State Street Corporation today announced first-quarter 2011
earnings per common share of $0.93, compared to $0.99 in the first
quarter of 2010. Revenue of $2.4 billion increased 3% from the
first quarter of 2010 and expenses were $1.7 billion, up 8% from
$1.6 billion in the first quarter of 2010. First-quarter revenue
for 2011 included $62 million, or $0.08 per share, of net interest
revenue associated with discount accretion related to asset-backed
commercial paper conduit securities consolidated onto the Company’s
balance sheet in 2009. First-quarter 2011 expenses also included
$19 million, or $0.03 per share, attributable to merger and
integration costs and restructuring charges associated with a
previously announced reduction in force. First-quarter 2010 results
included $212 million, or $0.25 per share, of discount accretion
and $13 million, or $0.01 per share, of merger and integration
costs. Return on average common shareholders’ equity was 10.5% in
the first quarter of 2011, compared to 13.4% in the first quarter
of 2010.
In the fourth quarter of 2010, the Company reported earnings per
share of $0.16 on revenue of $2.0 billion. Expenses in the fourth
quarter of 2010 were $1.8 billion. Fourth-quarter 2010 revenue
included $139 million, or $0.17 per share, of conduit-related
discount accretion and the impact of a net loss of $344 million, or
$0.67 per share, related to a repositioning of the Company’s
investment portfolio. Expenses included restructuring charges
associated with a reduction in force and real estate consolidation
of $156 million, or $0.21 per share. Return on shareholders’ equity
was 1.8% in the fourth quarter of 2010.
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. Reconciliations of GAAP-basis
results to operating-basis results are provided 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 former conduit securities.
Operating-basis earnings per share in the first quarter of 2011
were $0.88 compared to $0.75 in the first quarter of 2010.
Operating-basis revenue in the first quarter of 2011 was $2.330
billion, up 10.1% from $2.116 billion in the first quarter of 2010.
Operating-basis expenses increased to $1.683 billion, up 7.5% from
$1.566 billion in the first quarter of 2010. On an operating basis,
comparing the first quarter of 2011 with the first quarter of 2010,
the Company achieved 260 basis points of positive operating
leverage. On an operating basis, return on average common
shareholders’ equity was 9.9% in the first quarter of 2011, down
slightly from 10.0% in the first quarter of 2010.
Operating-basis earnings per share in the first quarter of 2011
were up 1% from $0.87 per share in the fourth quarter of 2010;
revenue on the same basis and in the same comparison was up 2.1%
from $2.281 billion; and expenses on the same basis and in the same
comparison were up 3.6% from $1.624 billion. On an operating basis,
comparing the first quarter of 2011 with the fourth quarter of
2010, operating leverage was a negative 150 basis points. On an
operating basis, return on shareholders’ equity of 9.9% compared to
9.8% in the fourth quarter of 2010.
Joseph L. Hooley, State Street's chairman and chief executive
officer, said, “In the first quarter the performance of our core
asset servicing and asset management businesses continued to be
strong. In addition, we achieved positive operating leverage in the
first quarter of 2011 on an operating basis, compared to the first
quarter of 2010.
“In the first quarter of 2011 we increased our quarterly
dividend to $0.18 per share and our Board authorized the purchase
of up to $675 million of our common stock in 2011. As we stated
last quarter, we currently exceed the capital ratios required under
the Basel III proposal as we currently understand it.”
Addressing the performance of the Company’s recent acquisitions,
Hooley, said, “The performances of our securities servicing
business that we acquired from Intesa Sanpaolo and the acquired
Mourant business are exceeding the goals we set; and, as a result
of our expanded capabilities, we have added new clients in both of
these businesses. Also, the Bank of Ireland’s asset management
business, which we acquired in January, is off to a good start,
leveraging its capabilities in active equity strategies with the
distribution strengths at State Street Global Advisors.”
Looking ahead, Hooley noted, “We are pleased with our
first-quarter results. Our strong pipeline and significant business
opportunities continue to support the momentum in our core
business. We remain focused on continuing to control expenses while
enhancing our risk management and beginning to execute on our
operations and IT transformation program. While the recovery in the
U.S. appears to be slowly strengthening and we have put some issues
behind us, uncertainty still affects world markets, particularly in
light of developments in the Middle East and Japan. Overall, we
continue to be well positioned to take advantage of global growth
opportunities.”
The table below provides a summary of selected financial
information and key ratios for the indicated periods, presented on
an operating basis where noted. 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
2011
Q4
2010
Increase/(Decrease)
Q1
2010
Increase/(Decrease)
(Dollars in millions, except per share amounts or where otherwise
noted) For the quarters ended: Total revenue(1) $
2,330 $ 2,281 $ 49 2.1 % $ 2,116 $ 214 10.1 % Total expenses(1)
1,683 1,624 59 3.6 % 1,566 117 7.5 % Earnings per common share(1) $
0.88 $ 0.87 $ 0.01 1.1 % $ 0.75 $ 0.13 17.3 % Return on common
equity(1) 9.9 % 9.8 % 10 bps 10.0 % (10) bps As of period end:
Total assets $ 171,796 $ 160,505 $ 11,291 7.0 % $ 153,971 $ 17,825
11.6 % Unrealized loss on investment portfolio, after-tax (352 )
(504 ) 152 30.2 % (1,435 ) 1,083 75.5 % AUCM (dollars in billions):
Assets under custody and administration(2) $ 22,609 $ 21,527 $
1,082 5.0 % $ 19,041 $ 3,568 18.7 % Assets under management 2,120
2,010 110 5.5 % 1,969 151 7.7 % Total capital ratio 21.6 % 22.0 %
(40) bps 19.5 % 210 bps Tier 1 capital ratio 19.6 % 20.5 % (90) bps
18.0 % 160 bps Tier 1 leverage ratio 8.7 % 8.2 % 50 bps 9.0 % (30)
bps Tier 1 common ratio 17.5 % 18.1 % (60) bps 15.9 % 160 bps TCE
ratio 7.4 % 7.6 % (20) bps 7.5 % (10) bps TCE/RWA ratio 16.7 % 17.2
% (50) bps 14.1 % 260 bps (1) Presented on an
operating basis. (2) Includes assets under custody of $16,692
billion, $15,860 billion, and $14,058 billion, respectively, as of
period end Q1 2011, Q4 2010, and Q1 2010.
Total assets were $172 billion at March 31, 2011, including
$13.3 billion of excess deposits held at the Federal Reserve and
other central banks. The average balance sheet for the first
quarter of 2011 was $159 billion, compared to $160 billion for the
fourth quarter of 2010 and $143 billion for the first quarter of
2010. State Street’s regulatory capital ratios continue to be
strong as of March 31, 2011, with the Company’s total capital ratio
at 21.6%, its tier 1 capital ratio at 19.6% and its leverage ratio
at 8.7%. In addition, at that date, the Company’s tier 1 common
ratio was 17.5%, its TCE ratio was 7.4%, and its TCE to
risk-weighted assets ratio was 16.7%. March 31, 2011 ratios
adjusted for the effects of the applicable methodologies provided
for in the Basel III capital requirements are: total capital ratio
of 12.6%, tier 1 capital ratio of 11.4%, tier 1 leverage ratio of
6.3%, and tier 1 common ratio of 10.2%. These ratios reflect State
Street’s estimates of the impact of the requirements under Basel
III affecting capital, based upon published statements of the Basel
Committee and the Federal Reserve. See “Additional Information”
below for information concerning the specified capital ratios and
the addendum at the end of this news release for reconciliations of
these ratios to ratios calculated under presently applicable
requirements.
At March 31, 2011, the after-tax unrealized mark-to-market
losses in the investment portfolio were $352 million, improved from
$504 million at December 31, 2010 and improved from $1.44 billion
as of March 31, 2010; both improvements are primarily due to spread
compression, offset partially by higher rates.
As of March 31, 2011, the Company expects to record aggregate
pre-tax accretion of about $1.3 billion in interest revenue over
the remaining terms of the former conduit securities, of which it
expects to record approximately $200 million in 2011. These
expectations are based on many assumptions, including holding the
securities to maturity, anticipated pre-payment speeds, credit
quality and sales.
The following tables provide the components of operating-basis
revenue and operating-basis expenses for the periods noted:
Operating-Basis Revenue
(Dollars in millions)
Q1 2011 Q4 2010
% Increase/(Decrease)
Q1 2010
% Increase/(Decrease)
Servicing fees (1) $ 1,095 $ 1,064 2.9 % $ 895 22.3 % Investment
management fees(1) 236 221 6.8 211 11.8 Trading services revenue
302 310 (2.6 ) 242 24.8 Securities finance revenue 66 69 (4.3 ) 72
(8.3 ) Processing fees and other revenue 92 71 29.6 120 (23.3 ) Net
interest revenue, fully taxable- equivalent basis(2) 546 550 (0.7 )
481 13.5 Gains (losses) related to investment securities, net
(7 ) (4 ) (75.0 ) 95 (107.4 )
Total
Operating-Basis Revenue $ 2,330
$ 2,281 2.1 % $
2,116 10.1 % (1) The
Company reclassified approximately $15 million in the first quarter
of 2010 from management fee revenue to servicing fee revenue,
consistent with reclassifications recorded in 2010. (2)
Operating-basis information for the first quarter of 2011, fourth
quarter of 2010, and the first quarter of 2010 included $31
million, $33 million, and $32 million, respectively, of
tax-equivalent adjustments, and excluded $62 million, $139 million,
and $212 million, respectively, of discount accretion. GAAP-basis
net interest revenue for these periods was $577 million, $656
million, and $661 million, respectively.
Operating-Basis Expenses
(Dollars in millions)
Q1 2011 Q4 2010
% Increase/(Decrease)
Q1 2010
% Increase/(Decrease)
Salaries and employee benefits $ 974 $ 935 4.2 % $ 883 10.3 %
Information systems and communications
191
191
---
167
14.4
Transaction processing services 180 171 5.3 153 17.6 Occupancy 107
117 (8.5 ) 118 (9.3 ) Other 231 210
10.0 245 (5.7 )
Total Operating-Basis Expenses
$ 1,683 $ 1,624
3.6 % $ 1,566 7.5 %
FIRST-QUARTER 2011 RESULTS VS. FIRST
QUARTER 2010
Servicing fees were up 22% to $1.095 billion from $895 million
in the first quarter of 2010. The increase was attributable
primarily to the impact of the acquisitions of Intesa and Mourant,
net new business, and increases in daily average equity valuations.
Total assets under custody and administration were $22.609 trillion
at March 31, 2011, up 19% compared with $19.041 trillion at March
31, 2010. Daily average values for the S & P 500 Index were up
16% and the MSCI® EAFE IndexES increased approximately 10% from the
first quarter of 2010.
Investment management fees, generated by State Street Global
Advisors, were $236 million, up 12% from $211 million in the first
quarter of 2010. The increase in management fees was attributable
primarily to increases in the average of month-end valuations in
worldwide equity markets and the impact of the acquisition of the
Bank of Ireland asset management business. Average month-end equity
valuations increased about 18% and 12% compared to the first
quarter of 2010 as measured by the S & P 500 and the MSCI® EAFE
indexES, respectively. Total assets under management at March 31,
2011, were $2.120 trillion, up 8% compared to $1.969 trillion at
March 31, 2010.
Trading services revenue, which includes foreign exchange
trading revenue and brokerage and other fees, was $302 million for
the first quarter of 2011, an increase of 25% from $242 million in
the first quarter of 2010. Foreign exchange revenue increased 19%
primarily due to higher volumes, offset partially by lower
volatilities. Brokerage and other fees were up about 31% due
primarily to an increase in electronic trading and transition
management.
Securities finance revenue was $66 million in the quarter, down
8% from $72 million in the first quarter of 2010 due primarily to
lower volumes, offset partially by improved spreads. Processing
fees and other revenue was $92 million, down from $120 million
primarily due to the early buyout of a legacy leasing transaction
in the first quarter of 2010.
Net interest revenue on a fully taxable-equivalent basis, which
includes conduit-related discount accretion, was $608 million in
the first quarter of 2011, compared to $693 million in the first
quarter of 2010. On an operating basis, which excludes discount
accretion, net interest revenue was $546 million, an increase of
14% from $481 million in the first quarter of 2010 due to an
improvement in non-USD rates and the impact of deposits added in
connection with the Intesa acquisition, offset partially by lower
yields in the fixed-income investment portfolio. Fully
taxable-equivalent net interest margin, including the discount
accretion, was 185 basis points in the first quarter of 2011
compared to 234 basis points in the first quarter of 2010.
Operating-basis net interest margin was 166 basis points in the
first quarter of 2011, compared to 162 basis points in the first
quarter of 2010.
In the first quarter of 2011, on an operating basis, we recorded
$4 million of net gains from sales of available-for-sale
securities. Separately, we recorded $11 million of
other-than-temporary impairment, resulting in $7 million of net
losses related to investment securities.
Operating-basis expenses of $1.683 billion in the first quarter
of 2011 increased 7% compared to $1.566 billion in the first
quarter of 2010 primarily due to increases in salaries and benefits
expenses. Salaries and benefits expenses increased 10% to $974
million, primarily due to the impact of the acquisitions and an
increase in benefits expenses. Information systems and
communications expenses were $191 million, an increase of 14% from
$167 million due primarily to the impact of the acquisitions.
Transaction processing services expenses were up 18% to $180
million due to higher volumes in the investment servicing business,
including the impact of acquisitions. Occupancy expenses decreased
to $107 million from $118 million. Other expenses decreased 6% to
$231 million due to lower securities processing costs, offset
partially by the impact of a $25 million insurance recovery in the
first quarter of 2010.
The effective tax rate on first-quarter 2011 GAAP-basis earnings
was 28.7%, compared to 29.5% in the first quarter of 2010 due
primarily to the geographic mix of earnings. The effective tax rate
on operating-basis earnings for the first quarter of 2011 was
28.0%, consistent with our previously disclosed outlook. Our
expected effective tax rate on operating-basis earnings for the
full year 2011 continues to be about 28%.
FIRST-QUARTER 2011 RESULTS VS. THE FOURTH
QUARTER 2010
Servicing fees were $1.095 billion, up 3% from $1.064 billion in
the fourth quarter due primarily to higher average equity
valuations and new business installed. Daily average values as
measured by the S & P 500 and the MSCI® EAFE indexES increased
8% and 5%, respectively. Management fees were $236 million, up 7%
from $221 million, due primarily to the higher average month-end
equity market valuations and the impact of the acquisition of the
Bank of Ireland asset management business. Average month-end equity
valuations for the S & P 500 and MSCI® EAFE indexES were up 9%
and 7%, respectively. Trading services revenue, which includes
foreign exchange and brokerage and other fees, was $302 million,
down 3% compared to $310 million. Foreign exchange revenue declined
6% due to lower volatility offset partially by higher volumes in
foreign exchange. Brokerage and other fee revenue was $142 million,
an increase of 2% from $139 million due to higher revenue from
electronic trading, partially offset by lower revenue in transition
management. Securities finance revenue was $66 million, down 4%
from $69 million in the fourth quarter. Processing fees and other
revenue was up 30% at $92 million due to higher revenue from
various sources.
Fully taxable-equivalent net interest revenue in the first
quarter of 2011 totaled $608 million, including discount accretion,
compared to $689 million in the fourth quarter. On an operating
basis, fully taxable-equivalent net interest revenue in the first
quarter of 2011 was $546 million, down from $550 million due
primarily to lower yields on fixed-income securities as a result of
the repositioning of the investment portfolio in the fourth quarter
of 2010 and two fewer days in the quarter, offset partially by
lower funding costs.
Compared to the fourth quarter of 2010, salaries and benefits
expense increased 4% to $974 million from $935 million, due to the
timing of higher benefit costs, including higher payroll taxes.
Information systems and communications expense was $191 million,
flat with the fourth quarter of 2010. Transaction processing
expense was $180 million, up 5% from $171 million primarily due to
increased volumes in the investment servicing business. Occupancy
decreased 9% to $107 million. Other expenses were $231 million, up
10%, primarily due to the impact of a $40 million insurance
recovery in the fourth quarter of 2010.
ADDITIONAL INFORMATION
All per share amounts represent fully diluted earnings per
common share. Return on average common shareholders’ equity is
determined by dividing full-year or annualized net income available
to common equity by average common shareholders’ equity for the
period. Operating-basis return on average common equity utilizes
full-year or annualized operating-basis net income available to
common equity in the calculation. 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.
Non-GAAP Financial Measures
This news release includes financial information presented on a
GAAP basis as well as on an operating basis. Operating-basis
financial information is a non-GAAP presentation. 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.
This news release also includes capital ratios in addition to,
or adjusted from, those calculated in accordance with applicable
regulatory requirements. These include capital ratios based on tier
1 common capital and tangible common equity as well as capital
ratios adjusted to reflect our estimate of the impact of the Basel
III capital requirements. These non-regulatory and adjusted capital
measures are non-GAAP financial measures. Management presently
evaluates the non-GAAP capital ratios presented in this news
release to aid in its understanding of State Street’s capital
position under a variety of standards, including presently
applicable and evolving regulatory requirements. Management
believes that the use of the non-GAAP capital ratios described in
this news release similarly aids in an investor's understanding of
State Street's capital position and therefore is of interest to
investors.
In addition to the reconciliations, described below, of the
capital ratios referenced in this news release, the addendum to
this news release also includes reconciliations of the following
other non-GAAP financial measures referenced in this news release:
operating-basis results to GAAP-basis results and Basel
III-adjusted capital ratios to capital ratios calculated under
presently applicable requirements.
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 and capital ratios determined in
accordance with presently applicable regulatory requirements.
Capital Ratios
The total capital, 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 is sometimes used by the Federal Reserve in connection
with its capital assessment and review programs. 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.
- The total capital, 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.
- 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) total 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
tier 1 common capital as of March 31, 2011, December 31, 2010, and
March 31, 2010 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 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 TCE ratio as of March 31, 2011, December 31,
2010, and March 31, 2010 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). 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 TCE/RWA ratio as of March 31, 2011, December
31, 2010, and March 31, 2010, 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 19, 2011, 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 #36962726). 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#36962726), beginning
approximately two hours after the call’s completion. The telephone
replay will be available for approximately 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 $22.609 trillion in assets under custody and
administration and $2.120 trillion in assets under management at
March 31, 2011, State Street operates in 26 countries and more than
100 geographic markets and employs 29,000 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 relating to
our goals and expectations regarding our business, financial
condition, results of operations, investment portfolio performance
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 April 19,
2011.
Important factors that may affect future results and outcomes
include, but are not limited to:
- the manner in which the Federal Reserve
and other regulators implement the Dodd-Frank Act and other
regulatory initiatives in the US and internationally, including any
increases in the minimum regulatory capital ratios applicable to us
and adjustments that result in changes to our operating model or
other changes to the provision of our services in order to comply
with or respond to such regulations;
- required regulatory capital ratios
under Basel II and Basel III, in each case as fully implemented by
State Street and State Street Bank (and in the case of Basel III,
when finally adopted by the Federal Reserve), which may result in
the need for substantial additional capital or increased levels of
liquidity in the future;
- changes in law or regulation that may
adversely affect our, our clients’ or our counterparties’ business
activities and the products or services that we sell, including
additional or increased taxes or assessments thereon, capital
adequacy requirements and changes that expose us to risks related
to compliance;
- financial market disruptions and the
economic recession, whether in the U.S. or internationally;
- the liquidity of the U.S. and
international securities markets, particularly the markets for
fixed-income securities, and the liquidity requirements of our
clients;
- 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 clients do
business and to which we have investment, credit or financial
exposure;
- 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;
- delays or difficulties in the execution
of our previously announced global multi-year program designed to
enhance our operating model, which could lead to changes in our
estimates of the charges, expenses or savings associated with the
planned program, resulting in increased volatility of our
earnings;
- the maintenance of credit agency
ratings for our debt and depository obligations as well as the
level of credibility of credit agency ratings;
- 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 client
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 clients,
employees or regulators;
- the ability to complete acquisitions,
divestitures and joint ventures, including the ability to obtain
regulatory approvals, the ability to arrange financing as required
and the ability to satisfy closing conditions;
- the performance of and demand for the
products and services we offer, including the level and timing of
redemptions and withdrawals from our collateral pools and other
collective investment products;
- the possibility that our clients will
incur substantial losses in investment pools where we act as agent,
and the possibility of significant 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;
- 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 prove
insufficient, fail or be circumvented;
- adverse publicity or other reputational
harm;
- 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; the potential for
new products and services to impose additional costs on us and
expose us to increased operational risk;
- 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 affect 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 2010 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 presentation speak only as of the date
hereof, April 19, 2011, and we do not undertake efforts to revise
those forward-looking statements to reflect events after that
date.
STATE STREET CORPORATION Earnings Release Addendum
CONSOLIDATED FINANCIAL
HIGHLIGHTS March 31, 2011 Quarters Ended
% Change Q1 2011 Q1 2011
(Dollars in millions, except per share
amountsor where otherwise noted)
March 31,2011 December 31,2010 March 31,2010 vs.Q4
2010 vs.Q1 2010 Revenue: Fee revenue
$ 1,791 $
1,735 $ 1,540 3 % 16 % Net interest revenue (1)
577 656 661
(12 ) (13 ) Net gains (losses) from sales of investment securities
(2)
4 (341 ) 192 Losses from other-than-temporary impairment
(11 ) (7 ) (97 ) Total Revenue
2,361 2,043
2,296 16 3 Provision for Loan Losses
(1 ) (1 ) 15
Total Expenses: Expenses from operations
1,683 1,624 1,566 4
7 Acquisition and restructuring costs
19 168 13 Net Income
471 83 495 467 (5 ) Net Income Available to Common
Shareholders
466 81 492 Diluted Earnings Per Common
Share
.93 .16 .99 481 (6 ) Average Diluted Common
Shares Outstanding (in thousands)
500,980 499,232 498,056
Cash Dividends Declared Per Common Share
$ .18
$ .01 $ 0.01 Closing Price Per Share of Common Stock (at quarter
end)
44.94 46.34 45.14 Ratios: Return on average
common equity
10.5 % 1.8 % 13.4 % Net interest
margin, fully taxable-equivalent basis
1.85 2.07 2.34 Tier 1
risk-based capital
19.6 20.5 18.0 Total risk-based capital
21.6 22.0 19.5 Tier 1 leverage
8.7 8.2 9.0 Tier 1
common to risk-weighted assets (3)
17.5 18.1 15.9 Tangible
common equity to tangible assets (3)
7.4 7.6 7.5 Tangible
common equity to risk-weighted assets (3)
16.7 17.2 14.1
At Quarter End: Assets Under Custody and Administration (4)
(in trillions)
$ 22.61 $ 21.53 $ 19.04 Assets Under
Management (in trillions)
2.12 2.01 1.97
(1)
Amounts for quarters ended March 31, 2011,
December 31, 2010 and March 31, 2010 included discount accretion
related to former conduit securities of $62 million, $139 million
and $212 million, respectively.
(2)
Quarter ended December 31, 2010 included a
net loss of $344 million related to a repositioning of the
investment portfolio.
(3)
Refer to accompanying reconciliations for
additional information.
(4)
Includes assets under custody of $16.69
trillion, $15.86 trillion and $14.06 trillion, respectively.
STATE STREET CORPORATION
Earnings Release Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION Quarters
Ended March 31, 2011 and March 31, 2010 Quarters Ended
March 31, March 31,
(Dollars in millions, except per share
amounts)
2011 2010 % Change
Fee Revenue: Servicing fees
$ 1,095 $
895 22 % Management fees
236 211 12 Trading services
302 242 25 Securities finance
66 72 (8 ) Processing
fees and other
92 120 (23 )
Total fee revenue
1,791 1,540 16
Net Interest
Revenue: Interest revenue
734 878 (16 ) Interest expense
157 217 (28 ) Net interest
revenue (1)
577 661 (13 )
Gains (Losses) related
to investment securities, net: Net gains from sales of
available-for-sale securities
4 192 Losses from
other-than-temporary impairment
(35 ) (240 ) Losses
not related to credit
24 143
Gains (Losses) related to investment securities, net
(7 ) 95 Total revenue
2,361 2,296 3 Provision for loan losses
(1
) 15
Expenses: Salaries and employee benefits
974 883 10 Information systems and communications
191
167 14 Transaction processing services
180 153 18 Occupancy
107 118 (9 ) Acquisition and restructuring costs
19
13 Other
231 245 (6 ) Total
expenses
1,702 1,579 8 Income
before income tax expense
660 702 (6 ) Income tax expense
189 207
Net income
$ 471 $ 495 (5 ) Earnings
allocated to participating securities
(5 )
(3 )
Net income available to common shareholders
$ 466 $ 492
Earnings Per
Common Share: Basic
$ .94 $ .99 (5 ) Diluted
.93 .99 (6 )
Average Common Shares Outstanding (in
thousands): Basic
497,471 494,588 Diluted
500,980
498,056 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 $608 million and $693 million for the
quarters ended March 31, 2011 and 2010, respectively. These amounts
included tax-equivalent adjustments of $31 million and $32 million
for the quarters ended March 31, 2011 and 2010, respectively.
STATE STREET CORPORATION Earnings Release
Addendum SELECTED CONSOLIDATED
FINANCIAL INFORMATION Quarters Ended March 31, 2011 and
December 31, 2010 Quarters Ended
March 31,
December 31, (Dollars in millions, except per share amounts)
2011 2010 % Change
Fee
Revenue: Servicing fees
$ 1,095 $ 1,064 3 %
Management fees
236 221 7 Trading services
302 310 (3
) Securities finance
66 69 (4 ) Processing fees and other
92 71 30 Total fee revenue
1,791 1,735 3
Net Interest Revenue: Interest
revenue
734 834 (12 ) Interest expense
157
178 (12 ) Net interest revenue (1)
577
656 (12 )
Gains (Losses) related to investment
securities, net: Net gains (losses) from sales of investment
securities
4 (341 ) Losses from other-than-temporary
impairment
(35 ) (39 ) Losses not related to credit
24 32 Losses related to
investment securities, net
(7 ) (348 )
Total revenue
2,361 2,043 15.6 Provision for
loan losses
(1 ) (1 )
Expenses:
Salaries and employee benefits
974 935 4 Information systems
and communications
191 191 - Transaction processing services
180 171 5 Occupancy
107 117 (9 ) Acquisition and
restructuring costs
19 168 Other
231
210 10 Total expenses
1,702
1,792 (5.0 ) Income before income tax expense
660 252 162 Income tax expense
189
169
Net income $ 471 $ 83
467 Earnings allocated to participating securities
(5 ) (2 )
Net income available to
common shareholders $ 466 $ 81
Earnings Per Common Share: Basic
$ .94
$ .17 453 Diluted
.93 .16 481
Average Common
Shares Outstanding (in thousands): Basic
497,471 495,758
Diluted
500,980 499,232 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 $608 million and $689 million for the
quarters ended March 31, 2011 and December 31, 2010, respectively.
These amounts included tax-equivalent adjustments of $31 million
and $33 million for the quarters ended March 31, 2011 and December
31, 2010, respectively.
STATE STREET CORPORATION
Earnings Release Addendum
SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION
Quarters Ended March 31, 2011 and March 31, 2010
Quarters Ended (1)
March 31, March 31, (Dollars in millions,
except per share amounts)
2011
2010 % Change
Fee Revenue: Servicing
fees
$ 1,095 $ 895 22 % Management fees
236
211 12 Trading services
302 242 25 Securities finance
66 72 (8 ) Processing fees and other
92
120 (23 ) Total fee revenue
1,791 1,540 16
Net Interest Revenue: Interest revenue, operating
basis
703 698 1 Interest expense
157
217 (28 ) Net interest revenue, operating basis
546 481 14 Gains (Losses) related to investment
securities, net
(7 ) 95 Total
revenue, operating basis (2)
2,330 2,116 10.1
Provision for loan losses
(1 ) 15
Expenses: Salaries and employee benefits
974 883 10
Information systems and communications
191 167 14
Transaction processing services
180 153 18 Occupancy
107 118 (9 ) Other
231 245
(6 ) Total expenses, operating basis (2)
1,683
1,566 7.5 Income before income tax expense,
operating basis
648 535 21 Income tax expense, operating
basis
173 132 Tax-equivalent adjustment
31
32
Net income, operating basis $
444 $ 371 20 Earnings allocated to
participating securities
(5 ) (2 )
Net income available to common shareholders, operating basis
$ 439 $ 369
Diluted
earnings per common share, operating basis $ .88
$ .75 17
Average diluted common shares outstanding (in
thousands) 500,980 498,056
Return on average
common equity, operating basis 9.9 % 10.0 %
(1)
Refer to the accompanying reconciliation
of reported results to operating-basis results.
(2)
For the quarter ended March 31, 2011,
positive operating leverage in the year-over-year comparison was
260 basis points, based on an increase in total operating-basis
revenue of 10.1% and an increase in total operating-basis expenses
of 7.5%.
STATE STREET CORPORATION Earnings Release
Addendum SELECTED CONSOLIDATED
OPERATING-BASIS FINANCIAL INFORMATION Quarters Ended March
31, 2011 and December 31, 2010 Quarters Ended (1)
March 31, December 31, (Dollars in millions, except per
share amounts)
2011 2010
% Change
Fee Revenue: Servicing fees
$
1,095 $ 1,064 3 % Management fees
236 221 7 Trading
services
302 310 (3 ) Securities finance
66 69 (4 )
Processing fees and other
92 71
30 Total fee revenue
1,791 1,735 3
Net Interest
Revenue: Interest revenue, operating basis
703 728 (3 )
Interest expense
157 178 (12 )
Net interest revenue, operating basis
546 550 (1 )
Losses related to investment securities, net
(7
) (4 ) Total revenue, operating basis (2)
2,330 2,281 2.1 Provision for loan losses
(1
) (1 )
Expenses: Salaries and employee
benefits
974 935 4 Information systems and communications
191 191 - Transaction processing services
180 171 5
Occupancy
107 117 (9 ) Other
231
210 10 Total expenses, operating basis (2)
1,683 1,624 3.6 Income before income
tax expense, operating basis
648 658 (2 ) Income tax expense
173 184 Tax-equivalent adjustment
31
33
Net income, operating basis $
444 $ 441 1 Earnings allocated to
participating securities
(5 ) (6 )
Net income available to common shareholders $
439 $ 435
Diluted earnings per
common share, operating basis $ .88 $ .87 1
Average diluted common shares outstanding (in
thousands) 500,980 499,232
Return on average
common equity, operating basis 9.9 % 9.8 %
(1)
Refer to the accompanying reconciliation
of reported results to operating-basis results.
(2)
For the quarter ended March 31, 2011,
negative operating leverage in the quarter-over-quarter comparison
was 150 basis points, based on an increase in total operating-basis
revenue of 2.1% and an increase in total operating-basis expenses
of 3.6%.
STATE STREET CORPORATION
Earnings Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS
RESULTS Quarters Ended March 31, 2011 and March 31, 2010
(Dollars in millions, except per share
amounts)
Quarter Ended March 31, 2011
Quarter Ended March 31, 2010 Reported
Operating-Basis Reported Operating-Basis
Results Adjustments Results Results
Adjustments Results Fee Revenue: Servicing
fees
$ 1,095 $ 1,095 $ 895 $ 895
Management fees
236 236 211 211 Trading services
302 302 242 242 Securities finance
66
66 72 72 Processing fees and other
92
92 120 120 Total
fee revenue
1,791 1,791 1,540 1,540
Net
Interest Revenue: Interest revenue
734 $
(31 )
(1)
703 878 $ (180 )
(5)
698 Interest expense
157 -
157 217 -
217 Net interest revenue
577 (31 )
546 661 (180 ) 481 Gains (Losses) related to
investment securities, net
(7 )
- (7 ) 95 -
95
Total revenue 2,361 2,330
2,296 (180 ) 2,116 Provision for loan losses
(1
) - (1 ) 15 - 15
Expenses: Salaries and employee benefits
974 -
974 883 - 883 Information systems and communications
191 - 191 167 - 167 Transaction processing
services
180 - 180 153 - 153 Occupancy
107 - 107 118 - 118 Acquisition and
restructuring costs
19 (19 )
(2)
- 13 (13 )
(6)
- Other
231 -
231 245 - 245
Total expenses
1,702 (19
) 1,683 1,579 (13
) 1,566 Income before income tax expense
660
(12 ) 648 702 (167 ) 535 Income tax expense
189 (16 )
(3)
173 207 (75 )
(3)
132 Tax-equivalent adjustment
31
(4)
31 - 32
(4)
32
Net income $ 471
$ (27 ) $ 444 $ 495
$ (124 ) $ 371 Earnings allocated to
participating securities
(5 )
- (5 ) (3 ) 1
(7)
(2 )
Net income available to common shareholders
$ 466 $ (27 ) $
439 $ 492 $ (123 ) $ 369
Diluted earnings per common share $ .93
$ (.05 ) $ .88 $ .99 $ (.24 ) $
.75
Average diluted common shares outstanding (in
thousands) 500,980 500,980 500,980 498,056
498,056 498,056
Return on average common equity
10.5 % (.06 ) % 9.9
% 13.4 % (3.4 ) % 10.0 %
(1)
Represents tax-equivalent adjustment of
$31 million, not included in reported results, net of $62 million
of discount accretion related to former conduit securities.
(2)
Represents $14 million of merger and
integration costs and $5 million of restructuring charges related
to a business operations and information technology transformation
program.
(3)
Represents net tax effect of non-operating
adjustments.
(4)
Represents tax-equivalent adjustment, not
included in reported results.
(5)
Represents tax-equivalent adjustment of
$32 million, not included in reported results, net of $212 million
of discount accretion related to former conduit securities.
(6)
Represents $13 million of merger and
integration costs.
(7)
Represents effect of the difference
between reported and operating-basis earnings on allocation to
participating securities.
STATE STREET CORPORATION Earnings Release
Addendum RECONCILIATION
OF REPORTED RESULTS TO OPERATING-BASIS RESULTS Quarter Ended
December 31, 2010
(Dollars in millions,
except per share amounts)
Quarter Ended December
31, 2010 Reported Operating-Basis
Results Adjustments Results Fee
Revenue: Servicing fees $ 1,064 $ 1,064 Management fees 221 221
Trading services 310 310 Securities finance 69 69 Processing fees
and other 71 71 Total fee revenue 1,735
1,735
Net Interest Revenue: Interest revenue 834 $
(106 )
(1)
728 Interest expense 178 - 178
Net interest revenue 656 (106 ) 550 Losses related to
investment securities, net (348 ) 344
(2)
(4 )
Total revenue
2,043 238 2,281 Provision for loan losses (1 ) - (1 )
Expenses: Salaries and employee benefits 935 - 935
Information systems and communications 191 - 191 Transaction
processing services 171 - 171 Occupancy 117 - 117 Acquisition and
restructuring costs 168 168
(3)
- Other 210 - 210 Total
expenses 1,792 (168 ) 1,624
Income before income tax expense 252 406 658 Income tax expense 169
15
(4)
184 Tax-equivalent adjustment - 33
(5)
33
Net Income $ 83 $ 358 $ 441
Earnings allocated to participating securities $ (2 )
$ (4 )
(6)
$ (6 )
Net income available to common shareholders $ 81
$ 354 $ 435
Diluted earnings per
common share $ .16 $ .71 $ .87
Average diluted common
shares outstanding (in thousands) 499,232 499,232 499,232
Return on average common equity 1.8 % 8.0 % 9.8 %
(1)
Represents tax-equivalent adjustment of
$33 million, not included in reported results, net of $139 million
of discount accretion related to former conduit securities.
(2)
Represents a net loss related to a
repositioning of the investment portfolio.
(3)
Represents $156 million of restructuring
charges related to a business operations and information technology
transformation program and $12 million of merger and integration
costs.
(4)
Represents net tax effect of non-operating
adjustments.
(5)
Represents tax-equivalent adjustment, not
included in reported results.
(6)
Represents effect of the difference
between reported and operating-basis earnings on allocation to
participating securities.
STATE STREET CORPORATION Earnings Release
Addendum CONSOLIDATED
STATEMENT OF CONDITION
March 31,
December 31, March 31, (Dollars in millions, except per share
amounts)
2011 2010 2010
Assets Cash and due from banks
$ 2,637
$ 3,311 $ 2,097 Interest-bearing deposits with banks
19,984
22,234 24,269 Securities purchased under resale agreements
2,253 2,928 1,914 Trading account assets
1,832 479
147 Investment securities available for sale
90,691 81,881
72,956 Investment securities held to maturity
12,253 12,249
19,831 Loans and leases (net of allowance of $80, $100 and $91)
12,646 11,857 12,245 Premises and equipment
1,845
1,843 1,880 Accrued income receivable
1,850 1,733 1,563
Goodwill
5,720 5,597 4,515 Other intangible assets
2,644 2,593 1,768 Other assets
17,441
13,800 10,786 Total assets
$
171,796 $ 160,505 $ 153,971
Liabilities Deposits: Noninterest-bearing
$
23,667 $ 17,464 $ 13,550 Interest-bearing -- U.S.
2,581 6,957 8,240 Interest-bearing -- Non-U.S.
81,166 73,924 68,546
Total deposits
107,414 98,345 90,336 Securities sold
under repurchase agreements
7,133 7,599 8,894 Federal funds
purchased
4,605 7,748 4,386 Other short-term borrowings
8,060 8,694 16,514 Accrued taxes and other liabilities
15,873 11,782 9,616 Long-term debt
9,531
8,550 8,815 Total liabilities
152,616 142,718 138,561
Shareholders' Equity
Preferred stock, no par: authorized
3,500,000; 5,001 shares issued
500 - -
Common stock, $1 par: authorized
750,000,000 shares; 503,995,215 , 502,064,454 and 501,748,047
shares issued
504 502 502 Surplus
9,416 9,356 9,222 Retained
earnings
9,013 8,634 7,588 Accumulated other comprehensive
loss
(238 ) (689 ) (1,885 ) Treasury stock (at cost
401,849, 420,016 and 429,434 shares)
(15 )
(16 ) (17 ) Total shareholders' equity
19,180 17,787 15,410
Total liabilities and shareholders' equity
$ 171,796
$ 160,505 $ 153,971
STATE STREET
CORPORATION Earnings Release Addendum Tangible Common
Equity and Tier 1 Common Ratios - Reconciliations 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)
2011
2010 2010
Consolidated Total Assets
$ 171,796 $ 160,505 $ 153,971 Less: Goodwill
5,720 5,597 4,515 Other intangible assets
2,644 2,593
1,768 Excess reserves held at central banks
13,295
16,612 19,235 Adjusted assets
150,137 135,703 128,453 Plus deferred tax liabilities
781 747 515 Total
tangible assets
A $ 150,918 $ 136,450
$ 128,968
Consolidated Total Common
Shareholders' Equity $ 18,680 $ 17,787 $ 15,410
Less: Goodwill
5,720 5,597 4,515 Other intangible assets
2,644 2,593 1,768
Adjusted equity
10,316 9,597 9,127 Plus deferred tax
liabilities
781 747 515
Total tangible common equity
B $ 11,097
$ 10,344 $ 9,642 Tangible common equity
ratio
B/A 7.4 % 7.6 % 7.5 % Ratio of
tangible common equity to total risk-weighted assets
B/D
16.7 % 17.2 % 14.1 %
Tier 1 Capital
$ 13,077 $ 12,325 $ 12,335 Less: Trust preferred
securities
950 1,450 1,450 Preferred stock
500
- -
Tier 1 common capital
C $ 11,627 $ 10,875 $ 10,885
Total risk-weighted assets D
66,596 60,177 68,338 Ratio of tier 1 common capital
to total risk-weighted assets
C/D 17.5 % 18.1
% 15.9 %
STATE STREET CORPORATION BASEL III
CAPITAL RECONCILIATION March 31, 2011
Current Requirements (1) Basel III
Requirements (2) (Dollars in millions) Tier 1 capital
$ 13,077 A
$ 12,412 Less: Trust
preferred securities
950 855 Preferred stock
500 450 Tier 1 common capital
11,627 B
11,107 Total capital
14,380 C
13,653 Total risk-weighted assets
66,596 D
108,642 Adjusted quarterly average assets
149,824 E
197,500 Tier 1 capital ratio
19.6 % A/D
11.4 % Total capital ratio
21.6 % C/D
12.6 % Tier 1 common ratio
17.5 % B/D
10.2 % Tier 1 leverage ratio
8.7 % A/E
6.3 % (1) Actual (unaudited) total capital, tier 1
capital and tier 1 leverage ratios were calculated in accordance
with currently applicable bank regulatory requirements. Tier 1
common ratio was 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 (tier 1 common capital), by (b) total
risk-weighted assets, which were calculated in accordance with
currently applicable bank regulatory requirements.
(2) For purposes of the calculations in
accordance with Basel III (see below), total capital, tier 1
capital and tier 1 leverage ratios and total risk-weighted assets
were calculated based on State Street’s estimates, based upon
published statements of the Basel Committee and the Federal
Reserve, of the effects of the requirements under Basel III
affecting capital. The tier 1 common ratio is calculated by
dividing (a) tier 1 common capital (as described in footnote (1)),
but with tier 1 capital calculated in accordance with Basel III by
(b) total risk-weighted assets, which are calculated in accordance
with Basel III. State Street reports its financial ratios in
accordance with the requirements of the Board of Governors of the
Federal Reserve System, which has not yet adopted Basel III. There
remains considerable uncertainty concerning the timing for adoption
and implementation of Basel III by the Federal Reserve. When
adopted, the Federal Reserve may implement Basel III with some or
more modifications or adjustments. Therefore, State Street’s
current understanding of Basel III, as reflected in the table
above, may be different from the ultimate application of Basel III
by the Federal Reserve to State Street.
• Tier 1 capital used in the calculation of the tier 1
capital and tier 1 leverage ratios decreased by $665 million, as a
result of applying estimated Basel III requirements to tier 1
capital of $13.077 billion as of March 31, 2011. Total capital used
in the calculation of the total capital ratio decreased by $727
million, as a result of applying estimated Basel III requirements
to total capital of $14.380 billion as of March 31, 2011. •
Tier 1 common capital used in the
calculation of the tier 1 common ratio was $11.107 billion,
reflecting the adjustments to tier 1 capital described in the first
bullet above. Tier 1 common capital used in the calculation is
therefore calculated as adjusted tier 1 capital of $12.412 billion
less non-common elements of capital, composed of trust preferred
securities of $855 million and preferred stock of $450 million as
of March 31, 2011, resulting in tier 1 common capital of $11.107
billion. At March 31, 2011, there was no qualifying minority
interest in subsidiaries.
• Total risk-weighted assets used in the calculation of the total
capital, tier 1 capital and tier 1 common ratios increased by
$42.046 billion as a result of applying estimated Basel III
requirements to total risk-weighted assets of $66.596 billion as of
March 31, 2011. •
Consolidated adjusted quarterly average
assets used in the calculation of the leverage ratio increased by
$47.676 billion as a result of applying estimated Basel III
requirements to the actual consolidated adjusted quarterly average
assets as of March 31, 2011 of $149.824 billion.
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