On an Operating Basis1,
Second-Quarter 2014 EPS was $1.39, up 12% Compared to the Second
Quarter of 2013, on Revenue of $2.68 Billion
Strength in Core Asset Servicing and Asset
Management Revenue; up 7% from the Second Quarter of 2013
In announcing today's financial results, Joseph L. Hooley, State
Street's chairman, president and chief executive officer, said, "We
are pleased with our solid second-quarter revenue growth driven by
stronger global equity markets, net new business and the seasonal
benefit from securities finance activity."
"We continue to see strong demand for our products and services
as evidenced by our second quarter new business wins which were
$250 billion in asset servicing and $18 billion in net new assets
to be managed. We also have a robust and well-diversified new
business pipeline."
"Despite our solid performance, we remain cautious about the
overall environment given the continued low levels of interest
rates and volatility, and the ongoing pressure of regulatory
compliance costs."
"We also continue to prioritize returning capital to our
shareholders through dividends and purchases of our common stock.
During the second quarter of 2014, we purchased approximately $410
million of our common stock and ended the second quarter with
approximately $1.3 billion remaining under our March 2014 common
stock purchase program authorizing the purchase of up to $1.7
billion of our common stock through March 31, 2015. We also
increased our common stock dividend for the quarter to $0.30 per
share."
Second-Quarter 2014 GAAP Results
- Earnings per common share (EPS)
of $1.38 increased from $0.81 in the first quarter of 2014 and from
$1.24 in the second quarter of 2013. The comparison with the first
quarter reflects the seasonal deferred incentive compensation
expense for retirement-eligible employees and payroll taxes in the
first quarter of 2014, as well as the seasonal increase in
second-quarter 2014 securities finance revenue.
- Net income available to common
shareholders of $602 million increased from $356 million in the
first quarter of 2014 and from $571 million in the second quarter
of 2013.
- Revenue of $2.60 billion
increased from $2.49 billion in the first quarter of 2014 and from
$2.56 billion in the second quarter of 2013.
- Net interest revenue of $561
million increased from $555 million in the first quarter of 2014
and decreased from $596 million in the second quarter of 2013.
- Expenses of $1.85 billion
decreased from $2.03 billion in the first quarter of 2014 and
increased from $1.80 billion in the second quarter of 2013.
- Return on average common
shareholders' equity (ROE) of 11.9% increased from 7.2% in the
first quarter of 2014 and from 11.3% in the second quarter of
2013.
Second-Quarter 2014 Operating-Basis (Non-GAAP)
Results1
- EPS of $1.39 increased from
$0.99 in the first quarter of 2014 and increased from $1.24 in the
second quarter of 2013. The comparison with the first quarter
reflects the seasonal deferred incentive compensation expense for
retirement-eligible employees and payroll taxes in the first
quarter of 2014, as well as the seasonal increase in second-quarter
2014 securities finance revenue.
- Net income available to common
shareholders of $603 million increased from $433 million in the
first quarter of 2014 and from $571 million in the second quarter
of 2013.
- Revenue of $2.68 billion
increased from $2.56 billion in the first quarter of 2014 and from
$2.58 billion in the second quarter of 2013.
- Net interest revenue of $575
million increased from $572 million in the first quarter of 2014
and decreased from $582 million in the second quarter of 2013.
Operating-basis net interest revenue excluded discount accretion on
former conduit securities of $28 million, $27 million and $47
million for the second quarter of 2014, the first quarter of 2014,
and the second quarter of 2013, respectively. All quarters are
presented on a fully taxable-equivalent basis.
- Expenses of $1.82 billion
decreased from $1.92 billion in the first quarter of 2014 and
increased from $1.75 billion in the second quarter of 2013.
- ROE of 11.9% increased from 8.8%
in the first quarter of 2014 and from 11.3% in the second quarter
of 2013.
Second-Quarter 2014 Highlights
- New business2 New asset
servicing mandates during the second quarter of 2014 totaled $250
billion and net new assets to be managed were $18 billion.
- Business Operations and Information
Technology Transformation program3 Remains on track to
achieve $575 million to $625 million in annualized pre-tax expense
savings by 2015.
- Capital4 Our tier 1
common ratio as of June 30, 2014, calculated under the
advanced approach in conformity with the Basel III final rule, was
12.8%. Our estimated pro forma Basel III tier 1 common ratio as of
June 30, 2014, calculated under the standardized approach in
conformity with the Basel III final rule, was 11.3%.
- Return of capital to
shareholders Purchased approximately $410 million of our common
stock at an average price of $65.02 per share and declared a
quarterly common stock dividend of $0.30 per share in the second
quarter of 2014.
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 New business in assets to be serviced is reflected in our
assets under custody and administration after we begin servicing
the assets, and net new business in assets to be managed is
reflected in our assets under management after we begin managing
the assets. As such, only a portion of these new asset servicing
and asset management mandates is reflected in our assets under
custody and administration and assets under management, as the case
may be, as of June 30, 2014. 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.
3 Estimated pre-tax expense savings relate only to the Business
Operations and Information Technology Transformation program and
are based on projected improvement from our total 2010
operating-basis expenses, all else being equal. Our actual total
expenses have increased since 2010, and may increase or decrease in
the future, due to other factors.
4 Earlier this year, we announced that we had completed our
Basel III qualification period. As a result, beginning with the
second quarter of 2014, we are required to calculate and disclose
our regulatory capital ratios under the advanced approaches
framework of the Basel III final rule. Our estimated pro forma
Basel III tier 1 common ratio, calculated under the standardized
approach, is an estimate, calculated in conformity with the
standardized approach in the Basel III final rule. Refer to the
“Capital” section of this news release for important information
about the Basel III final rule, our calculations of our tier 1
common ratios thereunder, factors that could influence State
Street's calculations of its tier 1 common ratios and other
information about our capital ratios. 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.
Non-GAAP Financial Measures
In addition to presenting State Street's financial results in
conformity with U.S. generally accepted accounting principles, or
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, or non-GAAP, basis where noted. Amounts are presented
in millions of dollars, except for per-share amounts or where
otherwise noted.
Financial Highlights (Dollars in millions)
Q2 2014
Q1 2014
% Increase(Decrease)
Q2 2013
% Increase(Decrease)
Total revenue1
$ 2,676 $ 2,559 4.6 % $ 2,580 3.7 %
Total expenses1
1,818 1,917 (5.2 ) 1,753 3.7 Net income
available to common shareholders1
603 433 39.3 571 5.6
Earnings per common share1
1.39 .99 40.4 1.24 12.1 Return on
average common equity1
11.9 % 8.8 % 310 bps 11.3 % 60
bps Total assets as of period-end
$ 282,324 $ 256,663
10.0 % $ 227,300 24.2 % Quarterly average total assets
234,664 215,569 8.9 207,694 13.0 Net interest margin1
1.12 % 1.24 % (12) bps 1.31 % (19) bps Net unrealized
gains (losses) on investment securities, after-tax, as of
period-end
$ 456 $ 124 $ (123 )
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.
Assets Under Custody and Administration and Assets Under
Management (Dollars in billions)
Q2 2014 Q1 2014
% Increase(Decrease)
Q2 2013
% Increase(Decrease)
Assets under custody and administration1, 2
$ 28,400
$ 27,477 3.4 % $ 25,742 10.3 % Assets under management2
2,480 2,381 4.2 2,146 15.6 Market Indices: S&P 500®
daily average
1,900 1,835 3.5 1,609 18.1 MSCI EAFE® daily
average
1,942 1,894 2.5 1,707 13.8 S&P 500® average of
month-end
1,923 1,838 4.6 1,612 19.3 MSCI EAFE® average of
month-end
1,955 1,896 3.1 1,698 15.1
1 Includes assets under custody of $21,687 billion, $20,996
billion and $18,881 billion, as of June 30, 2014,
March 31, 2014 and June 30, 2013, respectively.
2 As of period-end.
Revenue
The following table provides the components of our
operating-basis (non-GAAP) revenue1 for the periods noted:
(Dollars in
millions)
Q2 2014 Q1 2014
% Increase(Decrease)
Q2 2013
% Increase(Decrease)
Servicing fees
$ 1,288 $ 1,238 4.0 % $ 1,201 7.2 %
Management fees
300 292 2.7 277 8.3 Trading services
revenue: Foreign-exchange trading
144 134 7.5 171 (15.8 )
Brokerage and other fees2
116 119 (2.5
) 133 (12.8 ) Total trading services revenue
260 253 2.8 304 (14.5 ) Securities finance revenue
147 85 72.9 131 12.2 Processing fees and other revenue1, 2,
3
108 113 (4.4 ) 92 17.4
Total fee revenue1, 2, 3
2,103 1,981 6.2 2,005 4.9
Net interest revenue1, 4
575 572 0.5 582 (1.2 ) Gains
(losses) related to investment securities, net
(2
) 6 (133.3 ) (7 ) (71.4 )
Total
Operating-Basis Revenue1 $ 2,676 $
2,559 4.6 % $ 2,580 3.7 %
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.
2 Brokerage and other fees for the second quarter of 2014
reflect the reclassification of revenue associated with currency
management from processing fees and other revenue. Brokerage and
other fees and processing fees and other revenue previously
reported for the first quarter of 2014 and the second quarter of
2013 have been adjusted for comparative purposes.
3 Processing fees and other revenue for the second quarter of
2014, first quarter of 2014 and second quarter of 2013, presented
in the table, included tax-equivalent adjustments of $64 million,
$57 million and $34 million, respectively, related to tax credits
generated by tax-advantaged investments. GAAP-basis processing fees
and other revenue for these periods was $44 million, $56 million
and $58 million, respectively.
4 Net interest revenue for the second quarter of 2014, first
quarter of 2014 and second quarter of 2013, presented in the table,
included tax-equivalent adjustments of $42 million, $44 million and
$33 million, respectively, and excluded conduit-related discount
accretion of $28 million, $27 million and $47 million,
respectively. GAAP-basis net interest revenue for these periods was
$561 million, $555 million and $596 million, respectively. The
Company expects to record aggregate pre-tax conduit-related
accretion of approximately $522 million in interest revenue from
July 1, 2014 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 and credit quality.
Servicing fees of $1.29 billion in the second quarter of
2014 increased 4.0% from the first quarter of 2014, primarily due
to net new business and stronger global equity markets. Compared to
the second quarter of 2013, servicing fees increased 7.2%, due to
stronger global equity markets, net new business and the impact of
the weaker U.S. dollar.
Management fees of $300 million in the second quarter of
2014 increased 2.7% and 8.3% from the first quarter of 2014 and
second quarter of 2013, respectively. The increase in both
comparisons periods is primarily due to stronger global equity
markets.
Foreign-exchange trading revenue of $144 million
increased 7.5% from the first quarter of 2014 due to higher volumes
partially offset by lower volatility. Compared to the second
quarter of 2013, foreign exchange trading revenue decreased 15.8%
due to lower volatility partially offset by higher volumes.
Brokerage and other fees of $116 million decreased 2.5% and
12.8% from the first quarter of 2014 and second quarter of 2013,
respectively. The decrease in both comparisons reflects lower
revenue related to electronic trading.
Securities finance revenue of $147 million in the second
quarter of 2014 increased 72.9% from the first quarter of 2014,
primarily due to seasonality. Compared to the second quarter of
2013, securities finance revenue increased 12.2%, primarily due to
new business in enhanced custody.
Processing fees and other revenue of $108 million in the
second quarter of 2014 decreased 4.4% from the first quarter of
2014. Compared to the second quarter of 2013, processing fees and
other revenue increased 17.4%, primarily due to higher revenue
associated with tax-advantaged investments and a more favorable
counterparty valuation adjustment. See notes 1, 2 and 3 to the
table above for a description of the presentation of
operating-basis processing fees and other revenue.
Net interest revenue of $575 million in the second
quarter of 2014 increased 0.5% from the first quarter of 2014.
Compared to the second quarter of 2013, net interest revenue
decreased 1.2%, primarily due to lower yields on interest-earning
assets, partially offset by lower interest expense and a higher
level of interest earning assets. See notes 1 and 4 to the table
above for a description of the presentation of operating-basis net
interest revenue.
Net interest margin, including balances held at the
Federal Reserve and other central banks, decreased to 112 basis
points in the second quarter of 2014 from 124 basis points in the
first quarter of 2014 and from 131 basis points in the second
quarter of 2013. Refer to the addendum included with this news
release for reconciliations of our net interest margin.
Expenses
The following table provides the components of our
operating-basis (non-GAAP)1 expenses for the periods noted:
(Dollars in
millions)
Q2 2014 Q1 2014
% Increase(Decrease)
Q2 2013
% Increase(Decrease)
Compensation and employee benefits1, 2
$ 974 $ 1,085
(10.2 )% $ 917 6.2 % Information systems and communications
244 244 — 235 3.8 Transaction processing services
193
191 1.0 186 3.8 Occupancy
115 114 0.9 114 0.9 Other1, 3
292 283 3.2 301 (3.0 )
Total
Operating-Basis Expenses1 $ 1,818 $ 1,917
(5.2 )% $ 1,753 3.7 %
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.
2 Compensation and employee benefits expenses for the second
quarter of 2014 and the first quarter of 2014, presented in the
table, excluded severance costs of $4 million and $72 million,
respectively, related to staffing realignment. GAAP-basis
compensation and employee benefits expenses for the second quarter
of 2014, first quarter of 2014 and second quarter of 2013 were $978
million, $1,157 million and $917 million, respectively.
3 GAAP-basis other expenses for the second quarter of 2014,
first quarter of 2014 and second quarter of 2013 were $292 million,
$289 million and $316 million, respectively.
Compensation and employee benefits expenses decreased
10.2% in the second quarter of 2014 from the first quarter of 2014,
primarily due to an incremental $146 million, or $0.23 per share,
associated with the seasonal deferred incentive compensation
expense for retirement-eligible employees and payroll taxes
recorded in the first quarter of 2014. Compared to the second
quarter of 2013, compensation and employee benefits expenses
increased 6.2%, primarily due to new business support, higher
incentive compensation, the impact of the weaker U.S. dollar,
annual merit increases, and higher regulatory compliance costs,
partially offset by savings associated with the Business Operations
and Information Technology Transformation program. See notes 1 and
2 to the table above for a description of the presentation of
operating-basis compensation and employee benefits expenses for the
relevant periods.
Information systems and communications expenses were flat
compared with the first quarter of 2014 and increased 3.8% compared
to the second quarter of 2013. The increase compared to second
quarter of 2013 is primarily related to higher infrastructure
costs.
Transaction processing services expenses of $193
million in the second quarter of 2014 increased 1.0% from the first
quarter of 2014. Compared to the second quarter of 2013,
transaction processing services expenses increased 3.8%, primarily
due to higher volumes and higher equity values in the investment
servicing business.
Occupancy expenses of $115 million in the second quarter
of 2014 increased approximately 1% from both the first quarter of
2014 and the second quarter of 2013. Occupancy expenses in the
second quarter of 2014 included a one-time recovery of $5
million.
Other expenses increased 3.2% to $292 million in the
second quarter of 2014 from $283 million in the first quarter of
2014, primarily due to higher professional services fees associated
with regulatory compliance, partially offset by a $9 million credit
associated with Lehman Brothers-related recoveries. Compared to the
second quarter of 2013, other expenses decreased 3.0%, primarily
due to a $9 million credit associated with Lehman Brothers-related
recoveries, and lower legal and sales promotion expenses, partially
offset by higher regulatory compliance costs. See notes 1 and 3 to
the table above for a description of GAAP-basis other expenses for
the relevant periods.
Income Taxes
Our second-quarter 2014 GAAP-basis effective tax rate was 16.6%,
down from 20.3% in the first quarter of 2014 and down from 24.0% in
the second quarter of 2013. Our second-quarter 2014 operating-basis
tax rate was 27.2%, down from 31.2% in the first quarter of 2014
and down from 30.0% in the second quarter of 2013.
Capital
In July 2013, the Federal Reserve issued a final rule intended
to implement the Basel III framework in the U.S., referred to as
the Basel III final rule. Provisions of the Basel III final rule
become effective under a transition timetable which began on
January 1, 2014. On February 21, 2014, we were notified by the
Federal Reserve that we completed our Basel III qualification
period and would be required to begin using the advanced approaches
framework provided in the Basel III final rule in the determination
of our risk-based capital requirements. Pursuant to this
notification, we used the advanced approaches framework to
calculate our regulatory capital ratios beginning with the second
quarter of 2014.
For the remainder of 2014, including the second quarter of 2014,
the lower of our regulatory capital ratios calculated under the
Basel III advanced approach and those ratios calculated under the
transitional provisions of Basel III will apply in the assessment
of our capital adequacy for regulatory purposes. Once the
provisions of the Basel III final rule are fully implemented
effective January 1, 2015, the lower of the Basel III regulatory
capital ratios calculated by us under the Basel III advanced
approach and the Basel III standardized approach will apply in the
assessment of our capital adequacy for regulatory purposes.
The following table presents our regulatory capital ratios as of
June 30, 2014. Refer to the addendum included with this news
release for a further description of these ratios, and for a
reconciliation applicable to State Street's tangible common equity,
or TCE, ratio presented in the table. All capital ratios presented
in the table and elsewhere in this news release refer to State
Street Corporation and not State Street Bank and Trust Company.
Capital ratios
Basel
IIIAdvancedApproachJune 30,
20141
Basel IIITransitionalJune
30, 20142
Total capital ratio
16.1% 20.2% Tier 1 capital ratio
14.1 17.7 Tier 1 common ratio
12.8 16.0
Tier 1 leverage ratio
6.9 6.9 TCE ratio3
7.0
1 Total capital, tier 1 capital, tier 1 common and tier 1
leverage ratios as of June 30, 2014 were calculated in
conformity with the advanced approaches provisions of the Basel III
final rule.
2 Total capital, tier 1 capital, tier 1 common and tier 1
leverage ratios as of June 30, 2014 were calculated in
conformity with the transitional provisions of the Basel III final
rule. Specifically, these ratios reflect total and tier 1 capital,
as applicable (the numerator), calculated in conformity with the
provisions of the Basel III final rule and total risk-weighted
assets or, with respect to the tier 1 leverage ratio, quarterly
average assets (in both cases, the denominator), calculated in
conformity with the provisions of Basel I.
3 The tangible common equity, or TCE, ratio is an additional
capital ratio that management believes provides context useful in
understanding and assessing State Street's capital adequacy. The
TCE ratio is not required by GAAP or by banking regulations, but is
a metric used by management to evaluate the adequacy of State
Street’s capital levels. The TCE ratio 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. A reconciliation with respect to the
calculation of our TCE ratio as of June 30, 2014 is provided
in the addendum included with this news release.
Our tier 1 common ratio as of June 30, 2014, calculated in
conformity with the advanced approaches provisions of the Basel III
final rule, was 12.8%. Our estimated pro forma Basel III tier 1
common ratios, calculated in conformity with the advanced
approaches provisions of the Basel III final rule, were 13.2% as of
March 31, 2014 and 10.9% as of June 30, 2013. Our
estimated pro forma Basel III tier 1 common ratios, calculated in
conformity with the standardized approach in the Basel III final
rule, were 11.3% as of June 30, 2014, 11.2% as of
March 31, 2014 and 10.0% as of June 30, 2013. Our
estimated pro forma tier 1 common ratios are preliminary estimates,
calculated in conformity with the advanced approach or the
standardized approach (as the case may be) in the Basel III final
rule, based on our interpretations of the Basel III final rule as
of the respective date of each estimate’s first public
announcement.
The advanced approaches ratios (actual and estimated) presented
in this news release reflect calculations and determinations with
respect to our capital and related matters, 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 us for those purposes
as of the respective date of each ratio’s first public
announcement. Significant components of these advanced systems
involve the exercise of judgment by us and our regulators, and
these 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, we expect that our advanced systems and our
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 our pro forma Basel III tier 1 common ratios
calculated under the advanced and standardized approaches, and for
reconciliations of these estimated pro forma ratios to our tier 1
common ratio calculated under then currently applicable regulatory
requirements.
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. 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.
Investor Conference Call
State Street will webcast an investor conference call today,
Tuesday, July 22, 2014, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 877/423-4013 inside the U.S. or at
+1 706/679-5594 outside of the U.S. The Conference ID is #
58546215.
Recorded replays of the conference call will be available on the
website, 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 # 58546215.
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 $28.40 trillion in assets under custody and
administration and $2.48 trillion* in assets under management as of
June 30, 2014, State Street operates globally in more than 100
geographic markets and employs 29,420 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 $33 billion as of June 30, 2014), 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,
dividend and stock purchase programs, 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 “expect,” “objective,”
“intend,” “plan,” “forecast,” “outlook,” “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 22,
2014.
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 sovereign-debt risks in the U.S., Europe
and other regions;
- increases in the volatility of, or
declines in the level of, our net interest revenue, changes in the
composition or valuation 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 changes to the Basel III capital framework and
European legislation, such as the Alternative Investment Fund
Managers Directive and Undertakings for Collective Investment in
Transferable Securities Directives, 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 or will be required to meet,
whether arising under the Dodd-Frank Act or the 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 the
calculation of 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, or the
enforcement of 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;
- financial market disruptions or
economic recession, whether in the U.S., Europe, Asia or other
regions;
- our ability to promote a strong culture
of risk management, operating controls, compliance oversight and
governance that meet our expectations and those of our clients and
our regulators;
- the results of, and costs associated
with, government investigations, litigation and similar claims,
disputes, or proceedings;
- 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 potential for losses arising from
our investments in sponsored investment funds;
- 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
liquidity or valuation of assets underlying those pools;
- our ability to anticipate and manage
the level and timing of redemptions and withdrawals from our
collateral pools and other collective investment products;
- the credit agency ratings of our debt
and depository obligations and investor and client perceptions of
our financial strength;
- adverse publicity, whether specific to
State Street or regarding other industry participants or
industry-wide factors, or other reputational harm;
- our ability to control operational
risks, data security breach 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;
- dependencies on information technology
and our ability to control related risks, including cyber-crime and
other threats to our information technology infrastructure and
systems and their effective operation both independently and with
external systems, and complexities and costs of protecting the
security of our systems and data;
- 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;
- changes or 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;
- changes or 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;
- our 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 our 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 negative
synergies 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;
- 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 2013 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 22, 2014, and we do not undertake efforts to
revise those forward-looking statements to reflect events after
that date.
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20140722005802/en/
State Street CorporationInvestor Contact:Valerie Haertel, +1
617-664-3477orMedia Contact:Hannah Grove, +1 617-664-3377
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