In announcing today's financial results, Joseph L. Hooley, State
Street's chairman, president and chief executive officer, said, “We
reported a strong second quarter with revenue growth driven by new
business and improved equity markets. Seasonal factors and
increased market volatility benefited our securities finance and
foreign exchange businesses. The second-quarter results also
reflected our continued success in realizing the expected benefits
from our Business Operations and Information Technology
Transformation program and ongoing expense management. Importantly,
we achieved positive operating leverage compared to both the first
quarter of 2013 and the second quarter of 2012.
We remain focused on returning capital to our
shareholders. During the second quarter of 2013, we purchased
approximately $560 million of our common stock and have
approximately $1.5 billion remaining on our March 2013 common stock
purchase program authorizing the purchase of up to $2.1 billion of
our common stock through March 31, 2014."
Second-Quarter 2013 GAAP Results
- Earnings per common share (EPS)
of $1.24 increased from $0.98 in both the first quarter of 2013 and
the second quarter of 2012. EPS in the first quarter of 2013
reflected the effects of $118 million of equity incentive
compensation expense, or $0.19 per share, for retirement-eligible
employees and payroll taxes.
- Net income available to common
shareholders of $571 million increased from $455 million in the
first quarter of 2013 and increased from $480 million in the second
quarter of 2012.
- Revenue of $2.56 billion
increased from $2.44 billion in the first quarter of 2013 and
increased from $2.42 billion in the second quarter of 2012.
- Net interest revenue of $596
million increased from $576 million in the first quarter of 2013
and decreased from $672 million in the second quarter of 2012.
- Expenses of $1.80 billion
decreased from $1.83 billion in the first quarter of 2013 and
increased from $1.77 billion in the second quarter of 2012.
- Return on average common
shareholders' equity (ROE) of 11.3% increased from 9.1% in the
first quarter of 2013 and increased from 10.0% in the second
quarter of 2012.
Second-Quarter 2013 Operating-Basis (Non-GAAP)
Results(1)
- EPS of $1.24 increased 29% from
$0.96 in the first quarter of 2013 and increased 23% from $1.01 in
the second quarter of 2012. EPS in the first quarter of 2013
reflected the effects of $118 million of equity incentive
compensation expense, or $0.19 per share, for retirement-eligible
employees and payroll taxes.
- Net income available to common
shareholders of $571 million increased from $443 million in the
first quarter of 2013 and increased from $494 million in the second
quarter of 2012.
- Revenue of $2.58 billion
increased from $2.47 billion in the first quarter of 2013 and
increased from $2.46 billion in the second quarter of 2012.
- Net interest revenue on an
operating basis was $582 million in the second quarter of 2013, an
increase from $577 million in the first quarter of 2013, and a
decrease from $629 million in the second quarter of 2012. Net
interest revenue on an operating basis excluded discount accretion
of $47 million, $31 million, and $74 million for the quarters ended
June 30, 2013, March 31, 2013, and June 30, 2012,
respectively.
- Expenses of $1.75 billion
decreased from $1.81 billion in the first quarter of 2013 and
increased from $1.73 billion in the second quarter of 2012.
- ROE of 11.3% increased from 8.9%
in the first quarter of 2013 and from 10.3% in the second quarter
of 2012.
Second-Quarter 2013 Operating-Basis (Non-GAAP)
Highlights(1)
- Achieved positive operating
leverage(2) of 771 basis points and 347 basis points
compared to the first quarter of 2013 and the second quarter of
2012, respectively. Excluding the effect of expenses related to
equity incentive compensation for retirement-eligible employees and
payroll taxes recorded in the first quarter of 2013, we achieved
positive operating leverage of 97 basis points compared to the
first quarter of 2013.
- New business during the quarter
totaled $201 billion in asset servicing mandates and, excluding the
SPDR® Gold ETF, $11 billion in net new assets to be managed at
SSgA.(3)
- Business Operations and Information
Technology Transformation program(4) is on track to
achieve total incremental estimated pre-tax expense savings in 2013
of approximately $220 million.
- Capital(5) Estimated pro
forma Basel III tier 1 common ratio as of June 30, 2013 was 10.0%
(standardized approach) and 10.9% (advanced approach), each
calculated in conformity with the July 2013 final rule approved by
the Federal Reserve. Under the final rule, we expect to manage to
the lower of these two Basel III tier 1 common ratios.
- Capital distribution remains a
priority with purchases of approximately $560 million of our
common stock at an average price of $65.73 per share; in addition,
we declared a previously announced quarterly common stock dividend
of $0.26 per share.
(1) Operating basis is a non-GAAP presentation. For an
explanation of operating-basis information and related
reconciliations, refer to the addendum included with this news
release.
(2) Operating leverage is defined as the rate of growth of total
revenue less the rate of growth of total expenses, each as
determined on an operating basis. Calculations of operating
leverage comparing the second quarter of 2013 to each of the first
quarter of 2013 and the second quarter of 2012 are presented in the
addendum included with this news release. The comparisons to the
first quarter of 2013 both include and exclude the effect of equity
incentive compensation expense for retirement-eligible employees
and payroll taxes recorded in the first quarter of 2013.
(3) Only a portion of such new mandates are reflected in our
assets under custody and administration and our assets under
management as of June 30, 2013. Distribution fees from the SPDR®
Gold Exchange-Traded Fund, or ETF, are recorded in brokerage and
other fee revenue and not in management fee revenue.
(4) Estimated pre-tax expense savings relate only to the
Business Operations and Information Technology Transformation
program and are based on projected improvement from total 2010
operating-basis expenses. Actual total expenses of the Company have
increased since 2010, and may increase or decrease in the future,
due to other factors.
(5) Estimated pro forma Basel III tier 1 common ratios are
preliminary, reflect tier 1 common equity calculated under the July
2013 final rule as applicable on its January 1, 2014 effective date
and are based on State Street's present interpretations,
expectations and understanding of the final rule. Refer to the
“Capital” section of this news release for important information
about the July 2013 final rule, State Street's calculation of its
tier 1 common ratio thereunder and factors that could influence
State Street's calculation of its tier 1 common ratio. Unless
otherwise specified, all capital ratios referenced in this news
release refer to State Street Corporation and not State Street Bank
and Trust Company. Refer to the addendum included with this news
release for a further description of these ratios, and for
reconciliations applicable to State Street's tier 1 common
ratio.
Non-GAAP Financial Measures
In addition to presenting State Street's financial results in
conformity with U.S. generally accepted accounting principles
(GAAP), management also presents results on a non-GAAP, or
operating basis, in order to highlight comparable financial trends
with respect to State Street's business operations from period to
period. Summary results presented on a GAAP basis, descriptions of
our non-GAAP, or operating-basis financial measures, and
reconciliations of operating-basis information to GAAP-basis
information are provided in the addendum included with this news
release.
The table below provides a summary of selected financial
information and key ratios for the indicated periods, presented on
an operating (non-GAAP) basis where noted. Amounts are presented in
millions of dollars, except for per-share amounts or where
otherwise noted.
Financial Highlights(1)
(Dollars in millions)
Q2 2013
Q1 2013
% Increase(Decrease)
Q2 2012
% Increase(Decrease)
Total revenue(1)
$ 2,580 $ 2,470 4.5 % $ 2,459 4.9 %
Total expenses(1)
1,753 1,812 (3.3 ) 1,728 1.4
Net income available to common
shareholders(1)
571 443 28.9 494 15.6
Earnings per common share(1)
1.24
0.96
29.2 1.01 22.8
Return on average common equity(1)
11.3
%
8.9 % 240 bps 10.3 % 100 bps
Total assets at period-end
$
227,300
$ 218,189 4.2 % $ 200,777 13.2 % Quarterly average total assets
207,694 208,265 (0.3 ) 189,095 9.8 Net interest margin(1)
1.31 % 1.31 % — 1.54 % (23) bps
Net unrealized gain (loss) on investment
securities, after-tax at period-end
$ (123 ) $ 817 $ (54 )
(1) Presented on an operating basis, a non-GAAP presentation.
Refer to the addendum included with this news release for
explanations of our non-GAAP financial measures and for
reconciliations of our operating-basis financial information. Total
revenue for the second quarter of 2012 presented in the table has
been adjusted, for comparative purposes, from the amount previously
reported to include tax-equivalent adjustments to processing fees
and other revenue related to tax credits generated by
tax-advantaged investments.
Assets Under Custody and Administration
and Assets Under Management
(Dollars in billions)
Q2 2013
Q1 2013
% Increase(Decrease)
Q2 2012
% Increase(Decrease)
Assets under custody and administration(1) (2)
$
25,742 $ 25,422 1.3 % $ 22,423 14.8 % Assets under
management(2)
2,146 2,176 (1.4 ) 1,908 12.5
Market Indices:
S&P 500® daily average
1,609 1,514 6.3 1,350 19.2 MSCI EAFE® daily average
1,707 1,668 2.3 1,427 19.6 S&P 500® average of month-end
1,612 1,527 5.6 1,357 18.8 MSCI EAFE® average of month-end
1,698 1,676 1.3 1,424 19.2
(1) Includes assets under custody of $18.881 trillion, $18.588
trillion and $16.387 trillion, as of period-end Q2 2013, Q1 2013
and Q2 2012, respectively.
(2) As of period-end.
The following table provides the components of operating-basis
(non-GAAP) revenue(1) for the periods noted:
(Dollars in millions)
Q2 2013
Q1 2013
% Increase(Decrease)
Q2 2012
% Increase(Decrease)
Servicing fees
$ 1,201 $ 1,175 2.2 %
$ 1,086 10.6 % Management fees
277 263 5.3 246
12.6 Trading services revenue: Foreign-exchange trading
171
146 17.1 129 32.6 Brokerage and other fees
125
135 (7.4 ) 126 (0.8 )
Total trading services revenue
296 281 5.3 255 16.1
Securities finance revenue
131 78 67.9 143 (8.4 ) Processing
fees and other revenue(1) (2)
100 94 6.4 81 23.5
Net interest revenue(1) (3)
582 577 0.9 629 (7.5 ) Gains (Losses) related to investment
securities, net
(7 ) 2
(450.0 ) 19 (136.8 )
Total Operating-Basis
Revenue(1) $ 2,580 $ 2,470
4.5 % $ 2,459 4.9 %
(1) Refer to the addendum included with this news release for
explanations of our non-GAAP financial measures and for
reconciliations of our operating-basis financial information.
(2) Processing fees and other revenue for the second quarter of
2013, first quarter of 2013 and second quarter of 2012, presented
in the table, included tax-equivalent adjustments of $34 million,
$34 million and $33 million, respectively, related to tax credits
generated by tax-advantaged investments. GAAP-basis processing fees
and other revenue for these periods was $66 million, $60 million
and $48 million, respectively. The amount previously reported for
the second quarter of 2012 has been adjusted for comparative
purposes.
(3) Net interest revenue for the second quarter of 2013, first
quarter of 2013 and second quarter of 2012, presented in the table,
included tax-equivalent adjustments of $33 million, $32 million and
$31 million, respectively, and excluded conduit-related discount
accretion of $47 million, $31 million and $74 million,
respectively. GAAP-basis net interest revenue for these periods was
$596 million, $576 million and $672 million, respectively. The
Company expects to record aggregate pre-tax conduit-related
accretion of approximately $620 million in interest revenue from
July 1, 2013 through the remaining lives of the former conduit
securities. This expectation is based on numerous assumptions,
including holding the securities to maturity, anticipated
pre-payment speeds, credit quality and sales.
Servicing fees increased 2.2% to $1.2 billion in the
second quarter of 2013 from the first quarter of 2013, due to net
new business and stronger global equity markets. Compared to the
second quarter of 2012, servicing fees increased 10.6%, primarily
due to stronger global equity markets, net new business, and the
acquired Goldman Sachs Administration Services business.
Management fees increased 5.3% to $277 million in the
second quarter of 2013 from $263 million in the first quarter of
2013, and increased 12.6% from $246 million in the second quarter
of 2012. The increases in both comparisons reflect stronger global
equity markets and net new business.
Trading services revenue, which includes foreign-exchange
trading revenue and brokerage and other fees, was $296 million in
the second quarter of 2013, up 5.3% from the first quarter of 2013
due to strength in foreign-exchange partially offset by a decrease
in distribution fees associated with the SPDR® Gold ETF. Compared
to the second quarter of 2012, trading services revenue rose 16.1%
due to an increase in foreign-exchange trading. Foreign-exchange
revenue increased 17.1% from the first quarter of 2013 and
increased 32.6% from the second quarter of 2012, with both
increases due to higher volumes and volatilities. Brokerage and
other fees decreased 7.4% to $125 million from the first
quarter of 2013, primarily due to a decrease in distribution fees
associated with the SPDR® Gold ETF.
Securities finance revenue was $131 million in the second
quarter of 2013, an increase of 67.9% from the first quarter of
2013 primarily due to seasonality. Securities finance revenue
decreased 8.4% from the second quarter of 2012 primarily due to
lower spreads.
Processing fees and other revenue in the second quarter
of 2013 increased 6.4% and 23.5% from the first quarter of 2013 and
the second quarter of 2012, respectively. The increases in both
comparisons include a $20 million gain from the sale of an
investment from one of the company's joint ventures recorded in the
second quarter of 2013.
Operating-basis net interest revenue of $582 million in
the second quarter of 2013 increased 0.9% from $577 million in the
first quarter of 2013 primarily due to $7 million in additional
interest revenue associated with a commercial real estate loan
pay-down. Operating-basis net interest revenue in the second
quarter of 2013 decreased 7.5% from $629 million in the second
quarter of 2012 due to lower yields on earning assets partially
offset by lower liability costs.
Net interest margin, including balances held at the
Federal Reserve and other central banks, remained unchanged from
the first quarter of 2013 at 131 basis points. Compared to the
second quarter of 2012, net interest margin decreased from 154
basis points, due to lower yields on earning assets and higher
central bank balances.
The following table provides the components of operating-basis
(non-GAAP)(1) expenses for the periods noted:
(Dollars in millions)
Q2 2013
Q1 2013
% Increase(Decrease)
Q2 2012
% Increase(Decrease)
Compensation and employee benefits(1)
$ 917 $
1,035 (11.4 )% $ 942 (2.7 )% Information
systems and communications
235 237 (0.8 ) 208 13.0
Transaction processing services
186 180 3.3 172 8.1
Occupancy
114 116 (1.7 ) 115 (0.9 ) Other
301
244 23.4 291 3.4
Total Operating-Basis Expenses(2) $
1,753 $ 1,812 (3.3 )% $ 1,728
1.4 %
(1) Compensation and employee benefits expenses in the first
quarter of 2013 included $118 million related to equity incentive
compensation for retirement-eligible employees and payroll
taxes.
(2) Refer to the addendum included with this news release for
explanations of our non-GAAP financial measures and for
reconciliations of our operating-basis financial information.
Compensation and employee benefits expenses decreased
11.4% in the second quarter of 2013 from the first quarter of 2013,
primarily due to the effect of the $118 million of equity incentive
compensation expense for retirement-eligible employees and payroll
taxes recorded in the first quarter of 2013. Compared to the second
quarter of 2012, compensation and employee benefits expenses
decreased 2.7%, primarily due to savings associated with the
execution of the Business Operations and Information Technology
Transformation program, partially offset by expenses associated
with new business and acquisitions.
Information systems and communications expenses were $235
million in the second quarter of 2013, down 0.8% from the first
quarter of 2013. Compared to the second quarter of 2012,
information systems and communications expenses increased 13.0%,
primarily related to the planned transition of certain functions to
service providers as part of the Business Operations and
Information Technology Transformation program, as well as costs to
support new business.
Transaction processing services expenses increased 3.3%
to $186 million in the second quarter of 2013 from $180 million in
the first quarter of 2013. Compared to the second quarter of 2012,
transaction processing services increased 8.1%. The increases in
both comparisons reflected higher equity market values and higher
transaction volumes in the asset servicing business.
Other expenses increased 23.4% to $301 million in the
second quarter of 2013 from $244 million in the first quarter of
2013 primarily due to higher professional services fees, sales
promotion and legal costs. Compared to the second quarter of 2012,
other expenses increased 3.4%.
Income Taxes
The effective tax rate on second-quarter 2013 GAAP-basis
earnings was 24.0%, compared to 23.8% in the first quarter of 2013
and down from 24.9% in the second quarter of 2012. The effective
tax rate on second-quarter 2013 operating-basis earnings was 23.9%,
compared to 23.6% in the first quarter of 2013 and down from 24.7%
in the second quarter of 2012. Our effective tax rate on
operating-basis earnings for the full-year 2013 is expected to be
approximately 22% to 24%.
Capital
Capital ratios(1)
June 30,2013
March 31,2013
bps Increase(Decrease)
June 30,2012
bps Increase(Decrease)
Total capital ratio
19.1 % 19.2 %
(10
) bps
21.5 %
(240
) bps
Tier 1 capital ratio
16.6 18.0 (140 ) 19.9 (330 ) Tier 1
leverage ratio
6.9 6.9 — 7.7 (80 ) Tier 1 common ratio
14.9 16.1 (120 ) 17.9 (300 )
Estimated pro forma Basel III tier 1
common ratio(2)
10.0
10.6
11.0
TCE ratio
6.5 7.1 (60 ) 7.2 (70 )
(1) Unless otherwise specified, all capital ratios referenced in
the table above and elsewhere in this news release refer to State
Street Corporation and not State Street Bank and Trust Company.
Refer to the addendum included with this news release for a further
description of these ratios, and for reconciliations applicable to
State Street's tier 1 common and tangible common equity, or TCE,
ratios presented in this table. All ratios are presented as of
period-end.
(2) On July 2, 2013, the Federal Reserve approved a rule
intended to finalize its implementation of the Basel III framework
in the U.S. The final rule consolidates, with revisions, three
separate Notices of Proposed Rulemaking, or NPRs, originally issued
by the Federal Reserve in June 2012. State Street's transition
period with respect to the final rules has not yet commenced. Under
the final rule, State Street expects to manage to the lower of its
tier 1 common ratio calculated under the Basel III standardized
approach, referred to as the standardized approach, and under the
Basel III advanced approach, referred to as the advanced approach.
These calculations differ from those in conformity with the June
2012 NPRs.
The estimated pro forma Basel III tier 1 common ratio presented
in the table above as of June 30, 2013 is a preliminary estimate by
State Street, calculated pursuant to the standardized approach in
accordance with the July 2013 final rule. State Street has also
preliminarily estimated, at 10.9%, its June 30, 2013 pro forma
Basel III tier 1 common ratio calculated pursuant to the advanced
approach in accordance with the July 2013 final rule. The ratio
calculated under the standardized approach is lower than the ratio
calculated under the advanced approach and is therefore presented
in the table above. Each of these calculations is preliminary,
reflects tier 1 common equity calculated under the final rule as
applicable on its January 1, 2014 effective date and is based on
State Street's present interpretations, expectations and
understanding of the final rule. The estimated pro forma Basel III
tier 1 common ratios presented in the table above as of March 31,
2013 and June 30, 2012 are estimates by State Street, calculated
pursuant to the advanced approach in accordance with the June 2012
NPRs. Each of these calculations is based on State Street's present
interpretations and understanding of the June 2012 NPRs.
The estimated pro forma Basel III tier 1 common ratio as of June
30, 2013, calculated pursuant to the advanced approach in
conformity with the July 2013 final rule, reflects calculations and
determinations with respect to State Street's capital and related
matters as of June 30, 2013, based on State Street and external
data, quantitative formulae, statistical models, historical
correlations and assumptions, collectively referred to as “advanced
systems,” in effect and used by State Street's advanced systems for
those purposes as of July 19, 2013. Significant components of these
advanced systems involve the exercise of judgment by State Street
and its regulators, and its advanced systems may not accurately
represent or calculate the scenarios, circumstances, outputs or
other results for which they are designed or intended. Due to the
influence of changes in these advanced systems, whether resulting
from changes in data inputs, regulation or regulatory supervision
or interpretation, State Street-specific or market activities or
experiences or other updates or factors, State Street expects that
its advanced systems and its capital ratios calculated in
conformity with the Basel III framework will change and may be
volatile over time, and that those latter changes or volatility
could be material as calculated and measured from period to period.
Refer to the addendum included with this news release for
information concerning the specified capital ratios and for
reconciliations of State Street's estimated pro forma Basel III
tier 1 common ratios to the tier 1 common ratio calculated using
currently applicable regulatory requirements under Basel I
rules.
The following table presents the primary elements of the
transition, as described in note (2) to the preceding table, from
State Street's March 31, 2013 presentation of its estimated pro
forma Basel III tier 1 common ratio, calculated in conformity with
the June 2012 NPRs (advanced approach), to the estimated pro forma
Basel III tier 1 common ratio as of June 30, 2013, calculated in
conformity with the July 2013 Basel III final rule (advanced
approach):
AdvancedApproach
Estimated tier 1 common equity ratio
under June 2012 Basel III NPRs as of March 31, 2013
10.6
%
Capital generation, net of common stock purchases and
dividends
— bps
Change in risk-weighted assets (5 ) Impact of July 2013 final rule:
Treatment of accumulated other comprehensive income (5 )
Risk-weighted assets 40
Estimated tier 1 common equity
ratio under July 2013 Basel III final rule as of June 30, 2013
10.9 %
Common Stock Dividend and Share Purchase Program
The Company purchased approximately 8.5 million shares of its
common stock at a total cost of approximately $560 million and an
average price of $65.73 per share in the second quarter of 2013 and
also declared a quarterly common stock dividend of $0.26 per
share.
Additional Information
All earnings per share amounts represent fully diluted earnings
per common share. Return on average common shareholders' equity is
determined by dividing annualized net income available to common
equity by average common shareholders' equity for the period.
Operating-basis return on average common equity utilizes annualized
operating-basis net income available to common equity in the
calculation.
Investor Conference Call
State Street will webcast an investor conference call today,
Friday, July 19, 2013, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 888/391-4233 in the U.S. or at +1
706/679-5594 outside of the U.S. The Conference ID is #95866201.
Recorded replays of the conference call will be available on the
web site, and by telephone at +1 855/859-2056 inside the U.S. or at
+1 404/537-3406 outside the U.S. beginning approximately two hours
after the call's completion. The Conference ID is #95866201. 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 (including those
concerning our investment portfolio), and additional financial
information are available on State Street's website, at
www.statestreet.com/stockholder under “Investor Relations--Investor
News & Events" and under the title “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 $25.74 trillion in assets under custody and
administration and $2.15 trillion* in assets under management as of
June 30, 2013, State Street operates globally in more than 100
geographic markets and employs 29,225 worldwide. For more
information, visit State Street's website 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.
* Assets under management include the assets of the SPDR® Gold
ETF (approximately $37.1 billion as of June 30, 2013), for which
State Street Global Markets, LLC, an affiliate of SSgA, serves as
the distribution agent.
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 and
capital 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, but not
always, identified by such forward-looking terminology as "plan,"
"expect," "look," "believe," "anticipate," "estimate," "seek,"
"may," "will," "trend," "target," "strategy" 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 July 19, 2013.
Important factors that may affect future results and outcomes
include, but are not limited to:
- 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, including, for example, the direct and indirect effects
on counterparties of the current sovereign-debt risks in Europe and
other regions;
- financial market disruptions or
economic recession, whether in the U.S., Europe, Asia or other
regions;
- increases in the volatility of, or
declines in the level of, our net interest revenue, changes in the
composition of the assets recorded in our consolidated statement of
condition (and our ability to measure the fair value of investment
securities) and the possibility that we may change the manner in
which we fund those assets;
- the liquidity of the U.S. and
international securities markets, particularly the markets for
fixed- income securities and inter-bank credits, and the liquidity
requirements of our clients;
- 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;
- 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;
- our ability to attract deposits and
other low-cost, short-term funding, and our ability to deploy
deposits in a profitable manner consistent with our liquidity
requirements and risk profile;
- the manner and timing with which the
Federal Reserve and other U.S. and foreign regulators implement the
Dodd-Frank Act, the Basel II and Basel III capital and liquidity
standards, and European legislation with respect to the levels of
regulatory capital we must maintain, our credit exposure to third
parties, margin requirements applicable to derivatives, banking and
financial activities and other regulatory initiatives in the U.S.
and internationally, including regulatory developments that result
in changes to our structure or operating model, increased costs or
other changes to how we provide services;
- adverse changes in the regulatory
capital ratios that we are required to meet, whether arising under
the Dodd-Frank Act, the Basel II or Basel III capital and liquidity
standards or due to changes in regulatory positions, practices or
regulations in jurisdictions in which we engage in banking
activities, including changes in internal or external data,
formulae, models, assumptions or other advanced systems used in
calculating our capital ratios that cause changes in those ratios
as they are measured from period to period;
- increasing requirements to obtain the
prior approval of the Federal Reserve or our other regulators for
the use, allocation or distribution of our capital or other
specific capital actions or programs, including acquisitions,
dividends and equity purchases, without which our growth plans,
distributions to shareholders, equity purchase programs or other
capital initiatives may be restricted;
- changes in law or regulation that may
adversely affect our business activities or those of our clients or
our counterparties, and the products or services that we sell,
including additional or increased taxes or assessments thereon,
capital adequacy requirements, margin requirements and changes that
expose us to risks related to the adequacy of our controls or
compliance programs;
- our ability to promote a strong culture
of risk management, operating controls, compliance oversight and
governance that meet our expectations or those of our clients and
our regulators;
- the credit agency ratings of our debt
and depository obligations and investor and client perceptions of
our financial strength;
- delays or difficulties in the execution
of our previously announced Business Operations and Information
Technology Transformation program, which could lead to changes in
our estimates of the charges, expenses or savings associated with
the planned program and may cause volatility of our earnings;
- the results of, and costs associated
with, government investigations, litigation, and similar claims,
disputes, or proceedings;
- the possibility that our clients will
incur substantial losses in investment pools for which we act as
agent, and the possibility of significant reductions in the
valuation of assets underlying those pools;
- adverse publicity or other reputational
harm;
- dependencies on information technology,
complexities and costs of protecting the security of our systems
and difficulties with protecting our intellectual property
rights;
- our ability to grow revenue, control
expenses, attract and retain highly skilled people and raise the
capital necessary to achieve our business goals and comply with
regulatory requirements;
- potential changes to the competitive
environment, including changes due to regulatory and technological
changes, the effects of industry consolidation, and perceptions of
State Street as a suitable service provider or counterparty;
- potential changes in how and in what
amounts clients compensate us for our services, and the mix of
services provided by us that clients choose;
- the ability to complete acquisitions,
joint ventures and divestitures, including the ability to obtain
regulatory approvals, the ability to arrange financing as required
and the ability to satisfy closing conditions;
- the risks that acquired businesses and
joint ventures will not achieve their anticipated financial and
operational benefits or 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 our
relationships with our clients, our employees or regulators;
- our ability to recognize emerging needs
of our clients and to develop products that are responsive to such
trends and profitable to us, the performance of and demand for the
products and services we offer, and the potential for new products
and services to impose additional costs on us and expose us to
increased operational risk;
- our ability to anticipate and manage
the level and timing of redemptions and withdrawals from our
collateral pools and other collective investment products;
- our ability to control operating risks,
data security breach 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;
- 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 2012 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, July 19, 2013, and we do not undertake efforts to revise
those forward-looking statements to reflect events after that
date.
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