly from $245 million in the
first quarter a year ago. Foreign exchange revenue decreased 30%
primarily due to lower volatility, offset partially by higher
volumes. Brokerage and other fees doubled due primarily to strength
in electronic trading. In the first quarter of 2009, brokerage fee
revenue was affected by lower market valuations on several
securities held in the trading account.
Securities finance revenue was $72 million in the quarter, down
60% from $181 million in the year-ago first quarter due primarily
to compressed spreads, partially offset by slightly higher
volumes.
Processing fees and other revenue was $120 million, up 145% from
$49 million in the first quarter of 2009 due primarily to a gain
from an early buyout of a legacy leasing transaction and improved
revenue from structured products.
Net interest revenue on a fully-taxable equivalent basis
(including a tax–equivalent adjustment of $32 million and discount
accretion of $212 million) was $693 million, and on an operating
basis, excluding discount accretion, was $481 million, a decrease
of 18% from $589 million in the year-ago first quarter due
primarily to the impact of the continuing low interest-rate
environment, as well as compression in LIBOR spreads. Net interest
margin, including the discount accretion, was 234 basis points in
the first quarter of 2010 compared to 201 basis points in the first
quarter of 2009. Operating-basis net interest margin was 162 basis
points in the first quarter of 2010.
In the quarter, we recorded $192 million of net gains from sales
of securities, partially offset by $97 million of
other-than-temporary impairment, resulting in $95 million of net
gains related to investment securities. In addition, we recorded a
$15 million provision for loan losses, primarily related to
commercial real estate exposures.
Operating-basis expenses in the first quarter of 2010 increased
22% compared to the year-ago quarter due to increases in salaries
and benefits expenses as well as other expenses. Salaries and
benefits expenses increased to $883 million, or 21%, because in the
first quarter of 2009, we did not accrue discretionary cash
incentive compensation in order to support our TCE improvement
plan. Other expenses increased 71% to $245 million due to an
unusually low level of these expenses in the first quarter of 2009.
Transaction processing expense of $153 million increased 17%
attributable to higher volumes in the investment servicing
business, and information systems and communications expense
increased 4% to $167 million. Occupancy expense decreased 2% to
$118 million.
The effective tax rate on first-quarter 2010 GAAP earnings was
29.5%, compared to 22.5% in the first quarter of 2009. The
effective tax rate on operating-basis earnings for the first
quarter of 2010 was 26.2%, up from 22.7% on the same basis for the
first quarter of 2009. The increase in the effective tax rate on
GAAP and operating-basis earnings is due to the non-recurrence of
certain reductions in prior-period tax accruals recorded in the
first quarter of 2009. The effective tax rate on operating-basis
earnings for the full year 2010 is expected to be between 28% and
29%.
FIRST-QUARTER 2010 RESULTS VS.
FOURTH QUARTER 2009
The following information is presented on an operating basis.
Earnings per common share in the first quarter of 2010 were $0.75
up 6% from $0.71 in the fourth quarter of 2009. Total revenue in
the first quarter of $2.116 billion was up 1.6% compared with
fourth-quarter revenue of $2.082 billion. Total expenses for the
first quarter of 2010 were $1.566 billion, up 0.6% compared with
$1.556 in the fourth quarter. As a result, we achieved 100 basis
points of positive operating leverage comparing the results of the
first quarter of 2010 with those of the fourth quarter of 2009.
Return on common shareholders’ equity of 10.0% compares with 9.9%
in the fourth quarter of 2009.
The table below provides the components of operating-basis
revenue:
Operating-Basis Revenue
Increase/(Decrease)
(Dollars in millions)
Q1 2010 Q4 2009 $
% Servicing fees $ 880 $ 882 $ (2 ) (0.2 )%
Investment management fees 226 231 (5 ) (2.2 ) Trading services
revenue 242 270 (28 ) (10.4 ) Securities finance revenue 72 83 (11
) (13.3 ) Processing fees and other revenue 120 60 60 100.0 Net
interest revenue, fully-taxable equivalent basis(1) 481 499 (18 )
(3.6 ) Gains related to investment securities, net 95
57 38 66.7
Total
Operating-Basis Revenue $ 2,116
$ 2,082 $ 34
1.6
%
(1) Information for the first
quarter of 2010 and the fourth quarter of 2009 each reflect $32
million of tax-equivalent adjustments. GAAP-basis revenue for the
first quarter of 2010 and the fourth quarter of 2009 included $212
million and $230 million, respectively, of discount accretion,
resulting in GAAP-basis net interest revenue of $661 million and
$697 million, respectively, for those periods. Operating-basis
results for the fourth quarter of 2009 presented in this news
release have been adjusted to reflect the 2010 basis of
presentation and therefore exclude discount accretion.
Consequently, these operating-basis results may differ from
previously disclosed operating-basis results for the same
period.
Servicing fees were $880 million, down slightly from $882
million in the fourth quarter due primarily to a stronger US dollar
and lower volumes, partially offset by new business and the impact
of higher average equity markets. Management fees were $226 million
down 2% from $231 million primarily due to lower performance fees
in the first quarter of 2010. Trading services revenue was $242
million, compared to $270 million due to lower brokerage and other
revenue as well as lower volumes and lower volatility in foreign
exchange services. Securities finance revenue was $72 million, down
13% from $83 million in the prior quarter primarily due to
compressed spreads, partially offset by slightly increased volumes.
Processing fees and other revenue increased from $60 million to
$120 million due primarily to a gain from an early buyout of a
legacy leasing transaction. Fully taxable-equivalent net interest
revenue in the fourth quarter of 2009 totaled $729 million, and
included a tax-equivalent adjustment of $32 million and discount
accretion of $230 million. On an operating basis, excluding
accretion, net interest revenue in the first quarter of 2010 was
$481 million, down 4% from $499 million in the fourth quarter of
2009 due to the reinvestment of the investment portfolio at lower
rates.
The table below provides the components of operating-basis
expenses for the indicated periods:
Operating-Basis
Expenses Increase/(Decrease) (Dollars in millions)
Q1
2010 Q4 2009 $ % Salaries
and employee benefits $ 883 $ 791 $ 92 11.6 Information systems and
communications 167 163 4 2.5 Transaction processing services 153
158 (5 ) (3.2 ) Occupancy 118 115 3 2.6 Other 245
329 (84 ) (25.5 )
Total
Operating-Basis Expenses $ 1,566
$ 1,556 $ 10
0.6 %
Compared to the fourth quarter of 2009, salaries and employee
benefits expense increased 12% to $883 million from $791 million
primarily due to a higher level of incentive compensation accruals
recorded in the first quarter and increased benefit costs. Other
expenses declined 26% to $245 million. Other expenses in the fourth
quarter included a previously disclosed legal settlement.
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 news 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 news release.
Management believes that the use of other non-GAAP financial
measures in the calculation of 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 news 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. Management is
currently monitoring this ratio, along with the other capital
ratios described in this news 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 March 31, 2010, December 31, 2009, and
March 31, 2009 are provided in the addendum at the end of this news
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 March 31, 2010,
December 31, 2009, and March 31, 2009 are provided in the addendum
at the end of this news release.
- The ratio of tangible common
equity to risk-weighted assets, or TCE/RWA ratio, is calculated
by dividing consolidated total 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 March 31, 2010,
December 31, 2009, and March 31, 2009 are included in the addendum
at the end of this news release.
INVESTOR CONFERENCE
CALL
State Street will webcast an investor conference call today,
Tuesday, April 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 #62659468). 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#62659468), beginning
approximately two hours after the call’s completion. The telephone
replay will be available for two weeks following the conference
call. This news 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 $19.041 trillion in assets under custody and
administration and $1.929 trillion in assets under management at
March 31, 2010, State Street operates in 25 countries and more than
100 geographic markets and employs 27,700 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 news release 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. Forward-looking statements are often
identified by such forward-looking terminology as “plan,” “expect,”
“look,” “believe,” “anticipate,” “estimate,” “seek,” “may,” “will,”
“trend,” “target” and “goal,” or similar statements or variations
of such terms. 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 news 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 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 recognition of an impairment loss in our
consolidated statement of income;
- 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, as well as future acquisitions,
divestitures and joint ventures, including the ability to obtain
regulatory approvals, the ability to arrange financing as required,
and the ability to satisfy other closing conditions;
- the risks that acquired
businesses will not be integrated successfully, or that the
integration 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 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 or proceedings;
- the enactment of new legislation
and changes in governmental regulation and enforcement that affect
us or our customers, and which may increase our costs and expose us
to risk related to compliance;
- adverse publicity or other
reputational harm;
- 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,
and our ability to protect our intellectual property rights, 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;
- 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 2009 Annual Report on Form 10-K,
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 news release speak
only as of the date hereof, April 20, 2010, and we do not undertake
efforts to revise those forward-looking statements to reflect
events after this date.
State Street Corporation Earnings Release
Addendum Consolidated
Financial Highlights March 31, 2010
Quarters Ended % Change Q1 2010 Q1 2010
(Dollars in millions, except per
share amounts
March 31, December 31, March 31, vs. vs.
or where otherwise noted)
2010 2009 2009
Q4 2009 Q1 2009 Revenue: Fee
revenue
$ 1,540 $ 1,526 $ 1,422 Net interest revenue
661 697 564 Net gains from sales of available-for-sale
securities
192 108 29 Losses from other-than-temporary
impairment
(97 ) (51 ) (13 ) Total Revenue
2,296 2,280 2,002 1 % 15 % Provision for Loan Losses
15 35 84 Total Expenses: Expenses from operations
1,566 1,556 1,287 1 22 Merger and integration costs
13 9 17 44 (24 ) Net Income
495 498 476 (1 ) 4
Net Income Available to Common Shareholders
495 498
445 (1 ) 11 Diluted Earnings Per Common Share
.99
1.00 1.02 (1 ) (3 ) Average Diluted Common Shares
Outstanding (in thousands)
498,056 497,615 435,299
Cash Dividends Declared Per Common Share
$ .01 $ .01
$ .01 Closing Price Per Share of Common Stock (at quarter end)
45.14 43.54 30.78 Ratios: Return on common equity
13.4 % 14.0 % 15.7 % Net interest margin, fully
taxable-equivalent basis
2.34 2.35 2.01 Tier 1 risk-based
capital
18.1 17.7 19.1 Total risk-based capital
19.5
19.1 20.5 Tier 1 leverage
9.0 8.5 10.4 Tier 1 common to
risk-weighted assets (1)
15.9 15.6 14.7 Tangible common
equity to tangible assets (1)
7.5 6.6 5.9 Tangible common
equity to risk-weighted assets (1)
14.1 12.8 8.2
At Quarter End: Assets Under Custody and Administration(2)
(in trillions)
$ 19.04 $ 18.79 $ 15.03 Assets Under
Management (in trillions)
1.93 1.91 1.40 (1) Refer to
accompanying reconciliation for additional information. (2)
Includes assets under custody of $14.06 trillion, $13.75 trillion,
and $11.34 trillion, respectively.
STATE
STREET CORPORATION Earnings Release Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION Quarters
Ended March 31, 2010 and March 31, 2009 Quarters Ended
March 31, March 31, (Dollars in millions, except per share
amounts)
2010 2009 % Change
Fee Revenue: Servicing fees
$ 880 $ 766 15 %
Management fees
226 181 25 Trading services
242 245
(1 ) Securities finance
72 181 (60 ) Processing fees and
other
120 49 145 Total fee
revenue
1,540 1,422 8
Net Interest Revenue:
Interest revenue
878 738 19 Interest expense
217 174 25 Net interest revenue (1)
661 564 17
Gains related to investment securities,
net: Net gains from sales of available-for-sale securities
192 29 Losses from other-than-temporary impairment
(240 ) (13 ) Losses not related to credit
143 - Gains related to investment
securities, net
95 16 Total revenue
2,296
2,002 15 Provision for loan losses
15 84
Expenses: Salaries and employee benefits
883 731 21
Information systems and communications
167 161 4 Transaction
processing services
153 131 17 Occupancy
118 121 (2 )
Merger and integration costs
13 17 (24 ) Other
245 143 71 Total expenses
1,579 1,304 21 Income before income tax
expense
702 614 14 Income tax expense
207
138
Net income $ 495
$ 476 4
Adjustments to net income:
Dividend on preferred stock
$ - $ (25 ) Accretion of
preferred stock discount
- (6 )
- (31 )
Net income available to common
shareholders $ 495 $ 445 11
Earnings Per Common Share: Basic (2)
$ .99
$
1.03 (4 ) Diluted
.99 1.02 (3 )
Average Common
Shares Outstanding (in thousands): Basic
494,588 432,179
Diluted
498,056 435,299 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 $693 million and $596 million for the quarters ended March 31,
2010 and 2009, respectively. These amounts include tax-equivalent
adjustments of $32 million for each of the quarters ended March 31,
2010 and 2009. (2) Basic earnings per common share on
distributed earnings were $.01 and $.24 for the quarters ended
March 31, 2010 and 2009, respectively. Basic earnings per common
share on undistributed earnings were $.98 and $.79 for the quarters
ended March 31, 2010 and 2009, respectively.
STATE STREET CORPORATION Earnings Release
Addendum SELECTED CONSOLIDATED FINANCIAL
INFORMATION Quarters Ended March 31, 2010 and December 31,
2009 Quarters Ended
March 31, December 31,
(Dollars in millions, except per share amounts)
2010 2009 % Change
Fee Revenue: Servicing fees
$
880 $ 882 (0 ) % Management fees
226 231 (2 ) Trading
services
242 270 (10 ) Securities finance
72 83 (13 )
Processing fees and other
120 60
100 Total fee revenue
1,540 1,526 1
Net Interest
Revenue: Interest revenue
878 877 0 Interest expense
217 180 21 Net interest revenue
(1)
661 697 (5 )
Gains related to investment
securities, net: Net gains from sales of available-for-sale
securities
192 108 Losses from other-than-temporary
impairment
(240 ) (257 ) Losses not related to credit
143 206 Gains related to
investment securities, net
95 57 Total revenue
2,296 2,280 1 Provision for loan losses
15 35
Expenses: Salaries and employee benefits
883
791 12 Information systems and communications
167 163 2
Transaction processing services
153 158 (3 ) Occupancy
118 115 3 Merger and integration costs
13 9 44 Other
245 329 (26 ) Total expenses
1,579 1,565 1 Income before
income tax expense
702 680 3 Income tax expense
207 182 14
Net income $
495 $ 498 (1 )
Earnings Per Common
Share: Basic (2)
$ .99 $ 1.01 (2 ) Diluted
.99 1.00 (1 )
Average Common Shares Outstanding
(in thousands): Basic
494,588 493,459 Diluted
498,056 497,615 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 $693 million and $729 million for the quarters ended March 31,
2010 and December 31, 2009, respectively. These amounts include
tax-equivalent adjustments of $32 million for each of the quarters
ended March 31, 2010 and December 31, 2009. (2) Basic
earnings per common share on distributed earnings was $.01 and $.01
for the quarters ended March 31, 2010 and December 31, 2009, and on
undistributed earnings were $.98 and $1.00 for the quarters ended
March 31, 2010 and December 31, 2009, respectively.
STATE STREET CORPORATION
Earnings Release Addendum SELECTED CONSOLIDATED
OPERATING-BASIS FINANCIAL INFORMATION Quarters Ended March
31, 2010 and March 31, 2009 Quarters Ended (1)
March
31, March 31, (Dollars in millions, except per share amounts)
2010 2009 % Change
Fee
Revenue: Servicing fees
$ 880 $ 766 15 %
Management fees
226 181 25 Trading services
242 245
(1 ) Securities finance
72 181 (60 ) Processing fees and
other
120 49 145 Total fee revenue
1,540 1,422 8
Net Interest Revenue: Interest
revenue, operating basis
698 746 (6 ) Interest expense
217 157 38 Net interest revenue, operating
basis
481 589 (18 ) Gains related to investment
securities, net
95 16 Total revenue, operating
basis
2,116 2,027 4.4 Provision for loan losses
15 84
Expenses: Salaries and employee benefits
883 731 21 Information systems and communications
167
161 4 Transaction processing services
153 131 17 Occupancy
118 121 (2 ) Other
245 143 71 Total
expenses, operating basis
1,566 1,287 21.7
Income before income tax expense, operating basis
535 656
(18 ) Income tax expense, operating basis
132 142
Tax-equivalent adjustment
32 32
Net income,
operating basis $ 371 $ 482 (23 )
Net
income available to common shareholders, operating basis
$ 371 $ 451 (18 )
Diluted earnings
per common share, operating basis $ .75 $ 1.04
(28 )
Average diluted common shares outstanding (in
thousands) 498,056 435,299
Return on common
equity, operating basis 10.0 % 15.9 %
(1) Refer to the accompanying reconciliation of reported
results to operating-basis results.
STATE STREET
CORPORATION Earnings Release Addendum
SELECTED CONSOLIDATED OPERATING-BASIS
FINANCIAL INFORMATION Quarters Ended March 31, 2010 and
December 31, 2009 Quarters Ended (1)
March
31, December 31, (Dollars in millions, except per share
amounts)
2010 2009
% Change
Fee
Revenue: Servicing fees
$ 880 $ 882 (0 ) %
Management fees
226 231 (2 ) Trading services
242 270
(10 ) Securities finance
72 83 (13 ) Processing fees and
other
120 60 100 Total fee revenue
1,540 1,526 1
Net Interest Revenue: Interest
revenue, operating basis
698 679 3 Interest expense
217 180 21 Net interest revenue, operating basis
481 499 (4 ) Gains related to investment securities,
net
95 57 Total revenue, operating basis (2)
2,116 2,082 1.6 Provision for loan losses
15
35
Expenses: Salaries and employee benefits
883 791 12 Information systems and communications
167
163 2 Transaction processing services
153 158 (3 ) Occupancy
118 115 3 Other
245 329 (26 ) Total
expenses, operating basis (2)
1,566 1,556 0.6
Income before income tax expense, operating basis
535 491 9
Income tax expense, operating basis
132 106 Tax-equivalent
adjustment
32 32
Net income, operating
basis $ 371 $ 353 5
Diluted
earnings per common share, operating basis $ .75
$ .71 6
Average diluted common shares outstanding (in
thousands) 498,056 497,615
Return on common
equity, operating basis 10.0 % 9.9 %
(1) Refer to the accompanying reconciliation of reported
results to operating-basis results. (2) For the quarter
ended March 31, 2010, positive operating leverage in the
quarter-over-quarter comparison was 100 basis points, based on an
increase in total operating-basis revenue of 1.6% and an increase
in total operating-basis expenses of 0.6%.
STATE STREET CORPORATION Earnings Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS
RESULTS Quarters Ended March 31, 2010 and March 31, 2009
(Dollars in millions, except per
share amounts)
Quarter Ended March 31, 2010 Quarter Ended
March 31, 2009 Reported Operating
Reported Operating
Results Adjustments
Results Results Adjustments Results
Fee Revenue:
Servicing fees
$ 880 $ 880 $ 766 $ 766
Management fees
226 226 181 181 Trading services
242 242 245 245 Securities finance
72
72 181 181 Processing fees and other
120
120 49 49 Total fee revenue
1,540 1,540 1,422 1,422
Net Interest
Revenue: Interest revenue
878 $ (180
)
(1)
698 738 $ 8
(5)
746 Interest expense
217 -
217 174 (17 )
(6)
157 Net interest revenue
661 (180 )
481 564 25 589 Gains related to investment
securities, net
95 -
95 16 - 16
Total revenue
2,296 (180 ) 2,116 2,002 25 2,027
Provision for loan losses
15 - 15 84 -
84
Expenses: Salaries and employee benefits
883 - 883 731 - 731 Information systems and
communications
167 - 167 161 - 161 Transaction
processing services
153 - 153 131 - 131
Occupancy
118 - 118 121 - 121 Merger and
integration costs
13 (13 )
(2)
- 17 (17 )
(2)
- Other
245 - 245
143 - 143 Total expenses
1,579 (13 ) 1,566
1,304 (17 ) 1,287 Income before income tax expense
702 (167 ) 535 614 42 656 Income tax
expense
207 (75 )
(3)
132 138 4
(7)
142 Tax-equivalent adjustment
- 32
(4)
32 - 32
(4)
32
Net income $ 495 $
(124 ) $ 371 $ 476 $ 6 $ 482
Net income available to common shareholders $
495 $ (124 ) $ 371 $ 445
$ 6 $ 451
Diluted earnings per common share
$ .99 $ (.24 )
$
.75 $ 1.02 $ .02 $ 1.04
Average diluted common
shares outstanding (in thousands) 498,056 498,056
498,056 435,299 435,299 435,299
Return on common
equity 13.4 % (3.4 ) %
10.0 % 15.7
%
0.2 % 15.9 % (1) Represents tax-equivalent
adjustment of $32 million, which is not included in reported
results, net of $212 million of discount accretion for the period,
primarily related to 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. (2)
Represents merger and integration costs. (3) Represents $8
million of income tax benefit related to the merger and integration
costs net of $83 million of income tax expense related to discount
accretion. (4) Represents tax-equivalent adjustment, which
is not included in reported results. (5) Represents
tax-equivalent adjustment of $32 million, which is not included in
reported results, net of $24 million of interest revenue related to
the AMLF. (6) Represents interest expense related to the
AMLF. (7) Represents $3 million of income tax expense
related to the AMLF net of $7 million of income tax benefit related
to merger and integration costs.
STATE STREET CORPORATION Earnings Release
Addendum RECONCILIATION OF REPORTED RESULTS TO
OPERATING-BASIS RESULTS Quarter Ended December 31, 2009
(Dollars in millions, except per share
amounts)
Quarter Ended December 31, 2009
Reported Operating Results
Adjustments Results Fee Revenue:
Servicing fees $ 882 $ 882 Management fees 231 231 Trading services
270 270 Securities finance 83 83 Processing fees and other
60 60 Total fee revenue 1,526 1,526
Net Interest
Revenue: Interest revenue 877 $ (198 )
(1)
679 Interest expense 180 - 180 Net
interest revenue 697 (198 ) 499 Gains related to investment
securities, net 57 - 57
Total
revenue 2,280 (198 ) 2,082 Provision for loan losses 35
- 35
Expenses: Salaries and employee benefits 791 -
791 Information systems and communications 163 - 163 Transaction
processing services 158 - 158 Occupancy 115 - 115 Merger and
integration costs 9 (9 )
(2)
- Other 329 - 329 Total expenses
1,565 (9 ) 1,556 Income before income tax expense 680
(189 ) 491 Income tax expense 182 (76 )
(3)
106 Tax-equivalent adjustment - 32
(1)
32
Net income available to common shareholders $ 498
$ (145 ) $ 353
Diluted earnings per common
share $ 1.00 $ (.29 ) $ .71
Average diluted common
shares outstanding (in thousands) 497,615 497,615 497,615
Return on common equity 14.0 % (4.1 ) % 9.9 %
(1) Represents tax-equivalent adjustment of $32 million,
which is not included in reported results, net of $230 million of
discount accretion for the period, related to 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. (2) Represents merger and integration costs recorded
in connection with the acquisition of Investors Financial.
(3) Represents $15 million of
aggregate income tax benefit related to merger and integration
costs and the provision for legal exposure associated with certain
fixed-income strategies managed by SSgA, net of $91 million of
income tax expense related to discount accretion.
STATE STREET CORPORATION Earnings 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
March 31, December 31, March 31, (Dollars in millions)
2010 2009 2009
Consolidated Total Assets $ 153,971 $
157,946 $ 142,144 Less: Goodwill
4,515 4,550 4,493 Other
intangible assets
1,768 1,810 1,809 AMLF investment
securities
- - 740 Excess reserves held at central banks
19,235 21,731 29,963
Adjusted assets
128,453 129,855 105,139 Plus:
Deferred tax liability
515 521
540 Total tangible assets
A $
128,968 $ 130,376 $ 105,679
Consolidated Total Common Shareholders' Equity
$ 15,410 $ 14,491 $ 11,969 Less: Goodwill
4,515 4,550 4,493 Intangible assets
1,768
1,810 1,809 Adjusted equity
9,127 8,131 5,667 Plus deferred tax liability
515 521 540 Total
tangible common equity
B $ 9,642 $
8,652 $ 6,207 Tangible common equity ratio
B/A 7.5 % 6.6 % 5.9 % Ratio of tangible
common equity to total risk-weighted assets
B/D 14.1
% 12.8 % 8.2 %
Tier 1 capital $
12,335 $ 12,005 $ 14,567 Less: Trust preferred securities
1,450 1,450 1,450 TARP preferred stock
-
- 1,889 Tier 1 common capital
C $ 10,885 $ 10,555 $ 11,228
Total risk-weighted assets D
68,247 67,691 76,138 Ratio of tier 1 common capital
to total risk-weighted assets
C/D 15.9 % 15.6
% 14.7 %
STATE STREET CORPORATION
Earnings Release Addendum CONSOLIDATED STATEMENT
OF CONDITION
March 31, December 31, March 31, (Dollars in
millions, except per share amounts)
2010 2009 2009
Assets Cash and due from banks
$ 2,097 $ 2,641
$ 3,539 Interest-bearing deposits with banks
24,269 26,632
34,906 Securities purchased under resale agreements
1,914
2,387 1,291 Trading account assets
147 148 4,872 Investment
securities available for sale
72,956 72,699 54,295
Investment securities held to maturity purchased under money market
liquidity facility
- - 740 Investment securities held to
maturity
19,831 20,877 15,439 Loans and leases (net of
allowance of $91, $79 and $94)
12,245 10,729 7,644 Premises
and equipment
1,880 1,953 2,029 Accrued income receivable
1,563 1,497 1,498 Goodwill
4,515 4,550 4,493 Other
intangible assets
1,768 1,810 1,809 Other assets
10,786 12,023 9,589 Total
assets
$ 153,971 $ 157,946 $ 142,144
Liabilities Deposits: Noninterest-bearing
$ 13,550 $ 11,969 $ 13,247 Interest-bearing -- U.S.
8,240 5,956 12,691 Interest-bearing -- Non-U.S.
68,546 72,137 57,978
Total deposits
90,336 90,062 83,916 Securities sold
under repurchase agreements
8,894 10,542 10,388 Federal
funds purchased
4,386 4,532 1,402 Short-term borrowings
under money market liquidity facility
- - 740 Other
short-term borrowings
16,514 20,200 15,646 Accrued taxes and
other liabilities
9,616 9,281 7,789 Long-term debt
8,815 8,838 8,405 Total
liabilities
138,561 143,455 128,286
Shareholders'
Equity Preferred stock, no par: authorized 3,500,000; 20,000
shares issued and outstanding
- - 1,889 Common stock, $1
par: authorized 750,000,000 shares; 501,748,047, 495,365,571 and
434,798,034 shares issued
502 495 435 Surplus
9,222
9,180 6,964 Retained earnings
7,588 7,071 9,575 Accumulated
other comprehensive loss
(1,885 ) (2,238 ) (4,987 )
Treasury stock (at cost 429,434, 431,832 and 421,803 shares)
(17 ) (17 ) (18 ) Total shareholders'
equity
15,410 14,491
13,858 Total liabilities and shareholders' equity
$
153,971 $ 157,946 $ 142,144
State Street (NYSE:STT)
Historical Stock Chart
From May 2024 to Jun 2024
State Street (NYSE:STT)
Historical Stock Chart
From Jun 2023 to Jun 2024