UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 24, 2015
______________________
State Street Corporation
(Exact name of registrant as specified in its charter)
______________________
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Massachusetts | | 001-07511 | | 04-2456637 |
(State of Incorporation) | | (Commission File Number) | | (IRS Employer Identification Number) |
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One Lincoln Street Boston, Massachusetts | | 02111 |
(Address of principal executive office) | | (Zip Code) |
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Registrant’s telephone number, including area code: (617) 786-3000 |
______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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o | Written communications pursuant to Rule 425 under the Securities Act |
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o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act |
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o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |
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o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act |
Item 2.02. Results of Operations and Financial Condition.
On April 24, 2015, State Street Corporation (“State Street” or the “Company”) issued a news release announcing its results of operations for the first quarter of 2015. Copies of that news release and accompanying first-quarter 2015 financial information addendum are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
In addition, a slide presentation providing highlights of State Street's first-quarter 2015 results of operations and information pertaining to its investment portfolio as of March 31, 2015, which will be made available in connection with the investor conference call to be held by the Company on April 24, 2015, is furnished with this Current Report on Form 8-K as Exhibit 99.3.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
State Street Corporation's news release dated April 24, 2015, announcing its first-quarter 2015 results of operations, and accompanying first-quarter 2015 financial information addendum, are furnished herewith as Exhibits 99.1 and 99.2, respectively; and a slide presentation providing highlights of State Street's first-quarter 2015 results of operations and information pertaining to its investment portfolio as of March 31, 2015, which will be made available in connection with the investor conference call referenced in the April 24, 2015 news release, is furnished herewith as Exhibit 99.3.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | STATE STREET CORPORATION |
| | | | |
| | By: | | /s/ SEAN P. NEWTH |
| | Name: | | Sean P. Newth |
| | Title: | | Senior Vice President, Chief Accounting Officer and Controller |
Date: April 24, 2015 | | | | |
EXHIBIT INDEX
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Exhibit No. |
| Description |
99.1 |
| State Street's news release dated April 24, 2015, announcing its first-quarter 2015 results of operations |
99.2 |
| State Street's first-quarter 2015 financial information addendum |
99.3 |
| Slide presentation providing highlights of State Street's first-quarter 2015 results of operations and information pertaining to its investment portfolio as of March 31, 2015 |
Exhibit 99.1
One Lincoln Street
Boston, MA 02111
United States of America
News Release
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Investor Contact: Anthony Ostler | Media Contact: Hannah Grove |
+1 617/664-3477 | +1 617/664-3377 |
STATE STREET REPORTS FIRST-QUARTER 2015 GAAP-BASIS EPS OF $0.90
ON REVENUE OF $2.6 BILLION
First-quarter 2015 operating-basis1 EPS was $1.17, up 18.2%, on revenue
of $2.7 billion, up 4.6%, compared to the first quarter of 2014
As previously disclosed, authorized to purchase up to $1.8 billion of common stock through June 30, 2016
Boston, MA ...April 24, 2015
In announcing today's financial results, Joseph L. Hooley, State Street's chairman and chief executive officer said, "We are pleased with our first-quarter 2015 results, which reflect strong fee revenue growth compared to the first quarter of 2014, continued momentum of our core business, and our focus on managing expenses. We continue to benefit from our strong market position and client demand for our servicing solutions remains robust as evidenced by $214 billion of new servicing commitments."
Hooley continued, “Our fee revenue growth in the first quarter was supported by strong foreign exchange trading activity. The divergence in interest rate expectations for the United States relative to most other major economies and the actions taken by several central banks around the world to increase their quantitative easing has contributed to an increase in volatility and volumes of foreign exchange trading. The strengthening of the U.S. dollar during the quarter reduced our fee revenue outside of the U.S., but the parallel reduction in expenses largely offset this impact on our bottom line."
Hooley concluded, "We continue to prioritize returning capital to our shareholders. During the first quarter of 2015, we executed the final phase of our $1.7 billion common stock purchase program announced in March 2014. In March 2015, our Board of Directors approved a $1.8 billion common stock purchase program following the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR) 2015 process. Our 2015 capital plan also includes a proposed increase in our quarterly common stock dividend to $0.34 per share starting in the second quarter of 2015."
First-Quarter 2015 GAAP-Basis Results:
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• | Earnings per common share (EPS) of $0.90 decreased from $1.12 in the fourth quarter of 2014 and increased from $0.81 in the first quarter of 2014. First-quarter 2015 and fourth-quarter 2014 results include net after-tax charges of $150 million and $92 million, or $0.36 and $0.22 per share, respectively, to increase our legal accrual associated with indirect foreign exchange matters. |
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• | Net income available to common shareholders of $377 million decreased from $473 million in the fourth quarter of 2014 and increased from $356 million in the first quarter of 2014. |
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• | Revenue of $2.61 billion decreased from $2.63 billion in the fourth quarter of 2014 and increased from $2.49 billion in the first quarter of 2014. |
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• | Net interest revenue of $546 million decreased from $574 million in the fourth quarter of 2014 and from $555 million in the first quarter of 2014. |
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• | Provision for loan losses of $4 million was flat with the fourth quarter of 2014 and increased from $2 million in the first quarter of 2014. |
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• | Expenses of $2.10 billion increased from $2.06 billion in the fourth quarter of 2014 and from $2.03 billion in the first quarter of 2014. First-quarter 2015 pre-tax expenses included an incremental $137 million (down from $146 million, recorded in the first quarter of 2014), primarily associated with the seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes. |
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• | Return on average common shareholders' equity (ROE) of 7.9% decreased from 9.4% in the fourth quarter of 2014 and increased from 7.2% in the first quarter of 2014. |
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. Non-GAAP measures are not a substitute for, and are not superior to, measures presented on a GAAP basis. 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 following table reconciles select first-quarter 2015 operating-basis financial information to financial information prepared and reported in conformity with GAAP for the same period. The addendum included with this news release includes additional reconciliations. |
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(In millions, except per share amounts) | Income Before Income Tax Expense | | Net Income Available to Common Shareholders | | Earnings Per Common Share |
GAAP basis | $ | 504 |
| | $ | 377 |
| | $ | .90 |
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Tax-equivalent adjustments | | | | | |
Tax-advantaged investments (processing fees and other revenue) | 53 |
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Tax-exempt investment securities (net interest revenue) | 44 |
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Total | 97 |
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Non-operating adjustments | | | | | |
Discount accretion associated with former conduit securities (net interest revenue) | (25 | ) | | (15 | ) | | (.04 | ) |
Severance costs associated with staffing realignment (compensation and employee benefits expenses) | (1 | ) | | (1 | ) | | — |
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Provisions for legal contingencies (other expenses) | 150 |
| | 150 |
| | .36 |
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Acquisition costs (expenses) | 5 |
| | 3 |
| | .01 |
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Restructuring charges, net (expenses) | 1 |
| | 1 |
| | — |
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Effect on income tax of non-operating adjustments | — |
| | (24 | ) | | (.06 | ) |
Total | 130 |
| | 114 |
| | .27 |
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Operating basis | $ | 731 |
| | $ | 491 |
| | $ | 1.17 |
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First-Quarter 2015 Operating-Basis (Non-GAAP) Results1:
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• | EPS of $1.17 decreased from $1.37 in the fourth quarter of 2014 and increased from $0.99 in the first quarter of 2014. |
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• | Net income available to common shareholders of $491 million decreased from $582 million in the fourth quarter of 2014 and increased from $433 million in the first quarter of 2014. |
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• | Revenue of $2.68 billion decreased from $2.72 billion in the fourth quarter of 2014 and increased from $2.56 billion in the first quarter of 2014. |
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• | Net interest revenue of $565 million decreased from $587 million in the fourth quarter of 2014 and from $572 million in the first quarter of 2014. Operating-basis net interest revenue excluded discount accretion on former conduit securities of $25 million, $31 million and $27 million for the first quarter of 2015, the fourth quarter of 2014, and the first quarter of 2014, respectively. Operating-basis net interest revenue for all quarters is presented on a fully taxable-equivalent basis. |
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• | Expenses of $1.94 billion increased from $1.88 billion in the fourth quarter of 2014 and from $1.92 billion in the first quarter of 2014. First-quarter 2015 pre-tax expenses included an incremental $137 million (down from $146 million, recorded in the first quarter of 2014), primarily associated with the seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes. |
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• | ROE of 10.4% decreased from 11.6% in the fourth quarter of 2014 and increased from 8.8% in the first quarter of 2014. |
First-Quarter 2015 Highlights1:
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• | The strengthening of the U.S. dollar during the first quarter of 2015 reduced our fee revenue outside of the U.S., but the parallel reduction in expenses largely offset this impact on our bottom line. |
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• | New business2: New asset servicing mandates during the first quarter of 2015 totaled $214 billion. In asset management we experienced net outflows of $38 billion during the first quarter of 2015, primarily due to seasonal outflows from SPY, our S&P 500 ETF. |
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• | Capital3: Our common equity tier 1 ratios as of March 31, 2015 were 12.1% and 10.4%, calculated under the advanced approaches and standardized approach provisions, respectively, in conformity with the Basel III final rule. On a fully phased-in basis, our estimated pro forma Basel III common equity tier 1 ratios as of March 31, 2015 were 11.5% and 9.8%, calculated under the advanced approaches and standardized approach provisions, respectively, in conformity with the Basel III final rule. |
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• | Return of capital to shareholders: During the first quarter of 2015, we completed the final phase of our $1.7 billion common stock purchase program announced in March 2014 with the purchase of 6.3 million shares of our common stock at an average price of $74.88 per share. In addition, we declared a quarterly common stock dividend of $0.30 per share in the first quarter of 2015. |
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• | After the annual CCAR 2015 process was completed in March 2015, our Board of Directors approved a new common stock purchase program authorizing the purchase of up to $1.8 billion of our common stock through June 30, 20164. Additionally, our 2015 capital plan includes a proposed increase to our quarterly common stock dividend to $0.34 per share starting in the second quarter of 2015. |
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 March 31, 2015. 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 Our estimated pro forma fully phased-in Basel III common equity tier 1 ratios calculated under the Basel III advanced approaches and standardized approach (in each case, fully phased in as of January 1, 2019, as per Basel III phase-in requirements for capital) are preliminary estimates based on our interpretations of the Basel III final rule as applied to our current businesses and operations as currently conducted. Refer to the “Capital” section of this news release for important information about the Basel III final rule, our calculations of our common equity tier 1 ratios thereunder, factors that could influence State Street's calculations of its common equity tier 1 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.
4 Stock purchases may be made using various types of mechanisms, including open market purchases or transactions off market, and may be made under Rule 10b5-1 trading programs. The timing of stock purchases, types of transactions and number of shares purchased will depend on several factors, including, market conditions and State Street’s capital positions, its financial performance and investment opportunities. The common stock purchase program does not have specific price targets and may be suspended at any time. State Street’s second-quarter 2015 common stock and other stock dividends, including the declaration, timing and amount thereof, remain subject to consideration and approval by its Board of Directors at the relevant times.
Selected Financial Information and Ratios
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.
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Financial Highlights | | | | | | | | | |
(Dollars in millions) | Q1 2015 | | Q4 2014 | | % Increase (Decrease) | | Q1 2014 | | % Increase (Decrease) |
Total revenue1 | $ | 2,677 |
| | $ | 2,724 |
| | (1.7 | )% | | $ | 2,559 |
| | 4.6 | % |
Total expenses1 | 1,942 |
| | 1,880 |
| | 3.3 |
| | 1,917 |
| | 1.3 |
|
Net income available to common shareholders1 | 491 |
| | 582 |
| | (15.6 | ) | | 433 |
| | 13.4 |
|
Earnings per common share1 | 1.17 |
| | 1.37 |
| | (14.6 | ) | | .99 |
| | 18.2 |
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Return on average common equity1 | 10.4 | % | | 11.6 | % | | (120) bps |
| | 8.8 | % | | 160 bps |
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Total assets as of period-end | $ | 279,476 |
| | $ | 274,119 |
| | 2.0 | % | | $ | 256,663 |
| | 8.9 | % |
Quarterly average total assets | 259,082 |
| | 254,439 |
| | 1.8 |
| | 215,569 |
| | 20.2 |
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Net interest margin1 | 1.01 | % | | 1.04 | % | | (3) bps |
| | 1.24 | % | | (23) bps |
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Net unrealized gains (losses) on investment securities, after-tax, as of period-end2 | $ | 699 |
| | $ | 487 |
| | | | $ | 124 |
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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 Includes net unrealized gains (losses) on investment securities, after tax, for securities classified as available for sale and held to maturity.
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Assets Under Custody and Administration and Assets Under Management |
(Dollars in billions) | Q1 2015 | | Q4 2014 | | % Increase (Decrease) | | Q1 2014 | | % Increase (Decrease) |
Assets under custody and administration1, 2 | $ | 28,491 |
| | $ | 28,188 |
| | 1.1 | % | | $ | 27,477 |
| | 3.7 | % |
Assets under management2 | 2,443 |
| | 2,448 |
| | (0.2 | ) | | 2,381 |
| | 2.6 |
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Market Indices3: | | | | | | | | | |
S&P 500® daily average | 2,064 |
| | 2,009 |
| | 2.7 |
| | 1,835 |
| | 12.5 |
|
MSCI EAFE® daily average | 1,817 |
| | 1,795 |
| | 1.2 |
| | 1,894 |
| | (4.1 | ) |
S&P 500® average of month-end | 2,056 |
| | 2,048 |
| | 0.4 |
| | 1,838 |
| | 11.9 |
|
MSCI EAFE® average of month-end | 1,839 |
| | 1,811 |
| | 1.5 |
| | 1,896 |
| | (3.0 | ) |
1 Includes assets under custody of $21,978 billion, $21,656 billion and $20,996 billion, as of March 31, 2015, December 31, 2014 and March 31, 2014, respectively.
2 As of period-end.
3 The index names listed in the table are service marks of their respective owners.
The following table presents first-quarter 2015 activity in assets under management, by product category.
Assets Under Management |
| | | | | | | | | | | | | | | | | | | | | | | |
(In billions) | Equity | | Fixed-Income | | Cash | | Multi-Asset-Class Solutions | | Alternative Investments | | Total |
Balance as of December 31, 2014 | $ | 1,475 |
| | $ | 319 |
| | $ | 399 |
| | $ | 127 |
| | $ | 128 |
| | $ | 2,448 |
|
Long-term institutional inflows1 | 67 |
| | 19 |
| | — |
| | 10 |
| | 9 |
| | 105 |
|
Long-term institutional outflows1 | (66 | ) | | (17 | ) | | — |
| | (25 | ) | | (5 | ) | | (113 | ) |
Long-term institutional flows, net | 1 |
| | 2 |
| | — |
| | (15 | ) | | 4 |
| | (8 | ) |
ETF flows, net | (33 | ) | | 4 |
| | — |
| | — |
| | 2 |
| | (27 | ) |
Cash fund flows, net | — |
| | — |
| | (3 | ) | | — |
| | — |
| | (3 | ) |
Total flows, net | (32 | ) | | 6 |
| | (3 | ) | | (15 | ) | | 6 |
| | (38 | ) |
Market appreciation2 | 47 |
| | 5 |
| | 1 |
| | 7 |
| | 11 |
| | 71 |
|
Foreign exchange impact2 | (18 | ) | | (7 | ) | | (4 | ) | | (4 | ) | | (5 | ) | | (38 | ) |
Total market/foreign exchange impact | 29 |
| | (2 | ) | | (3 | ) | | 3 |
| | 6 |
| | 33 |
|
Balance as of March 31, 2015 | $ | 1,472 |
| | $ | 323 |
| | $ | 393 |
| | $ | 115 |
| | $ | 140 |
| | $ | 2,443 |
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1 Amounts represent long-term portfolios, excluding ETFs.
2 Amounts represent aggregate impact on each product category for the period.
Revenue1
The following table provides the components of our operating-basis (non-GAAP) revenue1 for the periods noted: |
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(Dollars in millions) | Q1 2015 | | Q4 2014 | | % Increase (Decrease) | | Q1 2014 | | % Increase (Decrease) |
Servicing fees | $ | 1,273 |
| | $ | 1,301 |
| | (2.2 | )% | | $ | 1,238 |
| | 2.8 | % |
Management fees | 301 |
| | 299 |
| | 0.7 |
| | 292 |
| | 3.1 |
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Trading services revenue: | | | | | | | | | |
Foreign exchange trading | 203 |
| | 168 |
| | 20.8 |
| | 134 |
| | 51.5 |
|
Brokerage and other fees2 | 121 |
| | 125 |
| | (3.2 | ) | | 119 |
| | 1.7 |
|
Total trading services revenue | 324 |
| | 293 |
| | 10.6 |
| | 253 |
| | 28.1 |
|
Securities finance revenue | 101 |
| | 106 |
| | (4.7 | ) | | 85 |
| | 18.8 |
|
Processing fees and other revenue1, 2, 3 | 114 |
| | 138 |
| | (17.4 | ) | | 113 |
| | 0.9 |
|
Total fee revenue1, 2, 3 | 2,113 |
| | 2,137 |
| | (1.1 | ) | | 1,981 |
| | 6.7 |
|
Net interest revenue1, 4 | 565 |
| | 587 |
| | (3.7 | ) | | 572 |
| | (1.2 | ) |
Gains (losses) related to investment securities, net | (1 | ) | | — |
| | nm |
| | 6 |
| | nm |
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Total Operating-Basis Revenue1 | $ | 2,677 |
| | $ | 2,724 |
| | (1.7 | )% | | $ | 2,559 |
| | 4.6 | % |
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 first quarter of 2015 and fourth 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 have been adjusted for comparative purposes.
3 Processing fees and other revenue for the first quarter of 2015, fourth quarter of 2014 and first quarter of 2014, presented in the table, included tax-equivalent adjustments of $53 million, $81 million and $57 million, respectively, related to tax credits generated by tax-advantaged investments. GAAP-basis processing fees and other revenue for these periods was $61 million, $57 million and $56 million, respectively.
4 Net interest revenue for the first quarter of 2015, fourth quarter of 2014 and first quarter of 2014, presented in the table, included tax-equivalent adjustments of $44 million, $44 million and $44 million, respectively, and excluded conduit-related discount accretion of $25 million, $31 million and $27 million, respectively. GAAP-basis net interest revenue for these periods was $546 million, $574 million and $555 million, respectively.
nm Not meaningful.
Servicing fees of $1,273 million in the first quarter of 2015 decreased 2.2% from the fourth quarter of 2014, primarily due to the impact of the stronger U.S. dollar, partially offset by stronger global equity markets. Compared to the first quarter of 2014, servicing fees increased 2.8%, primarily due to net new business and stronger U.S. equity markets, partially offset by the impact of the stronger U.S. dollar.
Management fees of $301 million in the first quarter of 2015 increased 0.7% from the fourth quarter of 2014. Compared to the fourth quarter of 2014, management fees were relatively flat as positive revenue contributions from net new business and higher markets were offset by the impact of the stronger U.S. dollar. Compared to the first quarter of 2014, management fees increased 3.1%, primarily due to net new business and stronger U.S. equity markets, partially offset by the impact of the stronger U.S. dollar.
Foreign exchange trading revenue of $203 million in the first quarter of 2015 increased 20.8% from the fourth quarter of 2014 and increased 51.5% from the first quarter of 2014. The increase over both periods was due to higher volatility and volumes. Brokerage and other fees of $121 million in the first quarter of 2015 decreased 3.2% from the fourth quarter of 2014, primarily due to lower transition management revenue. Compared to the first quarter of 2014, brokerage and other fees increased 1.7%.
Securities finance revenue of $101 million in the first quarter of 2015 decreased 4.7% from the fourth quarter of 2014, primarily due to lower spreads. Compared to the first quarter of 2014, securities finance revenue increased 18.8%, primarily due to new business from enhanced custody, our principal securities lending service for custody clients, and higher volumes.
Processing fees and other revenue of $114 million in the first quarter of 2015 decreased 17.4% from the fourth quarter of 2014, primarily due to lower equity earnings from joint ventures and lower revenue associated with tax advantaged investments. Compared to the first quarter of 2014, processing fees and other revenue increased 0.9%. 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 $565 million in the first quarter of 2015 decreased 3.7% from the fourth quarter of 2014, primarily due to a one-time accelerated loan prepayment recorded in the fourth quarter of 2014, two fewer days in the first quarter of 2015, and the impact of lower market interest rates, partially offset by higher deposit levels. Compared to the first quarter of 2014, net interest revenue decreased 1.2%.
Operating-basis net interest revenue excludes discount accretion on former conduit securities and is presented on a fully taxable-equivalent basis. See notes 1 and 4 to the table above for a description of the presentation of operating-basis net interest revenue. The Company expects to record aggregate pre-tax conduit-related accretion of approximately $343 million in interest revenue from April 1, 2015 through the remaining lives of the former conduit securities. This expectation is based on numerous assumptions, including holding the securities to maturity, anticipated prepayment speeds and credit quality.
Net interest margin, including balances held at the Federal Reserve and other central banks, decreased to 101 basis points in the first quarter of 2015 from 104 basis points in the fourth quarter of 2014 and from 124 basis points in the first quarter of 2014. The reduction in the net interest margin compared to the first quarter of 2014 reflects higher interest-earning assets and lower yields. Refer to the addendum included with this news release for reconciliations of our operating-basis net interest margin.
Expenses1
The following table provides the components of our operating-basis (non-GAAP) expenses1 for the periods noted: |
| | | | | | | | | | | | | | | | | |
(Dollars in millions) | Q1 2015 | | Q4 2014 | | % Increase (Decrease) | | Q1 2014 | | % Increase (Decrease) |
Compensation and employee benefits1, 2 | $ | 1,088 |
| | $ | 962 |
| | 13.1 | % | | $ | 1,085 |
| | 0.3 | % |
Information systems and communications | 247 |
| | 246 |
| | 0.4 |
| | 244 |
| | 1.2 |
|
Transaction processing services | 197 |
| | 201 |
| | (2.0 | ) | | 191 |
| | 3.1 |
|
Occupancy | 113 |
| | 113 |
| | — |
| | 114 |
| | (0.9 | ) |
Other1, 3 | 297 |
| | 358 |
| | (17.0 | ) | | 283 |
| | 4.9 |
|
Total Operating-Basis Expenses1 | $ | 1,942 |
| | $ | 1,880 |
| | 3.3 | % | | $ | 1,917 |
| | 1.3 | % |
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 first quarter of 2015, fourth quarter of 2014 and first quarter of 2014 presented in the table, excluded a severance cost credit adjustment of $1 million and severance costs of $10 million and $72 million, respectively, related to staffing realignment. GAAP-basis compensation and employee benefits expenses for the first quarter of 2015, fourth quarter of 2014 and first quarter of 2014 were $1,087 million, $972 million and $1,157 million, respectively.
3 GAAP-basis other expenses for the first quarter of 2015, fourth quarter of 2014 and first quarter of 2014 were $447 million, $473 million and $289 million, respectively.
Compensation and employee benefits expenses of $1,088 million in the first quarter of 2015 increased 13.1% from the fourth quarter of 2014, primarily due to an incremental $137 million, or $0.23 per share, primarily associated with the seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes, partially offset by the impact of the stronger U.S. dollar. Compared to the first quarter of 2014, compensation and employee benefits expenses remained relatively flat reflecting increased costs to support new business and regulatory initiatives, mostly offset by the benefit of the stronger U.S. dollar.
Information systems and communications expenses of $247 million in the first quarter of 2015 increased 0.4% and 1.2% from the fourth quarter of 2014 and the first quarter of 2014, respectively.
Transaction processing services expenses of $197 million in the first quarter of 2015 decreased 2.0% from the fourth quarter of 2014. Compared to the first quarter of 2014, transaction processing expenses increased 3.1%, primarily due to higher volumes.
Occupancy expenses of $113 million in the first quarter of 2015 remained flat compared to the fourth quarter of 2014 and decreased 0.9% from the the first quarter of 2014.
Other expenses of $297 million in the first quarter of 2015 decreased $61 million, or 17.0%, from the fourth quarter of 2014, primarily due to lower professional services and securities processing costs, expenses associated with our withdrawal from derivatives clearing and execution activities in the fourth quarter of 2014 and an impairment primarily associated with an intangible asset in the fourth quarter of 2014, partially offset by higher regulatory and compliance costs. Compared to the first quarter of 2014, other expenses increased 4.9%, primarily due to a new bank levy and higher securities processing 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 first quarter of 2015 GAAP-basis effective tax rate was 18.9%, up from 13.5% in the fourth quarter of 2014 and down from 20.3% in the first quarter of 2014. The first quarter of 2015 rate was affected by a legal accrual, whereas the fourth quarter of 2014 rate reflected a net benefit attributable to foreign operations. The first quarter of 2015 operating-basis effective tax rate was 28.4%, in line with 28.5% from the fourth quarter of 2014 and a decrease from 31.2% in the first quarter of 2014 due to the mix of earnings.
Capital
Provisions of the Basel III final rule, issued by U.S. banking regulators in July 2013, become effective under a transition timetable which began on January 1, 2014. We have used the advanced approaches provisions provided in the Basel III final rule to calculate our regulatory capital ratios beginning with the second quarter of 2014. Beginning with the first quarter of 2015, we began to also use the standardized approach provisions provided in the Basel III final rule to calculate our regulatory capital ratios.
Prior to the first quarter of 2015, the lower of our regulatory capital ratios calculated under the Basel III advanced approaches and those ratios calculated under the transitional provisions of Basel III were applied in the assessment of our capital adequacy for regulatory purposes. Beginning in the first quarter of 2015, capital ratios calculated under the Basel III standardized approach replaced the transitional ratios in the assessment of our capital adequacy for regulatory purposes.
The following table presents our regulatory capital ratios as of March 31, 2015 and December 31, 2014. Refer to notes 1, 2 and 3 following the table for an explanation of the methodology as of those dates. Refer to the addendum included with this news release for a further description of these ratios. 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.
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Capital ratios | Basel III Advanced Approaches March 31, 20151 | | Basel III Standardized Approach March 31, 20152 | | Basel III Advanced Approaches December 31, 20141 | | Basel III Transitional December 31, 20143 |
Common equity tier 1 ratio | 12.1 | % | | 10.4 | % | | 12.5 | % | | 14.9 | % |
Tier 1 capital ratio | 14.1 | % | | 12.1 | % | | 14.6 |
| | 17.4 |
|
Total capital ratio | 16.2 | % | | 13.8 | % | | 16.6 |
| | 19.8 |
|
Tier 1 leverage ratio | 5.8 | % | | 5.8 | % | | 6.4 |
| | 6.4 |
|
1 Common equity tier 1, tier 1 capital, total capital and tier 1 leverage ratios as of March 31, 2015 and December 31, 2014 were calculated in conformity with the advanced approaches provisions of the Basel III final rule.
2 Common equity tier 1, tier 1 capital, total capital and tier 1 leverage ratios as of March 31, 2015 were calculated in conformity with the standardized approach provisions of the Basel III final rule.
3 Common equity tier 1, tier 1 capital, total capital and tier 1 leverage ratios as of December 31, 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.
On a fully phased-in basis, our estimated pro forma Basel III common equity tier 1 ratios as of March 31, 2015, calculated under the advanced approaches and standardized approach provisions in conformity with the Basel III final rule, were 11.5% and 9.8%, respectively. Our estimated pro forma fully phased-in Basel III common equity tier 1 ratios are preliminary estimates, calculated in conformity with the advanced approaches and the standardized approach
provisions (as the case may be, and in each case, fully phased-in as of January 1, 2019, as per Basel III phase-in requirements for capital) in the Basel III final rule, based on our interpretations of the Basel III final rule as of April 24, 2015 and as applied to our businesses and operations as of March 31, 2015. Refer to the addendum included with this news release for information concerning our estimated pro forma fully phased-in Basel III common equity tier 1 ratios calculated under the advanced approaches and standardized approach, and for reconciliations of these estimated pro forma fully phased-in ratios to our common equity tier 1 ratios calculated under the currently applicable regulatory requirements.
In 2014, U.S. banking regulators issued final rules implementing a supplementary leverage ratio, or SLR, for certain bank holding companies, like State Street, and their insured depository institution subsidiaries, like State Street Bank. We refer to these final rules as the SLR final rule. Under the SLR final rule, upon implementation as of January 1, 2018, (i) State Street Bank must maintain an SLR of at least 6% to be well capitalized under the U.S. banking regulators’ Prompt Corrective Action framework and (ii) if State Street maintains an SLR of at least 5%, it is not subject to limitations on distribution and discretionary bonus payments under the SLR final rule. Beginning with reporting for March 31, 2015, State Street is required to include SLR disclosures with its other Basel disclosures.
State Street Corporation's SLR as of March 31, 2015 and estimated pro forma SLR as of December 31, 2014, calculated in conformity with the SLR final rule, were 5.2% and 5.7%, respectively. State Street Corporation's estimated pro forma fully phased-in SLRs as of March 31, 2015 and December 31, 2014, calculated in conformity with the SLR final rule, were 4.9% and 5.1%, respectively. State Street Bank's SLR as of March 31, 2015 and estimated pro forma SLR as of December 31, 2014, calculated in conformity with the SLR final rule, were 5.0% and 5.1%, respectively. State Street Bank's estimated pro forma fully phased-in SLRs as of March 31, 2015 and December 31, 2014, calculated in conformity with the SLR final rule, were 4.8% and 4.8%, respectively. Estimated pro forma fully phased-in SLRs as of March 31, 2015 and December 31, 2014 are preliminary estimates, calculated based on our interpretations of the SLR final rule as of April 24, 2015 and January 23, 2015 respectively, and as applied to our businesses and operations as of March 31, 2015 and December 31, 2014, respectively. Refer to the addendum included with this news release for information concerning our estimated pro forma fully phased-in SLRs and for reconciliations of these estimated pro forma fully phased-in SLRs to our SLRs under currently applicable regulatory requirements.
The advanced approaches-based ratios (actual and estimated pro forma) 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, individually or collectively, precisely 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.
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 and Quarterly Website Disclosures
State Street will webcast an investor conference call today, Friday, April 24, 2015, 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 # 98667454.
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 # 98667454.
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 intends to publish updates to its public disclosure regarding regulatory capital, as required by the Basel III final rule, on a quarterly basis on its website at www.statestreet.com/stockholder, under "Filings & Reports." Those updates will be published each quarter, during the period beginning after State Street's public announcement of its quarterly results of operations and ending on or prior to the due date under applicable bank regulatory requirements (i.e., ordinarily, ending no later than 60 days following year-end or 45 days following each other quarter-end, as applicable). For the first quarter of 2015, State Street expects to publish its updates during the period beginning today and ending on or about May 8, 2015.
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 $28.5 trillion in assets under custody and administration and $2.4 trillion* in assets under management as of March 31, 2015, State Street operates globally in more than 100 geographic markets and employs 30,495 worldwide. For more information, visit State Street's website at www.statestreet.com.
* Assets under management include the assets of the SPDR® Gold ETF (approximately $28 billion as of March 31, 2015), 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 “outlook,” “expect,” “objective,” “intend,” “plan,” “forecast,” “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 April 24, 2015.
In particular, in the first quarter of 2015, we increased from $185 million to $335 million our legal accrual associated with indirect foreign exchange matters. This accrual reflects continued negotiations in connection with our intention to seek to resolve the outstanding claims asserted in the United States against us by federal governmental entities and civil litigants with regard to our indirect foreign exchange client activities. As of March 31, 2015, our total accrued reserve associated with these matters was $335 million. There can be no assurance that we will reach settlements in these matters or that the cost of any settlements or other resolutions of these matters will not materially exceed our accrual. Our current efforts, even if successful, may not address all of our potential legal exposure arising out of our indirect foreign exchange client activities, and other claims, which may be material, could be asserted against us. An adverse outcome with respect to one or more claims relating to our indirect foreign exchange client activities could have a material adverse effect on our reputation, on our consolidated results of operations for the period in which the adverse outcome occurs (or an accrual is determined to be required), or on our consolidated financial condition.
Important factors that may also affect future results and outcomes include, but are not limited to:
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• | 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; |
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• | 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; |
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• | 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; |
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• | the level and volatility of interest rates, the valuation of the U.S. dollar relative to other currencies in which we record revenue or accrue expenses and the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally; |
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• | 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; |
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• | our ability to attract deposits and other low-cost, short-term funding, the relative portion of our deposits that are determined to be operational under regulatory guidelines and our ability to deploy deposits in a profitable manner consistent with our liquidity requirements and risk profile; |
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• | the manner and timing with which the Federal Reserve and other U.S. and foreign regulators implement changes to the regulatory framework applicable to our operations, including implementation of the Dodd-Frank Act, the Basel III final rule and European legislation (such as the Alternative Investment Fund Managers Directive and Undertakings for Collective Investment in Transferable Securities Directives); among other |
consequences, these regulatory changes impact the levels of regulatory capital we must maintain, acceptable levels of credit exposure to third parties, margin requirements applicable to derivatives, and restrictions on banking and financial activities. In addition, our regulatory posture and related expenses have been and will continue to be affected by changes in regulatory expectations for global systemically important financial institutions applicable to, among other things, risk management, capital planning and compliance programs, and changes in governmental enforcement approaches to perceived failures to comply with regulatory or legal obligations;
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• | adverse changes in the regulatory ratios that we are required or will be required to meet, whether arising under the Dodd-Frank Act or the Basel III final rule, 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; |
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• | increasing requirements to obtain the prior approval of the Federal Reserve or our other U.S. and non-U.S. regulators for the use, allocation or distribution of our capital or other specific capital actions or programs, including acquisitions, dividends and stock purchases, without which our growth plans, distributions to shareholders, share repurchase programs or other capital initiatives may be restricted; |
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• | 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; |
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• | financial market disruptions or economic recession, whether in the U.S., Europe, Asia or other regions; |
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• | 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; |
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• | the results of, and costs associated with, governmental or regulatory inquiries and investigations, litigation and similar claims, disputes, or proceedings; |
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• | the potential for losses arising from our investments in sponsored investment funds; |
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• | 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; |
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• | our ability to anticipate and manage the level and timing of redemptions and withdrawals from our collateral pools and other collective investment products; |
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• | the credit agency ratings of our debt and depository obligations and investor and client perceptions of our financial strength; |
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• | adverse publicity, whether specific to State Street or regarding other industry participants or industry-wide factors, or other reputational harm; |
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• | our ability to control operational risks, data security breach risks and outsourcing risks, 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; |
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• | our ability to expand our use of technology to enhance the efficiency, accuracy and reliability of our operations and our 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;
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• | our ability to grow revenue, manage expenses, attract and retain highly skilled people and raise the capital necessary to achieve our business goals and comply with regulatory requirements and expectations; |
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• | 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; |
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• | changes or potential changes in the amount of compensation we receive from clients for our services, and the mix of services provided by us that clients choose; |
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• | 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; |
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• | 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 or liabilities 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; |
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• | 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; |
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• | changes in accounting standards and practices; and |
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• | 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 2014 Annual Report on Form 10-K and our subsequent SEC filings. We encourage investors to read these filings, particularly the sections on risk factors, for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this news release speak only as of the date hereof, April 24, 2015, and we do not undertake efforts to revise those forward-looking statements to reflect events after that date.
Exhibit 99.2
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
March 31, 2015
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Table of Contents |
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GAAP-Basis Financial Information: | |
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Operating-Basis (Non-GAAP) Financial Information: | |
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Capital | |
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This financial information should be read in conjunction with State Street's news release dated April 24, 2015. Additional financial and other information about State Street is available in its Annual Report on Form 10-K for the year ended December 31, 2014, which was previously filed with the SEC.
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED FINANCIAL HIGHLIGHTS
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| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Revenue: | | | | | | | | | | | | | | |
Fee revenue | | $ | 1,924 |
| | $ | 2,039 |
| | $ | 2,012 |
| | $ | 2,056 |
| | $ | 2,060 |
| | 7 | % | | — | % |
Net interest revenue | | 555 |
| | 561 |
| | 570 |
| | 574 |
| | 546 |
| | (2 | ) | | (5 | ) |
Net gains from sales of available-for-sale securities | | 15 |
| | — |
| | — |
| | — |
| | — |
| |
| |
|
Net losses from other-than-temporary impairment | | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | |
| |
|
Net losses reclassified (from) to other comprehensive income | | (8 | ) | | (2 | ) | | — |
| | — |
| | — |
| |
| |
|
Total revenue | | 2,485 |
| | 2,598 |
| | 2,582 |
| | 2,630 |
| | 2,605 |
| | 5 |
| | (1 | ) |
Provision for loan losses | | 2 |
| | 2 |
| | 2 |
| | 4 |
| | 4 |
| |
| |
|
Total expenses | | 2,028 |
| | 1,850 |
| | 1,892 |
| | 2,057 |
| | 2,097 |
| | 3 |
| | 2 |
|
Income before income tax expense | | 455 |
| | 746 |
| | 688 |
| | 569 |
| | 504 |
| | 11 |
| | (11 | ) |
Income tax expense | | 92 |
| | 124 |
| | 128 |
| | 77 |
| | 95 |
| | 3 |
| | 23 |
|
Net income | | 363 |
| | 622 |
| | 560 |
| | 492 |
| | 409 |
| | 13 |
| | (17 | ) |
Net income available to common shareholders | | 356 |
| | 602 |
| | 542 |
| | 473 |
| | 377 |
| | 6 |
| | (20 | ) |
Diluted earnings per common share | | .81 |
| | 1.38 |
| | 1.26 |
| | 1.12 |
| | .90 |
| | 11 |
| | (20 | ) |
Average diluted common shares outstanding (in thousands) | | 438,815 |
| | 435,320 |
| | 429,736 |
| | 424,339 |
| | 418,750 |
| | (5 | ) | | (1 | ) |
Cash dividends declared per common share | | $ | .26 |
| | $ | .30 |
| | $ | .30 |
| | $ | .30 |
| | $ | .30 |
| | 15 |
| | — |
|
Closing price per share of common stock (as of quarter end) | | 69.55 |
| | 67.26 |
| | 73.61 |
| | 78.50 |
| | 73.53 |
| | 6 |
| | (6 | ) |
Ratios: | | | | | | | | | | | | | | |
Return on average common equity | | 7.2 | % | | 11.9 | % | | 10.6 | % | | 9.4 | % | | 7.9 | % | | 10 |
| | (16 | ) |
Pre-tax operating margin | | 18.3 |
| | 28.7 |
| | 26.6 |
| | 21.6 |
| | 19.3 |
| | 5 |
| | (11 | ) |
Net interest margin, fully taxable-equivalent basis | | 1.30 |
| | 1.17 |
| | 1.12 |
| | 1.09 |
| | 1.06 |
| | (18 | ) | | (3 | ) |
Common equity tier 1 risk-based capital1,2 | | NA |
| | 12.8 |
| | 12.8 |
| | 12.5 |
| | 12.1 |
| | — |
| | (3 | ) |
Tier 1 risk-based capital1 | | NA |
| | 14.1 |
| | 14.2 |
| | 14.6 |
| | 14.1 |
| | — |
| | (3 | ) |
Total risk-based capital1 | | NA |
| | 16.1 |
| | 16.2 |
| | 16.6 |
| | 16.2 |
| | — |
| | (2 | ) |
Tier 1 leverage1 | | NA |
| | 6.9 |
| | 6.4 |
| | 6.4 |
| | 5.8 |
| | — |
| | (9 | ) |
Tangible common equity2 | | 6.7 |
| | 6.8 |
| | 6.6 |
| | 6.8 |
| | 6.0 |
| | (10 | ) | | (12 | ) |
At quarter-end: | | | | | | | | | | | | | | |
Assets under custody and administration (in trillions)3 | | $ | 27.48 |
| | $ | 28.40 |
| | $ | 28.47 |
| | $ | 28.19 |
| | $ | 28.49 |
| | 4 |
| | 1 |
|
Asset under management (in trillions) | | 2.38 |
| | 2.48 |
| | 2.42 |
| | 2.45 |
| | 2.44 |
| | 3 |
| | — |
|
Total assets | | 256,663 |
| | 282,324 |
| | 274,805 |
| | 274,119 |
| | 279,476 |
| | 9 |
| | 2 |
|
Investment securities | | 117,504 |
| | 117,303 |
| | 115,319 |
| | 112,636 |
| | 112,857 |
| | (4 | ) | | — |
|
Deposits | | 194,648 |
| | 218,834 |
| | 207,968 |
| | 209,040 |
| | 211,352 |
| | 9 |
| | 1 |
|
Long-term debt | | 9,503 |
| | 9,037 |
| | 9,016 |
| | 10,042 |
| | 9,174 |
| | (3 | ) | | (9 | ) |
Total shareholders' equity | | 21,273 |
| | 21,700 |
| | 21,156 |
| | 21,473 |
| | 20,819 |
| | (2 | ) | | (3 | ) |
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1 In early 2014, we announced that we had completed our Basel III qualification period. As a result, our regulatory capital ratios as of June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015 presented in the table above have been calculated under the advanced approaches provisions of the Basel III final rule. Regulatory capital ratios as of March 31, 2014 were calculated under Basel I, are not directly comparable to such ratios as of June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015 and are not disclosed. Refer to page 16 of this earnings release addendum for additional information about our regulatory capital ratios as of June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015.
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2 Tangible common equity ratios as of March 31, 2014, June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015 are non-GAAP financial measures. Refer to accompanying reconciliations on page 17 for additional information. |
3 Included assets under custody of $21.00 trillion, $21.69 trillion, $21.71 trillion, $21.66 trillion and $21.98 trillion as of March 31, 2014, June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, respectively. |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED RESULTS OF OPERATIONS
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| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters | | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Reported Results | | | | | | | | | | | | | | |
Fee revenue: | | | | | | | | | | | | | | |
Servicing fees | | $ | 1,238 |
| | $ | 1,288 |
| | $ | 1,302 |
| | $ | 1,301 |
| | $ | 1,273 |
| | 3 | % | | (2 | )% |
Management fees | | 292 |
| | 300 |
| | 316 |
| | 299 |
| | 301 |
| | 3 |
| | 1 |
|
Trading services: | | | | | | | | | | | | | | |
Direct sales and trading | | 71 |
| | 79 |
| | 101 |
| | 110 |
| | 135 |
| | 90 |
| | 23 |
|
Indirect foreign exchange trading1 | | 63 |
| | 65 |
| | 60 |
| | 58 |
| | 68 |
| | 8 |
| | 17 |
|
Total foreign exchange trading | | 134 |
| | 144 |
| | 161 |
| | 168 |
| | 203 |
| | 51 |
| | 21 |
|
Electronic foreign exchange services | | 48 |
| | 43 |
| | 44 |
| | 46 |
| | 48 |
| | — |
| | 4 |
|
Other trading, transition management and brokerage | | 71 |
| | 73 |
| | 73 |
| | 79 |
| | 73 |
| | 3 |
| | (8 | ) |
Total brokerage and other trading services | | 119 |
| | 116 |
| | 117 |
| | 125 |
| | 121 |
| | 2 |
| | (3 | ) |
Total trading services | | 253 |
| | 260 |
| | 278 |
| | 293 |
| | 324 |
| | 28 |
| | 11 |
|
Securities finance | | 85 |
| | 147 |
| | 99 |
| | 106 |
| | 101 |
| | 19 |
| | (5 | ) |
Processing fees and other | | 56 |
| | 44 |
| | 17 |
| | 57 |
| | 61 |
| | 9 |
| | 7 |
|
Total fee revenue | | 1,924 |
| | 2,039 |
| | 2,012 |
| | 2,056 |
| | 2,060 |
| | 7 |
| | — |
|
Net interest revenue: | | | | | | | | | | | | | | |
Interest revenue | | 655 |
| | 650 |
| | 671 |
| | 676 |
| | 642 |
| | (2 | ) | | (5 | ) |
Interest expense | | 100 |
| | 89 |
| | 101 |
| | 102 |
| | 96 |
| | (4 | ) | | (6 | ) |
Net interest revenue | | 555 |
| | 561 |
| | 570 |
| | 574 |
| | 546 |
| | (2 | ) | | (5 | ) |
Gains (losses) related to investment securities, net: | | | | | | | | | | | | | | |
Net gains (losses) from sales of available-for-sale securities | | 15 |
| | — |
| | — |
| | — |
| | — |
| |
|
| |
|
|
Losses from other-than-temporary impairment | | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | |
|
| |
|
|
Losses reclassified (from) to other comprehensive income | | (8 | ) | | (2 | ) | | — |
| | — |
| | — |
| |
|
| |
|
|
Gains (losses) related to investment securities, net | | 6 |
| | (2 | ) | | — |
| | — |
| | (1 | ) | |
|
| |
|
|
Total revenue | | 2,485 |
| | 2,598 |
| | 2,582 |
| | 2,630 |
| | 2,605 |
| | 5 |
| | (1 | ) |
Provision for loan losses | | 2 |
| | 2 |
| | 2 |
| | 4 |
| | 4 |
| |
|
| |
|
|
Expenses: | | | | | | | | | | | | | | |
Compensation and employee benefits | | 1,157 |
| | 978 |
| | 953 |
| | 972 |
| | 1,087 |
| | (6 | ) | | 12 |
|
Information systems and communications | | 244 |
| | 244 |
| | 242 |
| | 246 |
| | 247 |
| | 1 |
| | — |
|
Transaction processing services | | 191 |
| | 193 |
| | 199 |
| | 201 |
| | 197 |
| | 3 |
| | (2 | ) |
Occupancy | | 114 |
| | 115 |
| | 119 |
| | 113 |
| | 113 |
| | (1 | ) | | — |
|
Acquisition and restructuring costs | | 33 |
| | 28 |
| | 20 |
| | 52 |
| | 6 |
| | (82 | ) | | (88 | ) |
Other | | 289 |
| | 292 |
| | 359 |
| | 473 |
| | 447 |
| | 55 |
| | (5 | ) |
Total expenses | | 2,028 |
| | 1,850 |
| | 1,892 |
| | 2,057 |
| | 2,097 |
| | 3 |
| | 2 |
|
Income before income tax expense | | 455 |
| | 746 |
| | 688 |
| | 569 |
| | 504 |
| | 11 |
| | (11 | ) |
Income tax expense | | 92 |
| | 124 |
| | 128 |
| | 77 |
| | 95 |
| | 3 |
| | 23 |
|
Net income | | $ | 363 |
| | $ | 622 |
| | $ | 560 |
| | $ | 492 |
| | $ | 409 |
| | 13 |
| | (17 | ) |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED RESULTS OF OPERATIONS (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters | | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Adjustments to net income: | | | | | | | | | | | | | | |
Dividends on preferred stock | | $ | (6 | ) | | $ | (19 | ) | | $ | (18 | ) | | $ | (18 | ) | | $ | (31 | ) | | | | |
Earnings allocated to participating securities | | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | | | |
Net income available to common shareholders | | $ | 356 |
| | $ | 602 |
| | $ | 542 |
| | $ | 473 |
| | $ | 377 |
| | 6 | % | | (20 | )% |
Earnings per common share: | | | | | | | | | | | | | | |
Basic | | $ | .83 |
| | $ | 1.41 |
| | $ | 1.28 |
| | $ | 1.14 |
| | $ | .91 |
| |
|
| |
|
|
Diluted | | .81 |
| | 1.38 |
| | 1.26 |
| | 1.12 |
| | .90 |
| |
|
| |
|
|
Average common shares outstanding: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Basic | | 430,621 |
| | 427,824 |
| | 421,974 |
| | 416,651 |
| | 412,225 |
| |
|
| |
|
|
Diluted | | 438,815 |
| | 435,320 |
| | 429,736 |
| | 424,339 |
| | 418,750 |
| |
|
| |
|
|
Cash dividends declared per common share | | $ | .26 |
| | $ | .30 |
| | $ | .30 |
| | $ | .30 |
| | $ | .30 |
| |
|
| |
|
|
Closing price per share of common stock (as of quarter end) | | 69.55 |
| | 67.26 |
| | 73.61 |
| | 78.50 |
| | 73.53 |
| |
|
| |
|
|
Financial ratios: | | | | | | | | | | | | | | |
Return on average common equity | | 7.2 | % | | 11.9 | % | | 10.6 | % | | 9.4 | % | | 7.9 | % | |
|
| |
|
|
Pre-tax operating margin | | 18.3 |
| | 28.7 |
| | 26.6 |
| | 21.6 |
| | 19.3 |
| |
|
| |
|
|
After-tax margin | | 14.6 |
| | 23.9 |
| | 21.7 |
| | 18.7 |
| | 14.5 |
| |
|
| |
|
|
Internal capital generation rate | | 5.0 |
| | 9.4 |
| | 8.2 |
| | 6.9 |
| | 5.3 |
| |
|
| |
|
|
Common dividend payout ratio | | 31.5 |
| | 21.2 |
| | 23.3 |
| | 26.3 |
| | 32.8 |
| |
|
| |
|
|
| | | | | | | | | | | | | | |
1 We calculate revenue for indirect foreign exchange using an attribution methodology. This methodology takes into consideration estimated effective mark-ups/downs and observed client volumes. Direct sales and trading revenue is total foreign exchange trading revenue excluding the revenue attributed to indirect foreign exchange. |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED STATEMENT OF CONDITION
|
| | | | | | | | | | | | | | | | | | | | | | |
| | As of Quarter End | | % Change |
(Dollars in millions, except per share amounts) | | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Assets: | | | | | | | | | | |
Cash and due from banks | | $ | 3,877 |
| $ | 6,247 |
| $ | 4,146 |
| $ | 1,855 |
| $ | 3,149 |
| | (19 | )% | | 70 | % |
Interest-bearing deposits with banks | | 75,796 |
| 98,386 |
| 86,946 |
| 93,523 |
| 83,398 |
| | 10 |
| | (11 | ) |
Securities purchased under resale agreements | | 6,087 |
| 3,681 |
| 2,603 |
| 2,390 |
| 11,331 |
| | 86 |
| | 374 |
|
Trading account assets | | 889 |
| 941 |
| 1,033 |
| 924 |
| 1,145 |
| | 29 |
| | 24 |
|
Investment securities: | | | | | | | | | | |
Investment securities available for sale | | 99,162 |
| 98,546 |
| 96,552 |
| 94,913 |
| 96,612 |
| | (3 | ) | | 2 |
|
Investment securities held to maturity1 | | 18,342 |
| 18,757 |
| 18,767 |
| 17,723 |
| 16,245 |
| | (11 | ) | | (8 | ) |
Total investment securities | | 117,504 |
| 117,303 |
| 115,319 |
| 112,636 |
| 112,857 |
| | (4 | ) | | — |
|
Loans and leases2 | | 16,084 |
| 16,767 |
| 18,364 |
| 18,161 |
| 18,278 |
| | 14 |
| | 1 |
|
Premises and equipment3 | | 1,896 |
| 1,920 |
| 1,911 |
| 1,937 |
| 1,933 |
| | 2 |
| | — |
|
Accrued interest and fees receivable | | 2,197 |
| 2,221 |
| 2,318 |
| 2,242 |
| 2,281 |
| | 4 |
| | 2 |
|
Goodwill | | 6,038 |
| 6,037 |
| 5,899 |
| 5,826 |
| 5,663 |
| | (6 | ) | | (3 | ) |
Other intangible assets | | 2,306 |
| 2,247 |
| 2,121 |
| 2,025 |
| 1,892 |
| | (18 | ) | | (7 | ) |
Other assets | | 23,989 |
| 26,574 |
| 34,145 |
| 32,600 |
| 37,549 |
| | 57 |
| | 15 |
|
Total assets | | $ | 256,663 |
| $ | 282,324 |
| $ | 274,805 |
| $ | 274,119 |
| $ | 279,476 |
| | 9 |
| | 2 |
|
Liabilities: | | | | | | | | | | |
Deposits: | | | | | | | | | | |
Noninterest-bearing | | $ | 72,800 |
| $ | 73,109 |
| $ | 66,134 |
| $ | 70,490 |
| $ | 72,704 |
| | — |
| | 3 |
|
Interest-bearing -- U.S. | | 15,327 |
| 27,584 |
| 24,435 |
| 33,012 |
| 30,769 |
| | 101 |
| | (7 | ) |
Interest-bearing -- Non-U.S. | | 106,521 |
| 118,141 |
| 117,399 |
| 105,538 |
| 107,879 |
| | 1 |
| | 2 |
|
Total deposits | | 194,648 |
| 218,834 |
| 207,968 |
| 209,040 |
| 211,352 |
| | 9 |
| | 1 |
|
Securities sold under repurchase agreements | | 8,953 |
| 9,168 |
| 9,385 |
| 8,925 |
| 10,158 |
| | 13 |
| | 14 |
|
Federal funds purchased | | 18 |
| 14 |
| 17 |
| 21 |
| 17 |
| | (6 | ) | | (19 | ) |
Other short-term borrowings | | 3,811 |
| 4,322 |
| 4,307 |
| 4,381 |
| 4,346 |
| | 14 |
| | (1 | ) |
Accrued expenses and other liabilities | | 18,457 |
| 19,249 |
| 22,956 |
| 20,237 |
| 23,610 |
| | 28 |
| | 17 |
|
Long-term debt | | 9,503 |
| 9,037 |
| 9,016 |
| 10,042 |
| 9,174 |
| | (3 | ) | | (9 | ) |
Total liabilities | | 235,390 |
| 260,624 |
| 253,649 |
| 252,646 |
| 258,657 |
| | 10 |
| | 2 |
|
Shareholders' equity: | | | | | | | | | | |
Preferred stock, no par, 3,500,000 shares authorized: | | | | | | | | | | |
Series C, 5,000 shares issued and outstanding | | 491 |
| 491 |
| 491 |
| 491 |
| 491 |
| | — |
| | — |
|
Series D, 7,500 shares issued and outstanding | | 742 |
| 742 |
| 742 |
| 742 |
| 742 |
| | — |
| | — |
|
Series E, 7,500 shares issued and outstanding | | — |
| — |
| — |
| 728 |
| 728 |
| | — |
| | — |
|
Common stock, $1 par, 750,000,000 shares authorized4 | | 504 |
| 504 |
| 504 |
| 504 |
| 504 |
| | — |
| | — |
|
Surplus | | 9,737 |
| 9,765 |
| 9,780 |
| 9,791 |
| 9,744 |
| | — |
| | — |
|
Retained earnings | | 13,639 |
| 14,114 |
| 14,531 |
| 14,882 |
| 15,135 |
| | 11 |
| | 2 |
|
Accumulated other comprehensive income (loss) | | 188 |
| 489 |
| (107 | ) | (507 | ) | (1,006 | ) | | (635 | ) | | 98 |
|
Treasury stock, at cost5 | | (4,028 | ) | (4,405 | ) | (4,785 | ) | (5,158 | ) | (5,519 | ) | | 37 |
| | 7 |
|
Total shareholders' equity | | 21,273 |
| 21,700 |
| 21,156 |
| 21,473 |
| 20,819 |
| | (2 | ) | | (3 | ) |
Total liabilities and shareholders' equity | | $ | 256,663 |
| $ | 282,324 |
| $ | 274,805 |
| $ | 274,119 |
| $ | 279,476 |
| | 9 |
| | 2 |
|
| | | | | | | | | | |
1 Fair value of investment securities held to maturity as of Q1, Q2, Q3 and Q4 2014, and Q1 2015 was $18,326, $18,864, $18,865, $17,842, and $16,417, respectively. |
2 Allowance for loan losses as of Q1, Q2, Q3 and Q4 2014, and Q1 2015 was $30, $32, $34, $38, and $41, respectively. |
3 Accumulated depreciation for premises and equipment as of Q1, Q2, Q3 and Q4 2014, and Q1 2015 was $4,521, $4,620, $4,538, $4,599, and $4,653, respectively. |
4 Common stock shares issued as of Q1, Q2, Q3 and Q4 2014, and Q1 2015 was 503,881,095, 503,881,095, 503,880,120, 503,880,120 and 503,879,642, respectively. |
5 Treasury stock shares as of Q1, Q2, Q3 and Q4 2014, and Q1 2015 was 73,440,407, 78,910,844, 83,948,535, 88,684,969 and 92,569,079, respectively. |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
AVERAGE AND PERIOD-END BALANCE SHEET TRENDS
|
| | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | Quarters | | % Change |
Average Balance Sheet Mix | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Investment securities and short-duration instruments | | 79.9 | % | | 81.5 | % | | 81.7 | % | | 81.2 | % | | 80.4 | % | | 1 | % | | (1 | )% |
Loans and leases | | 6.8 |
| | 6.4 |
| | 6.5 |
| | 7.1 |
| | 7.0 |
| | 3 |
| | (1 | ) |
Noninterest-earning assets | | 13.3 |
| | 12.1 |
| | 11.8 |
| | 11.7 |
| | 12.6 |
| | (5 | ) | | 8 |
|
Total | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
|
| |
|
|
Client funds bearing interest | | 61.5 | % | | 64.1 | % | | 64.6 | % | | 62.8 | % | | 59.9 | % | | (3 | ) | | (5 | ) |
Client funds not bearing interest | | 18.9 |
| | 17.9 |
| | 18.0 |
| | 19.2 |
| | 21.2 |
| | 12 |
| | 10 |
|
Other noninterest-bearing liabilities | | 5.6 |
| | 4.9 |
| | 5.1 |
| | 5.9 |
| | 6.9 |
| | 23 |
| | 17 |
|
Long-term debt and common shareholders' equity | | 13.7 |
| | 12.6 |
| | 11.8 |
| | 11.5 |
| | 11.2 |
| | (18 | ) | | (3 | ) |
Preferred shareholders' equity | | 0.3 |
| | 0.5 |
| | 0.5 |
| | 0.6 |
| | 0.8 |
| | 167 |
| | 33 |
|
Total | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Average Investment Securities | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
U.S. Treasury and federal agencies | | | | | | | | | | | | | | |
Direct obligations | | $ | 5,992 |
| | $ | 8,027 |
| | $ | 11,570 |
| | $ | 15,858 |
| | $ | 17,123 |
| | 186 | % | | 8 | % |
Mortgage- and asset-backed securities | | 23,506 |
| | 22,547 |
| | 21,544 |
| | 20,797 |
| | 20,944 |
| | (11 | ) | | 1 |
|
Asset-backed securities | | | | | | | | | | | | | | |
Fixed | | 1,490 |
| | 1,480 |
| | 1,408 |
| | 1,405 |
| | 1,293 |
| | (13 | ) | | (8 | ) |
Floating | | 53,178 |
| | 51,889 |
| | 49,214 |
| | 43,425 |
| | 40,306 |
| | (24 | ) | | (7 | ) |
Collateralized mortgage-backed securities and obligations | | 8,068 |
| | 7,972 |
| | 7,979 |
| | 7,491 |
| | 7,757 |
| | (4 | ) | | 4 |
|
State and political subdivisions | | 10,452 |
| | 10,562 |
| | 10,636 |
| | 10,821 |
| | 10,963 |
| | 5 |
| | 1 |
|
Other debt investments | | 14,268 |
| | 14,425 |
| | 14,575 |
| | 13,980 |
| | 13,552 |
| | (5 | ) | | (3 | ) |
Money market mutual funds | | 670 |
| | 442 |
| | 390 |
| | 232 |
| | 531 |
| | (21 | ) | | 129 |
|
Other equity securities | | 211 |
| | 249 |
| | 302 |
| | 213 |
| | 187 |
| | (11 | ) | | (12 | ) |
Total investment securities | | $ | 117,835 |
| | $ | 117,593 |
| | $ | 117,618 |
| | $ | 114,222 |
| | $ | 112,656 |
| | (4 | ) | | (1 | ) |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
AVERAGE AND PERIOD-END BALANCE SHEET TRENDS (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | Quarters | | % Change |
Investment Securities - Appreciation (Depreciation) | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Held to maturity: | | | | | | | | | | | | | | |
Amortized cost (book value) | | $ | 18,342 |
| | $ | 18,757 |
| | $ | 18,767 |
| | $ | 17,723 |
| | $ | 16,245 |
| | (11 | )% | | (8 | )% |
Fair value | | 18,326 |
| | 18,864 |
| | 18,865 |
| | 17,842 |
| | 16,417 |
| | (10 | ) | | (8 | ) |
Appreciation (depreciation) | | (16 | ) | | 107 |
| | 98 |
| | 119 |
| | 172 |
| | (1,175 | ) | | 45 |
|
Available for sale: | | | | | | | | | | | | | | |
Amortized cost | | 98,770 |
| | 97,739 |
| | 95,834 |
| | 94,108 |
| | 95,524 |
| | (3 | ) | | 2 |
|
Fair value (book value) | | 99,162 |
| | 98,546 |
| | 96,552 |
| | 94,913 |
| | 96,612 |
| | (3 | ) | | 2 |
|
Appreciation (depreciation) | | 392 |
| | 807 |
| | 718 |
| | 805 |
| | 1,088 |
| | 178 |
| | 35 |
|
Pre-tax depreciation related to securities available for sale transferred to held to maturity | | (170 | ) | | (153 | ) | | (130 | ) | | (112 | ) | | (95 | ) | | (44 | ) | | (15 | ) |
Total pre-tax appreciation (depreciation) related to investment securities portfolio | | 206 |
| | 761 |
| | 686 |
| | 812 |
| | 1,165 |
| | 466 |
| | 43 |
|
Total after-tax appreciation (depreciation) related to investment securities portfolio | | 124 |
| | 456 |
| | 411 |
| | 487 |
| | 699 |
| | 464 |
| | 44 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities on Loan | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Average securities on loan | | $ | 333 |
| | $ | 357 |
| | $ | 354 |
| | $ | 346 |
| | $ | 350 |
| | 5.1 | % | | 1.2 | % |
End-of-period securities on loan | | 348 |
| | 364 |
| | 341 |
| | 351 |
| | 350 |
| | 0.6 |
| | (0.3 | ) |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
AVERAGE STATEMENT OF CONDITION - RATES EARNED AND PAID - FULLY TAXABLE-EQUIVALENT BASIS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents consolidated average interest-earning assets, average interest-bearing liabilities and related average rates earned and paid, respectively, for the quarters indicated, on a fully taxable-equivalent basis. Tax-equivalent adjustments were calculated using a federal income tax rate of 35%, adjusted for applicable state income taxes, net of related federal benefit. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters | | % Change |
| | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
(Dollars in millions; fully-taxable equivalent basis) | | Average balance | | Average rates | | Average balance | | Average rates | | Average balance | | Average rates | | Average balance | | Average rates | | Average balance | | Average rates | | Average balance | | Average balance |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits with banks | | $ | 33,410 |
| | 0.42 | % | | $ | 53,564 |
| | 0.38 | % | | $ | 63,160 |
| | 0.33 | % | | $ | 70,780 |
| | 0.32 | % | | $ | 71,568 |
| | 0.30 | % | | 114 | % | | 1 | % |
Securities purchased under resale agreements | | 6,631 |
| | 0.53 |
| | 4,307 |
| | 0.94 |
| | 3,249 |
| | 1.05 |
| | 2,178 |
| | 1.99 |
| | 2,449 |
| | 1.88 |
| | (63 | ) | | 12 |
|
Trading account assets | | 901 |
| | — |
| | 953 |
| | — |
| | 985 |
| | — |
| | 995 |
| | — |
| | 1,117 |
| | — |
| | 24 |
| | 12 |
|
Investment securities | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasury and federal agencies | | 29,498 |
| | 2.21 |
| | 30,574 |
| | 2.15 |
| | 33,114 |
| | 2.00 |
| | 36,655 |
| | 1.95 |
| | 38,067 |
| | 1.92 |
| | 29 |
| | 4 |
|
State and political subdivisions | | 10,452 |
| | 4.37 |
| | 10,562 |
| | 3.30 |
| | 10,636 |
| | 3.80 |
| | 10,821 |
| | 3.76 |
| | 10,963 |
| | 3.73 |
| | 5 |
| | 1 |
|
Other investments | | 77,885 |
| | 1.64 |
| | 76,457 |
| | 1.66 |
| | 73,868 |
| | 1.73 |
| | 66,746 |
| | 1.70 |
| | 63,626 |
| | 1.63 |
| | (18 | ) | | (5 | ) |
Total investment securities | | 117,835 |
| | 2.02 |
| | 117,593 |
| | 1.94 |
| | 117,618 |
| | 1.99 |
| | 114,222 |
| | 1.98 |
| | 112,656 |
| | 1.93 |
| | (4 | ) | | (1 | ) |
Loans and leases | | 14,602 |
| | 1.61 |
| | 15,061 |
| | 1.62 |
| | 16,002 |
| | 1.59 |
| | 17,945 |
| | 1.84 |
| | 18,025 |
| | 1.65 |
| | 23 |
| | — |
|
Other interest-earning assets | | 13,527 |
| | 0.02 |
| | 14,845 |
| | 0.06 |
| | 17,003 |
| | 0.05 |
| | 18,338 |
| | 0.05 |
| | 20,544 |
| | 0.06 |
| | 52 |
| | 12 |
|
Total interest-earning assets | | 186,906 |
| | 1.52 |
| | 206,323 |
| | 1.34 |
| | 218,017 |
| | 1.30 |
| | 224,458 |
| | 1.27 |
| | 226,359 |
| | 1.23 |
| | 21 |
| | 1 |
|
Cash and due from banks | | 4,618 |
| | | | 5,304 |
| | | | 4,240 |
| | | | 2,416 |
| | | | 2,397 |
| | | | (48 | ) | | (1 | ) |
Other assets | | 24,045 |
| | | | 23,037 |
| | | | 25,053 |
| | | | 27,565 |
| | | | 30,326 |
| | | | 26 |
| | 10 |
|
Total assets | | $ | 215,569 |
| | | | $ | 234,664 |
| | | | $ | 247,310 |
| | | | $ | 254,439 |
| | | | $ | 259,082 |
| | | | 20 | % | | 2 | % |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. | | $ | 12,072 |
| | 0.03 | % | | $ | 20,698 |
| | 0.09 | % | | $ | 24,144 |
| | 0.11 | % | | $ | 28,063 |
| | 0.12 | % | | $ | 30,174 |
| | 0.13 | % | | 150 | % | | 8 | % |
Non-U.S. transaction accounts | | 99,808 |
| | | | 106,894 |
| | | | 112,856 |
| | | | 109,260 |
| | | | 102,624 |
| | | | 3 |
| | (6 | ) |
Non-U.S. nontransaction accounts | | 1,474 |
| | | | 2,396 |
| | | | 1,900 |
| | | | 1,258 |
| | | | 1,207 |
| | | | (18 | ) | | (4 | ) |
Total Non-U.S. | | 101,282 |
| | 0.06 |
| | 109,290 |
| | 0.05 |
| | 114,756 |
| | 0.09 |
| | 110,518 |
| | 0.08 |
| | 103,831 |
| | 0.06 |
| | 3 |
| | (6 | ) |
Securities sold under repurchase agreements | | 8,424 |
| | — |
| | 8,747 |
| | — |
| | 9,111 |
| | — |
| | 8,977 |
| | — |
| | 9,354 |
| | — |
| | 11 |
| | 4 |
|
Federal funds purchased | | 20 |
| | — |
| | 19 |
| | — |
| | 18 |
| | — |
| | 22 |
| | — |
| | 24 |
| | — |
| | 20 |
| | 9 |
|
Other short-term borrowings | | 3,909 |
| | 1.57 |
| | 4,000 |
| | (1.20 | ) | | 4,376 |
| | — |
| | 4,415 |
| | 0.13 |
| | 4,448 |
| | 0.13 |
| | 14 |
| | 1 |
|
Long-term debt | | 9,668 |
| | 2.60 |
| | 9,340 |
| | 2.73 |
| | 9,020 |
| | 2.64 |
| | 9,216 |
| | 2.56 |
| | 9,736 |
| | 2.54 |
| | 1 |
| | 6 |
|
Other interest-bearing liabilities | | 6,758 |
| | 0.43 |
| | 7,559 |
| | 0.99 |
| | 7,386 |
| | 0.42 |
| | 7,690 |
| | 0.50 |
| | 7,465 |
| | 0.41 |
| | 10 |
| | (3 | ) |
Total interest-bearing liabilities | | 142,133 |
| | 0.29 |
| | 159,653 |
| | 0.22 |
| | 168,811 |
| | 0.24 |
| | 168,901 |
| | 0.24 |
| | 165,032 |
| | 0.24 |
| | 16 |
| | (2 | ) |
Non-interest bearing deposits | | 40,711 |
| | | | 41,906 |
| | | | 44,503 |
| | | | 48,951 |
| | | | 55,066 |
| | | | 35 |
| | 12 |
|
Other liabilities | | 12,034 |
| | | | 11,541 |
| | | | 12,513 |
| | | | 15,069 |
| | | | 17,767 |
| | | | 48 |
| | 18 |
|
Preferred shareholders' equity | | 722 |
| | | | 1,233 |
| | | | 1,233 |
| | | | 1,526 |
| | | | 1,961 |
| | | | 172 |
| | 29 |
|
Common shareholders' equity | | 19,969 |
| | | | 20,331 |
| | | | 20,250 |
| | | | 19,992 |
| | | | 19,256 |
| | | | (4 | ) | | (4 | ) |
Total liabilities and shareholders' equity | | $ | 215,569 |
| | | | $ | 234,664 |
| | | | $ | 247,310 |
| | | | $ | 254,439 |
| | | | $ | 259,082 |
| | | | 20 | % | | 2 | % |
Excess of rate earned over rate paid | | | | 1.23 | % | | | | 1.12 | % | | | | 1.06 | % | | | | 1.03 | % | | | | 0.99 | % | | | | |
Net interest margin | | | | 1.30 | % | | | | 1.17 | % | | | | 1.12 | % | | | | 1.09 | % | | | | 1.06 | % | | | | |
Net interest revenue, fully taxable-equivalent basis | | | | $ | 599 |
| | | | $ | 603 |
| | | | $ | 613 |
| | | | $ | 618 |
| | | | $ | 590 |
| | | | |
Tax-equivalent adjustment | | | | (44 | ) | | | | (42 | ) | | | | (43 | ) | | | | (44 | ) | | | | (44 | ) | | | | |
Net interest revenue, GAAP basis | | | | $ | 555 |
| | | | $ | 561 |
| | | | $ | 570 |
| | | | $ | 574 |
| | | | $ | 546 |
| | | | |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
ASSETS UNDER CUSTODY AND ADMINISTRATION1
|
| | | | | | | | | | | | | | | | | | | | | |
| | Quarters | | % Change |
(Dollars in billions) | | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | | 1Q15 vs. 1Q14 | 1Q15 vs. 4Q14 |
Assets Under Custody and Administration | | | | | | | | | |
By Product Classification: | | | | | | | | | |
Mutual funds | | $ | 6,908 |
| $ | 7,122 |
| $ | 7,035 |
| $ | 6,992 |
| $ | 7,073 |
| | 2 | % | 1 | % |
Collective funds | | 6,637 |
| 6,956 |
| 6,919 |
| 6,949 |
| 7,113 |
| | 7 |
| 2 |
|
Pension products | | 5,472 |
| 5,613 |
| 5,780 |
| 5,746 |
| 5,745 |
| | 5 |
| — |
|
Insurance and other products | | 8,460 |
| 8,709 |
| 8,731 |
| 8,501 |
| 8,560 |
| | 1 |
| 1 |
|
Total Assets Under Custody and Administration | | $ | 27,477 |
| $ | 28,400 |
| $ | 28,465 |
| $ | 28,188 |
| $ | 28,491 |
| | 4 |
| 1 |
|
By Financial Instrument: | | | | | | | | | |
Equities | | $ | 15,040 |
| $ | 15,607 |
| $ | 15,616 |
| $ | 15,876 |
| $ | 15,660 |
| | 4 | % | (1 | )% |
Fixed-income | | 9,053 |
| 9,255 |
| 9,298 |
| 8,739 |
| 9,157 |
| | 1 |
| 5 |
|
Short-term and other investments | | 3,384 |
| 3,538 |
| 3,551 |
| 3,573 |
| 3,674 |
| | 9 |
| 3 |
|
Total Assets Under Custody and Administration | | $ | 27,477 |
| $ | 28,400 |
| $ | 28,465 |
| $ | 28,188 |
| $ | 28,491 |
| | 4 |
| 1 |
|
By Geographic Location2: | | | | | | | | | |
North America | | $ | 20,540 |
| $ | 21,199 |
| $ | 21,255 |
| $ | 21,217 |
| $ | 21,554 |
| | 5 | % | 2 | % |
Europe/Middle East/Africa | | 5,704 |
| 5,923 |
| 5,869 |
| 5,633 |
| 5,590 |
| | (2 | ) | (1 | ) |
Asia/Pacific | | 1,233 |
| 1,278 |
| 1,341 |
| 1,338 |
| 1,347 |
| | 9 |
| 1 |
|
Total Assets Under Custody and Administration | | $ | 27,477 |
| $ | 28,400 |
| $ | 28,465 |
| $ | 28,188 |
| $ | 28,491 |
| | 4 |
| 1 |
|
Assets Under Custody3 | | | | | | | | | |
By Product Classification: | | | | | | | | | |
Mutual funds | | $ | 6,596 |
| $ | 6,812 |
| $ | 6,669 |
| $ | 6,634 |
| $ | 6,786 |
| | 3 | % | 2 | % |
Collective funds | | 5,110 |
| 5,375 |
| 5,354 |
| 5,475 |
| 5,626 |
| | 10 |
| 3 |
|
Pension products | | 4,868 |
| 4,985 |
| 5,188 |
| 5,161 |
| 5,160 |
| | 6 |
| — |
|
Insurance and other products | | 4,422 |
| 4,515 |
| 4,496 |
| 4,386 |
| 4,406 |
| | — |
| — |
|
Total Assets Under Custody | | $ | 20,996 |
| $ | 21,687 |
| $ | 21,707 |
| $ | 21,656 |
| $ | 21,978 |
| | 5 |
| 1 |
|
By Geographic Location2: | | | | | | | | | |
North America | | $ | 16,220 |
| $ | 16,743 |
| $ | 16,813 |
| $ | 16,903 |
| $ | 17,221 |
| | 6 | % | 2 | % |
Europe/Middle East/Africa | | 3,806 |
| 3,956 |
| 3,858 |
| 3,729 |
| 3,732 |
| | (2 | ) | — |
|
Asia/Pacific | | 970 |
| 988 |
| 1,036 |
| 1,024 |
| 1,025 |
| | 6 |
| — |
|
Total Assets Under Custody | | $ | 20,996 |
| $ | 21,687 |
| $ | 21,707 |
| $ | 21,656 |
| $ | 21,978 |
| | 5 |
| 1 |
|
1 Amounts as of quarter-end. |
2 Geographic mix is based on the location at which the assets are serviced. |
3 Assets under custody are a component of assets under custody and administration presented above. |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
ASSETS UNDER MANAGEMENT1
|
| | | | | | | | | | | | | | | | | | | | | |
| | Quarters | | % Change |
(Dollars in billions) | | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | | 1Q15 vs. 1Q14 | 1Q15 vs. 4Q14 |
Assets Under Management | | | | | | | | | |
By Asset Class and Investment Approach: | | | | | | | | | |
Equity: | | | | | | | | | |
Active | | $ | 42 |
| $ | 42 |
| $ | 40 |
| $ | 39 |
| $ | 38 |
| | (10 | )% | (3 | )% |
Passive | | 1,323 |
| 1,390 |
| 1,371 |
| 1,436 |
| 1,434 |
| | 8 |
| — |
|
Total Equity | | 1,365 |
| 1,432 |
| 1,411 |
| 1,475 |
| 1,472 |
| | 8 |
| — |
|
Fixed-Income: | | | | | | | | | |
Active | | 16 |
| 16 |
| 16 |
| 17 |
| 17 |
| | 6 |
| — |
|
Passive | | 320 |
| 336 |
| 322 |
| 302 |
| 306 |
| | (4 | ) | 1 |
|
Total Fixed-Income | | 336 |
| 352 |
| 338 |
| 319 |
| 323 |
| | (4 | ) | 1 |
|
Cash2 | | 419 |
| 413 |
| 410 |
| 399 |
| 393 |
| | (6 | ) | (2 | ) |
Multi-Asset-Class Solutions: | | | | | | | | | |
Active | | 25 |
| 34 |
| 34 |
| 30 |
| 31 |
| | 24 |
| 3 |
|
Passive | | 108 |
| 116 |
| 104 |
| 97 |
| 84 |
| | (22 | ) | (13 | ) |
Total Multi-Asset-Class Solutions | | 133 |
| 150 |
| 138 |
| 127 |
| 115 |
| | (14 | ) | (9 | ) |
Alternative Investments3: | | | | | | | | | |
Active | | 16 |
| 18 |
| 17 |
| 17 |
| 17 |
| | 6 |
| — |
|
Passive | | 112 |
| 115 |
| 107 |
| 111 |
| 123 |
| | 10 |
| 11 |
|
Total Alternative Investments | | 128 |
| 133 |
| 124 |
| 128 |
| 140 |
| | 9 |
| 9 |
|
Total Assets Under Management | | $ | 2,381 |
| $ | 2,480 |
| $ | 2,421 |
| $ | 2,448 |
| $ | 2,443 |
| | 3 |
| — |
|
By Geographic Location4: | | | | | | | | | |
North America | | $ | 1,480 |
| $ | 1,533 |
| $ | 1,502 |
| $ | 1,568 |
| $ | 1,549 |
| | 5 | % | (1 | )% |
Europe/Middle East/Africa | | 562 |
| 589 |
| 565 |
| 559 |
| 566 |
| | 1 |
| 1 |
|
Asia/Pacific | | 339 |
| 358 |
| 354 |
| 321 |
| 328 |
| | (3 | ) | 2 |
|
Total Assets Under Management | | $ | 2,381 |
| $ | 2,480 |
| $ | 2,421 |
| $ | 2,448 |
| $ | 2,443 |
| | 3 |
| — |
|
1 Amounts as of quarter-end. |
2 Includes both floating- and constant-net-asset-value portfolios held in commingled structures or separate accounts. |
3 Includes real estate investment trusts, currency and commodities, including SPDR® Gold Fund for which State Street is not the investment manager, but acts as distribution agent. |
4 Geographic mix is based on client location or fund management location. |
Exchange-Traded Funds5 | | | | | | | | | |
By Asset Class: | | | | | | | | | |
Alternative investments | | $ | 42 |
| $ | 43 |
| $ | 40 |
| $ | 38 |
| $ | 40 |
| | (5 | )% | 5 | % |
Cash | | 1 |
| 1 |
| 1 |
| 1 |
| 1 |
| | — |
| — |
|
Equity | | 308 |
| 331 |
| 338 |
| 388 |
| 356 |
| | 16 |
| (8 | ) |
Fixed-income | | 36 |
| 38 |
| 37 |
| 39 |
| 43 |
| | 19 |
| 10 |
|
Total Exchange-Traded Funds | | $ | 387 |
| $ | 413 |
| $ | 416 |
| $ | 466 |
| $ | 440 |
| | 14 |
| (6 | ) |
| | | | | | | | | |
5 Exchange-traded funds are a component of assets under management presented above. |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
OPERATING-BASIS CONSOLIDATED RESULTS OF OPERATIONS (NON-GAAP PRESENTATION)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q141 | | 2Q142 | | 3Q143 | | 4Q144 | | 1Q155 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Operating-Basis Results | | | | | | | | | | | | | | |
Fee revenue: | | | | | | | | | | | | | | |
Servicing fees | | $ | 1,238 |
| | $ | 1,288 |
| | $ | 1,302 |
| | $ | 1,301 |
| | $ | 1,273 |
| | 3 | % | | (2 | )% |
Management fees | | 292 |
| | 300 |
| | 316 |
| | 299 |
| | 301 |
| | 3 |
| | 1 |
|
Trading services: | | | | | | | | | | | | | | |
Direct sales and trading | | 71 |
| | 79 |
| | 101 |
| | 110 |
| | 135 |
| | 90 |
| | 23 |
|
Indirect foreign exchange trading6 | | 63 |
| | 65 |
| | 60 |
| | 58 |
| | 68 |
| | 8 |
| | 17 |
|
Total foreign exchange trading | | 134 |
| | 144 |
| | 161 |
| | 168 |
| | 203 |
| | 51 |
| | 21 |
|
Electronic foreign exchange services | | 48 |
| | 43 |
| | 44 |
| | 46 |
| | 48 |
| | — |
| | 4 |
|
Other trading, transition management and brokerage | | 71 |
| | 73 |
| | 73 |
| | 79 |
| | 73 |
| | 3 |
| | (8 | ) |
Total brokerage and other trading services | | 119 |
| | 116 |
| | 117 |
| | 125 |
| | 121 |
| | 2 |
| | (3 | ) |
Total trading services | | 253 |
| | 260 |
| | 278 |
| | 293 |
| | 324 |
| | 28 |
| | 11 |
|
Securities finance | | 85 |
| | 147 |
| | 99 |
| | 106 |
| | 101 |
| | 19 |
| | (5 | ) |
Processing fees and other | | 113 |
| | 108 |
| | 103 |
| | 138 |
| | 114 |
| | 1 |
| | (17 | ) |
Total fee revenue | | 1,981 |
| | 2,103 |
| | 2,098 |
| | 2,137 |
| | 2,113 |
| | 7 |
| | (1 | ) |
Net interest revenue (excluding discount accretion)7 | | 528 |
| | 533 |
| | 537 |
| | 543 |
| | 521 |
| | (1 | ) | | (4 | ) |
Tax-equivalent adjustment associated with tax-exempt investment securities | | 44 |
| | 42 |
| | 43 |
| | 44 |
| | 44 |
| | — |
| | — |
|
Operating-basis net interest revenue | | 572 |
| | 575 |
| | 580 |
| | 587 |
| | 565 |
| | (1 | ) | | (4 | ) |
Gains (losses) related to investment securities, net | | 6 |
| | (2 | ) | | — |
| | — |
| | (1 | ) | |
|
| |
|
|
Total revenue | | 2,559 |
| | 2,676 |
| | 2,678 |
| | 2,724 |
| | 2,677 |
| | 5 |
| | (2 | ) |
Provision for loan losses | | 2 |
| | 2 |
| | 2 |
| | 4 |
| | 4 |
| | 100 |
| | — |
|
Expenses: | | | | | | | | | | | | | | |
Compensation and employee benefits | | 1,085 |
| | 974 |
| | 955 |
| | 962 |
| | 1,088 |
| | — |
| | 13 |
|
Information systems and communications | | 244 |
| | 244 |
| | 242 |
| | 246 |
| | 247 |
| | 1 |
| | — |
|
Transaction processing services | | 191 |
| | 193 |
| | 199 |
| | 201 |
| | 197 |
| | 3 |
| | (2 | ) |
Occupancy | | 114 |
| | 115 |
| | 119 |
| | 113 |
| | 113 |
| | (1 | ) | | — |
|
Other | | 283 |
| | 292 |
| | 293 |
| | 358 |
| | 297 |
| | 5 |
| | (17 | ) |
Total expenses | | 1,917 |
| | 1,818 |
| | 1,808 |
| | 1,880 |
| | 1,942 |
| | 1 |
| | 3 |
|
Income before income tax expense | | 640 |
| | 856 |
| | 868 |
| | 840 |
| | 731 |
| | 14 |
| | (13 | ) |
Income tax expense | | 200 |
| | 233 |
| | 269 |
| | 239 |
| | 208 |
| | 4 |
| | (13 | ) |
Net income | | $ | 440 |
| | $ | 623 |
| | $ | 599 |
| | $ | 601 |
| | $ | 523 |
| | 19 |
| | (13 | ) |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
OPERATING-BASIS CONSOLIDATED RESULTS OF OPERATIONS (NON-GAAP PRESENTATION)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters | | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q141 | | 2Q142 | | 3Q143 | | 4Q144 | | 1Q155 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
Adjustments to net income: | | | | | | | | | | | | | | |
Dividends on preferred stock | | $ | (6 | ) | | $ | (19 | ) | | $ | (18 | ) | | $ | (18 | ) | | $ | (31 | ) | | | | |
Earnings allocated to participating securities | | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | | | |
Net income available to common shareholders | | $ | 433 |
| | $ | 603 |
| | $ | 581 |
| | $ | 582 |
| | $ | 491 |
| | 13 | % | | (16 | )% |
Earnings per common share: | | | | | | | | | | | | | | |
Basic | | $ | 1.01 |
| | $ | 1.41 |
| | $ | 1.37 |
| | $ | 1.40 |
| | $ | 1.19 |
| | | | |
Diluted | | .99 |
| | 1.39 |
| | 1.35 |
| | 1.37 |
| | 1.17 |
| | | | |
Average common shares outstanding: | | | | | | | | | | | | | | |
Basic | | 430,621 |
| | 427,824 |
| | 421,974 |
| | 416,651 |
| | 412,225 |
| | | | |
Diluted | | 438,815 |
| | 435,320 |
| | 429,736 |
| | 424,339 |
| | 418,750 |
| | | | |
Cash dividends declared per common share | | $ | .26 |
| | $ | .30 |
| | $ | .30 |
| | $ | .30 |
| | $ | .30 |
| | | | |
Closing price per share of common stock (as of quarter end) | | 69.55 |
| | 67.26 |
| | 73.61 |
| | 78.50 |
| | 73.53 |
| | | | |
Financial ratios: | | | | | | | | | | | | | | |
Return on average common equity | | 8.8 | % | | 11.9 | % | | 11.4 | % | | 11.6 | % | | 10.4 | % | | | | |
Pre-tax operating margin | | 25.0 |
| | 32.0 |
| | 32.4 |
| | 30.8 |
| | 27.3 |
| | | | |
After-tax margin | | 17.0 |
| | 22.6 |
| | 21.7 |
| | 21.4 |
| | 18.4 |
| | | | |
Internal capital generation rate | | 6.6 |
| | 9.4 |
| | 8.9 |
| | 9.1 |
| | 7.8 |
| | | | |
Common dividend payout ratio | | 25.8 |
| | 21.1 |
| | 21.7 |
| | 21.4 |
| | 25.1 |
| | | | |
| | | | | | | | | | | | | | |
1 Operating-basis revenue includes the tax-equivalent impact of income tax credits associated with tax-advantaged investments of $57 million. Operating-basis revenue excludes $27 million of discount accretion related to former conduit securities. Operating-basis expenses exclude $33 million of acquisition and restructuring costs (composed of $21 million of integration costs related to previous acquisitions and $12 million of restructuring charges); $72 million of compensation and employee benefits expenses related to severance costs associated with the staffing realignment; and a net provision of $6 million for legal contingencies. Income tax expense excludes a one-time Italian tax on banks and insurance companies of $11 million. |
2 Operating-basis revenue includes the tax-equivalent impact of income tax credits associated with tax-advantaged investments of $64 million. Operating-basis revenue excludes $28 million of discount accretion associated with former conduit securities. Operating-basis expenses exclude $28 million of acquisition and restructuring costs (composed of $15 million of integration costs related to previous acquisitions and $13 million of restructuring charges); and $4 million of compensation and employee benefits expenses related to severance costs associated with the staffing realignment. |
3 Operating-basis revenue includes the tax-equivalent impact of income tax credits associated with tax-advantaged investments of $86 million. Operating-basis revenue excludes $33 million of discount accretion associated with former conduit securities. Operating-basis expenses exclude $20 million of acquisition and restructuring costs (composed of $12 million of integration costs related to previous acquisitions and $8 million of restructuring charges); $2 million of credit adjustments to compensation and employee benefits expenses related to severance costs associated with the staffing realignment; and a net provision of $66 million for legal contingencies. |
4 Operating-basis revenue includes the tax-equivalent impact of income tax credits associated with tax-advantaged investments of $81 million. Operating-basis revenue excludes $31 million of discount accretion associated with former conduit securities. Operating-basis expenses exclude $52 million of acquisition and restructuring costs (composed of $10 million of integration costs related to previous acquisitions and $42 million of restructuring charges); $10 million of adjustments to compensation and employee benefits expenses related to severance costs associated with the staffing realignment; and a net provision of $115 million for legal contingencies. |
5 Operating-basis revenue includes the tax-equivalent impact of income tax credits associated with tax-advantaged investments of $53 million. Operating-basis revenue excludes $25 million of discount accretion associated with former conduit securities. Operating-basis expenses exclude $6 million of acquisition and restructuring costs (composed of $5 million of integration costs related to previous acquisitions and $1 million of restructuring charges); $1 million of credit adjustments to compensation and employee benefits expenses related to severance costs associated with the staffing realignment; and a net provision of $150 million for legal contingencies. |
6 We calculate revenue for indirect foreign exchange using an attribution methodology. This methodology takes into consideration estimated effective mark-ups/downs and observed client volumes. Direct sales and trading revenue is total foreign exchange trading revenue excluding the revenue attributed to indirect foreign exchange. |
7 First, second, third and fourth quarters of 2014 and first quarter of 2015 exclude discount accretion of $27 million, $28 million, $33 million, $31 million and $25 million, respectively. |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
OPERATING-BASIS AVERAGE STATEMENT OF CONDITION - RATES EARNED AND PAID (NON-GAAP PRESENTATION)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents consolidated average interest-earning assets, average interest-bearing liabilities and related average rates earned and paid, respectively, for the quarters indicated, on an operating basis. Tax-equivalent adjustments were calculated using a federal income tax rate of 35%, adjusted for applicable state income taxes, net of related federal benefit. |
| | Quarters | | % Change |
| | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 |
(Dollars in millions; operating basis) | | Average balance | | Average rates 1 | | Average balance | | Average rates 2 | | Average balance | | Average rates 3 | | Average balance | | Average rates 4 | | Average balance | | Average rates 5 | | Average balance | | Average balance |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits with banks | | $ | 33,410 |
| | 0.42 | % | | $ | 53,564 |
| | 0.38 | % | | $ | 63,160 |
| | 0.33 | % | | $ | 70,780 |
| | 0.32 | % | | $ | 71,568 |
| | 0.30 | % | | 114 | % | | 1 | % |
Securities purchased under resale agreements | | 6,631 |
| | 0.53 |
| | 4,307 |
| | 0.94 |
| | 3,249 |
| | 1.05 |
| | 2,178 |
| | 1.99 |
| | 2,449 |
| | 1.88 |
| | (63 | ) | | 12 |
|
Trading account assets | | 901 |
| | — |
| | 953 |
| | — |
| | 985 |
| | — |
| | 995 |
| | — |
| | 1,117 |
| | — |
| | 24 |
| | 12 |
|
Investment securities | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasury and federal agencies | | 29,498 |
| | 2.21 |
| | 30,574 |
| | 2.15 |
| | 33,114 |
| | 2.00 |
| | 36,655 |
| | 1.95 |
| | 38,067 |
| | 1.92 |
| | 29 |
| | 4 |
|
State and political subdivisions | | 10,452 |
| | 4.37 |
| | 10,562 |
| | 3.30 |
| | 10,636 |
| | 3.80 |
| | 10,821 |
| | 3.76 |
| | 10,963 |
| | 3.73 |
| | 5 |
| | 1 |
|
Other investments | | 77,885 |
| | 1.51 |
| | 76,457 |
| | 1.52 |
| | 73,868 |
| | 1.56 |
| | 66,746 |
| | 1.53 |
| | 63,626 |
| | 1.48 |
| | (18 | ) | | (5 | ) |
Total investment securities | | 117,835 |
| | 1.94 |
| | 117,593 |
| | 1.84 |
| | 117,618 |
| | 1.89 |
| | 114,222 |
| | 1.87 |
| | 112,656 |
| | 1.85 |
| | (4 | ) | | (1 | ) |
Loans and leases | | 14,602 |
| | 1.58 |
| | 15,061 |
| | 1.58 |
| | 16,002 |
| | 1.55 |
| | 17,945 |
| | 1.81 |
| | 18,025 |
| | 1.63 |
| | 23 |
| | — |
|
Other interest-earning assets | | 13,527 |
| | 0.02 |
| | 14,845 |
| | 0.06 |
| | 17,003 |
| | 0.05 |
| | 18,338 |
| | 0.05 |
| | 20,544 |
| | 0.06 |
| | 52 |
| | 12 |
|
Total interest-earning assets | | 186,906 |
| | 1.46 |
| | 206,323 |
| | 1.29 |
| | 218,017 |
| | 1.24 |
| | 224,458 |
| | 1.22 |
| | 226,359 |
| | 1.19 |
| | 21 |
| | 1 |
|
Cash and due from banks | | 4,618 |
| | | | 5,304 |
| | | | 4,240 |
| | | | 2,416 |
| | | | 2,397 |
| | | | (48 | ) | | (1 | ) |
Other assets | | 24,045 |
| | | | 23,037 |
| | | | 25,053 |
| | | | 27,565 |
| | | | 30,326 |
| | | | 26 |
| | 10 |
|
Total assets | | $ | 215,569 |
| | | | $ | 234,664 |
| | | | $ | 247,310 |
| | | | $ | 254,439 |
| | | | $ | 259,082 |
| | | | 20 | % | | 2 | % |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. | | $ | 12,072 |
| | 0.03 |
| | $ | 20,698 |
| | 0.09 |
| | $ | 24,144 |
| | 0.11 |
| | $ | 28,063 |
| | 0.12 |
| | $ | 30,174 |
| | 0.13 |
| | 150 | % | | 8 | % |
Non-U.S. transaction accounts | | 99,808 |
| | | | 106,894 |
| | | | 112,856 |
| | | | 109,260 |
| | | | 102,624 |
| | | | 3 |
| | (6 | ) |
Non-U.S. nontransaction accounts | | 1,474 |
| | | | 2,396 |
| | | | 1,900 |
| | | | 1,258 |
| | | | 1,207 |
| | | | (18 | ) | | (4 | ) |
Total Non-U.S. | | 101,282 |
| | 0.06 |
| | 109,290 |
| | 0.05 |
| | 114,756 |
| | 0.09 |
| | 110,518 |
| | 0.08 |
| | 103,831 |
| | 0.06 |
| | 3 |
| | (6 | ) |
Securities sold under repurchase agreements | | 8,424 |
| | — |
| | 8,747 |
| | — |
| | 9,111 |
| | — |
| | 8,977 |
| | — |
| | 9,354 |
| | — |
| | 11 |
| | 4 |
|
Federal funds purchased | | 20 |
| | — |
| | 19 |
| | — |
| | 18 |
| | — |
| | 22 |
| | — |
| | 24 |
| | — |
| | 20 |
| | 9 |
|
Other short-term borrowings | | 3,909 |
| | 1.57 |
| | 4,000 |
| | (1.20 | ) | | 4,376 |
| | — |
| | 4,415 |
| | 0.13 |
| | 4,448 |
| | 0.13 |
| | 14 |
| | 1 |
|
Long-term debt | | 9,668 |
| | 2.60 |
| | 9,340 |
| | 2.73 |
| | 9,020 |
| | 2.64 |
| | 9,216 |
| | 2.56 |
| | 9,736 |
| | 2.54 |
| | 1 |
| | 6 |
|
Other interest-bearing liabilities | | 6,758 |
| | 0.43 |
| | 7,559 |
| | 0.99 |
| | 7,386 |
| | 0.42 |
| | 7,690 |
| | 0.50 |
| | 7,465 |
| | 0.41 |
| | 10 |
| | (3 | ) |
Total interest-bearing liabilities | | 142,133 |
| | 0.29 |
| | 159,653 |
| | 0.22 |
| | 168,811 |
| | 0.24 |
| | 168,901 |
| | 0.24 |
| | 165,032 |
| | 0.24 |
| | 16 |
| | (2 | ) |
Non-interest bearing deposits | | 40,711 |
| | | | 41,906 |
| | | | 44,503 |
| | | | 48,951 |
| | | | 55,066 |
| | | | 35 |
| | 12 |
|
Other liabilities | | 12,034 |
| | | | 11,541 |
| | | | 12,513 |
| | | | 15,069 |
| | | | 17,767 |
| | | | 48 |
| | 18 |
|
Preferred shareholders' equity | | 722 |
| | | | 1,233 |
| | | | 1,233 |
| | | | 1,526 |
| | | | 1,961 |
| | | | 172 |
| | 29 |
|
Common shareholders' equity | | 19,969 |
| | | | 20,331 |
| | | | 20,250 |
| | | | 19,992 |
| | | | 19,256 |
| | | | (4 | ) | | (4 | ) |
Total liabilities and shareholders' equity | | $ | 215,569 |
| | | | $ | 234,664 |
| | | | $ | 247,310 |
| | | | $ | 254,439 |
| | | | $ | 259,082 |
| | | | 20 | % | | 2 | % |
Excess of rate earned over rate paid | | | | 1.17 | % | | | | 1.07 | % | | | | 1.00 | % | | | | 0.98 | % | | | | 0.95 | % | | | | |
Net interest margin | | | | 1.24 | % | | | | 1.12 | % | | | | 1.06 | % | | | | 1.04 | % | | | | 1.01 | % | | | | |
Net interest revenue, operating basis | | | | $ | 572 |
| | | | $ | 575 |
| | | | $ | 580 |
| | | | $ | 587 |
| | | | $ | 565 |
| | | | |
1 First quarter of 2014 presents rates earned and paid based on operating-basis net interest revenue, which is composed of reported net interest revenue of $555 million and a tax-equivalent adjustment of $44 million, excluding the impact of $27 million of discount accretion related to former conduit securities.
2 Second quarter of 2014 presents rates earned and paid based on operating-basis net interest revenue, which is composed of reported net interest revenue of $561 million and a tax-equivalent adjustment of $42 million, excluding the impact of $28 million of discount accretion related to former conduit securities.
3 Third quarter of 2014 presents rates earned and paid based on operating-basis net interest revenue, which is composed of reported net interest revenue of $570 million and a tax-equivalent adjustment of $43 million, excluding the impact of $33 million of discount accretion related to former conduit securities.
4 Fourth quarter of 2014 presents rates earned and paid based on operating-basis net interest revenue, which is composed of reported net interest revenue of $574 million and a tax-equivalent adjustment of $44 million, excluding the impact of $31 million of discount accretion related to former conduit securities.
5 First quarter of 2015 presents rates earned and paid based on operating-basis net interest revenue, which is composed of reported net interest revenue of $546 million and a tax-equivalent adjustment of $44 million, excluding the impact of $25 million of discount accretion related to former conduit securities.
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION
|
| | | | | | | | | | | | | | | | | | | | | | | | |
In addition to presenting State Street’s financial results in conformity with U.S. generally accepted accounting principles, referred to as GAAP, management also presents results on a non-GAAP, or "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, such as interest revenue from tax-exempt investment securities and processing fees and other revenue associated with tax-advantaged investments, on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of State Street's 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 and reported in conformity with GAAP. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in conformity with GAAP. |
The accompanying earnings release presents financial information prepared on a GAAP as well as on an operating basis; accordingly, this earnings release addendum provides reconciliations of operating-basis financial measures. The following tables reconcile operating-basis financial information presented in the accompanying earnings release to financial information prepared and reported in conformity with GAAP. |
| | | Quarters | | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 | |
Total Revenue: | | | | | | | | | | | |
Total revenue, GAAP basis | | $ | 2,485 |
| $ | 2,598 |
| $ | 2,582 |
| $ | 2,630 |
| $ | 2,605 |
| | 4.8 | % | | (1.0 | )% | |
| Adjustment to processing fees and other revenue (see below) | | 57 |
| 64 |
| 86 |
| 81 |
| 53 |
| | | | | |
| Adjustment to net interest revenue (see below) | | 44 |
| 42 |
| 43 |
| 44 |
| 44 |
| | | | | |
| Adjustment to net interest revenue (see below) | | (27 | ) | (28 | ) | (33 | ) | (31 | ) | (25 | ) | | | | | |
Total revenue, operating basis1,2 | | $ | 2,559 |
| $ | 2,676 |
| $ | 2,678 |
| $ | 2,724 |
| $ | 2,677 |
| | 4.61 |
| | (1.73 | ) | |
| | | | | | | | | | | | |
Fee Revenue: | | | | | | | | | | | |
Total fee revenue, GAAP basis | | $ | 1,924 |
| $ | 2,039 |
| $ | 2,012 |
| $ | 2,056 |
| $ | 2,060 |
| | 7 |
| | — |
| |
| Tax-equivalent adjustment associated with tax-advantaged investments | | 57 |
| 64 |
| 86 |
| 81 |
| 53 |
| | | | | |
Total fee revenue, operating basis | | $ | 1,981 |
| $ | 2,103 |
| $ | 2,098 |
| $ | 2,137 |
| $ | 2,113 |
| | 7 |
| | (1 | ) | |
| | | | | | | | | | | | |
Processing Fees and Other Revenue: | | | | | | | | | | | |
Total processing fees and other revenue, GAAP basis | | $ | 56 |
| $ | 44 |
| $ | 17 |
| $ | 57 |
| $ | 61 |
| | 9 |
| | 7 |
| |
| Tax-equivalent adjustment associated with tax-advantaged investments | | 57 |
| 64 |
| 86 |
| 81 |
| 53 |
| | | | | |
Total processing fees and other revenue, operating basis | | $ | 113 |
| $ | 108 |
| $ | 103 |
| $ | 138 |
| $ | 114 |
| | 1 |
| | (17 | ) | |
| | | | | | | | | | | | |
Net Interest Revenue: | | | | | | | | | | | |
Net interest revenue, GAAP basis | | $ | 555 |
| $ | 561 |
| $ | 570 |
| $ | 574 |
| $ | 546 |
| | (1.6 | ) | | (4.9 | ) | |
| Tax-equivalent adjustment associated with tax-exempt investment securities | | 44 |
| 42 |
| 43 |
| 44 |
| 44 |
| | | | | |
| Discount accretion associated with former conduit securities | | (27 | ) | (28 | ) | (33 | ) | (31 | ) | (25 | ) | | | | | |
Net interest revenue, operating basis3 | | $ | 572 |
| $ | 575 |
| $ | 580 |
| $ | 587 |
| $ | 565 |
| | (1.2 | ) | | (3.7 | ) | |
| | | | | | | | | | | | |
Net Interest Margin: | | | | | | | | | | | |
Net interest margin, fully taxable-equivalent basis | | 1.30 | % | 1.17 | % | 1.12 | % | 1.09 | % | 1.06 | % | | (24 | ) | bps | (3 | ) | bps |
| Effect of discount accretion | | 0.06 |
| 0.05 |
| 0.06 |
| 0.05 |
| 0.05 |
| | | | | |
Net interest margin, operating basis | | 1.24 | % | 1.12 | % | 1.06 | % | 1.04 | % | 1.01 | % | | (23 | ) | | (3 | ) | |
| | | | | | | | | | | | |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarters | | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 | |
Expenses: | | | | | | | | | | | |
Total expenses, GAAP basis | | $ | 2,028 |
| $ | 1,850 |
| $ | 1,892 |
| $ | 2,057 |
| $ | 2,097 |
| | 3.4 | % | | 1.9 | % | |
| Severance costs associated with staffing realignment | | (72 | ) | (4 | ) | 2 |
| (10 | ) | 1 |
| | | | | |
| Provisions for legal contingencies | | (6 | ) | — |
| (66 | ) | (115 | ) | (150 | ) | | | | | |
| Acquisition costs | | (21 | ) | (15 | ) | (12 | ) | (10 | ) | (5 | ) | | | | | |
| Restructuring charges, net | | (12 | ) | (13 | ) | (8 | ) | (42 | ) | (1 | ) | | | | | |
Total expenses, operating basis1,2 | | $ | 1,917 |
| $ | 1,818 |
| $ | 1,808 |
| $ | 1,880 |
| $ | 1,942 |
| | 1.30 |
| | 3.30 |
| |
| | | | | | | | | | | | |
Compensation and Employee Benefits Expenses: | | | | | | | | | | | |
Total compensation and employee benefits expenses, GAAP basis | | $ | 1,157 |
| $ | 978 |
| $ | 953 |
| $ | 972 |
| $ | 1,087 |
| | (6 | ) | | 12 |
| |
| Severance costs associated with staffing realignment | | (72 | ) | (4 | ) | 2 |
| (10 | ) | 1 |
| | | | | |
Total compensation and employee benefits expenses, operating basis | | $ | 1,085 |
| $ | 974 |
| $ | 955 |
| $ | 962 |
| $ | 1,088 |
| | — |
| | 13 |
| |
| | | | | | | | | | | | |
Other Expenses: | | | | | | | | | | | |
Total other expenses, GAAP basis | | $ | 289 |
| $ | 292 |
| $ | 359 |
| $ | 473 |
| $ | 447 |
| | 55 |
| | (5 | ) | |
| Provisions for legal contingencies | | (6 | ) | — |
| (66 | ) | (115 | ) | (150 | ) | | | | | |
Total other expenses, operating basis | | $ | 283 |
| $ | 292 |
| $ | 293 |
| $ | 358 |
| $ | 297 |
| | 5 |
| | (17 | ) | |
| | | | | | | | | | | | |
Income Before Income Tax Expense: | | | | | | | | | | | |
Income before income tax expense, GAAP basis | | $ | 455 |
| $ | 746 |
| $ | 688 |
| $ | 569 |
| $ | 504 |
| | 11 |
| | (11 | ) | |
| Net pre-tax effect of non-operating adjustments to revenue and expenses | | 185 |
| 110 |
| 180 |
| 271 |
| 227 |
| | | | | |
Income before income tax expense, operating basis | | $ | 640 |
| $ | 856 |
| $ | 868 |
| $ | 840 |
| $ | 731 |
| | 14 |
| | (13 | ) | |
| | | | | | | | | | | | |
Pre-tax operating margin: | | | | | | | | | | | |
Pre-tax operating margin, GAAP basis | | 18.3 | % | 28.7 | % | 26.6 | % | 21.6 | % | 19.3 | % | | | | | |
| Net effect of non-operating adjustments | | 6.7 |
| 3.3 |
| 5.8 |
| 9.2 |
| 8.0 |
| | | | | |
Pre-tax operating margin, operating basis4 | | 25.0 | % | 32.0 | % | 32.4 | % | 30.8 | % | 27.3 | % | | | | | |
| | | | | | | | | | | | |
Income Tax Expense: | | | | | | | | | | | |
Income tax expense, GAAP basis | | $ | 92 |
| $ | 124 |
| $ | 128 |
| $ | 77 |
| $ | 95 |
| | 3 |
| | 23 |
| |
| Aggregate tax-equivalent adjustments | | 101 |
| 106 |
| 129 |
| 125 |
| 97 |
| | | | | |
| One-time Italian tax on banks and insurance companies | | (11 | ) | — |
| — |
| — |
| — |
| | | | | |
| Net tax effect of non-operating adjustments | | 18 |
| 3 |
| 12 |
| 37 |
| 16 |
| | | | | |
Income tax expense, operating basis | | $ | 200 |
| $ | 233 |
| $ | 269 |
| $ | 239 |
| $ | 208 |
| | 4 |
| | (13 | ) | |
| | | | | | | | | | | | |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF OPERATING-BASIS (NON-GAAP) FINANCIAL INFORMATION (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarters | | % Change |
(Dollars in millions, except per share amounts, or where otherwise noted) | | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | | 1Q15 vs. 1Q14 | | 1Q15 vs. 4Q14 | |
Effective Tax Rate: | | | | | | | | | | | |
Income before income tax expense, operating basis | | $ | 640 |
| $ | 856 |
| $ | 868 |
| $ | 840 |
| $ | 731 |
| | | | | |
Income tax expense, operating basis | | 200 |
| 233 |
| 269 |
| 239 |
| 208 |
| | | | | |
Effective tax rate, operating basis | | 31.2 | % | 27.2 | % | 31.0 | % | 28.5 | % | 28.4 | % | | | | | |
| | | | | | | | | | | | |
Net Income Available to Common Shareholders: | | | | | | | | | | | |
Net income available to common shareholders, GAAP basis | | $ | 356 |
| $ | 602 |
| $ | 542 |
| $ | 473 |
| $ | 377 |
| | 5.9 | % | | (20.3 | )% | |
Net after-tax effect of non-operating adjustments to processing fees and other revenue, net interest revenue, expenses and income tax expense | | 77 |
| 1 |
| 39 |
| 109 |
| 114 |
| | | | | |
Net income available to common shareholders, operating basis | | $ | 433 |
| $ | 603 |
| $ | 581 |
| $ | 582 |
| $ | 491 |
| | 13.4 |
| | (15.6 | ) | |
| | | | | | | | | | | | |
Diluted Earnings per Common Share: | | | | | | | | | | | |
Diluted earnings per common share, GAAP basis | | $ | .81 |
| $ | 1.38 |
| $ | 1.26 |
| $ | 1.12 |
| $ | .90 |
| | 11.1 |
| | (19.6 | ) | |
| Severance costs | | .11 |
| .01 |
| — |
| .01 |
| — |
| | | | | |
| Provisions for legal contingencies | | .01 |
| — |
| .12 |
| .22 |
| .36 |
| | | | | |
| Acquisition costs | | .03 |
| .02 |
| .02 |
| .01 |
| .01 |
| | | | | |
| Restructuring charges, net | | .02 |
| .02 |
| .01 |
| .06 |
| — |
| | | | | |
| Effect on income tax of non-operating adjustments | | .02 |
| — |
| (.01 | ) | (.01 | ) | (.06 | ) | | | | | |
| Discount accretion associated with former conduit securities | | (.04 | ) | (.04 | ) | (.05 | ) | (.04 | ) | (.04 | ) | | | | | |
| One-time Italian tax on banks and insurance companies | | .03 |
| — |
| — |
| — |
| — |
| | | | | |
Diluted earnings per common share, operating basis | | $ | .99 |
| $ | 1.39 |
| $ | 1.35 |
| $ | 1.37 |
| $ | 1.17 |
| | 18.2 |
| | (14.6 | ) | |
| | | | | | | | | | | | |
Return on Average Common Equity: | | | | | | | | | | | |
Return on average common equity, GAAP basis | | 7.2 | % | 11.9 | % | 10.6 | % | 9.4 | % | 7.9 | % | | 70 |
| bps | (150 | ) | bps |
| Severance costs | | 1.0 |
| — |
| — |
| .1 |
| — |
| | | | | |
| Provisions for legal contingencies | | .1 |
| — |
| .9 |
| 1.8 |
| 3.2 |
| | | | | |
| Acquisition costs | | .3 |
| .2 |
| .2 |
| .2 |
| .1 |
| | | | | |
| Restructuring charges, net | | .1 |
| .1 |
| .1 |
| .6 |
| — |
| | | | | |
| Effect on income tax of non-operating adjustments | | .2 |
| — |
| — |
| (.1 | ) | (.5 | ) | | | | | |
| Discount accretion associated with former conduit securities | | (.3 | ) | (.3 | ) | (.4 | ) | (.4 | ) | (.3 | ) | | | | | |
| One-time Italian tax on banks and insurance companies | | .2 |
| — |
| — |
| — |
| — |
| | | | | |
Return on average common equity, operating basis | | 8.8 | % | 11.9 | % | 11.4 | % | 11.6 | % | 10.4 | % | | 160 |
| | (120 | ) | |
| | | | | | | | | | | | |
1 For the quarters ended March 31, 2015 and March 31, 2014, positive operating leverage in the year-over-year comparison was approximately 331 basis points, based on an increase in total operating-basis revenue of 4.61% and an increase in total operating-basis expenses of 1.30%. |
2 For the quarters ended March 31, 2015 and December 31, 2014, negative operating leverage in the quarter-over-quarter comparison was approximately 503 basis points, based on an decrease in total operating-basis revenue of 1.73% and an increase in total operating-basis expenses of 3.30%. |
3 Fully taxable-equivalent net interest margin for the first, second, third and fourth quarters of 2014 and first quarter of 2015 represented fully taxable-equivalent net interest revenue of $599 million, $603 million, $613 million, $618 million and $590 million, respectively (GAAP-basis net interest revenue of $555 million, $561 million, $570 million, $574 million and $546 million plus tax-equivalent adjustments of $44 million, $42 million, $43 million, $44 million and $44 million, respectively), on an annualized basis, as a percentage of average total interest-earning assets for the quarters presented. |
4 Pre-tax operating margin for the first, second, third and fourth quarters of 2014 and first quarter of 2015 was calculated by dividing income before income tax expense by total revenue. |
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
REGULATORY CAPITAL
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying news release presents capital ratios in addition to, or adjusted from, those calculated in conformity with applicable regulatory requirements. These include capital ratios based on tangible common equity, as well as capital ratios adjusted to reflect our estimate of the impact of the relevant Basel III requirements, as specified in the July 2013 final rule issued by the Board of Governors of the Federal Reserve System, referred to as the Basel III final rule. These non-regulatory and adjusted capital measures are non-GAAP financial measures. Management currently calculates the non-GAAP capital ratios presented in the news release to aid in its understanding of State Street’s capital position under a variety of standards, including currently applicable and transitioning regulatory requirements. Management believes that the use of the non-GAAP capital ratios presented in the news release similarly aids in an investor's understanding of State Street's capital position and therefore is of interest to investors. |
The common equity tier 1 risk-based capital, or CET1, tier 1 risk-based capital, total risk-based capital and tier 1 leverage ratios have each been calculated in conformity with applicable regulatory requirements as of the dates that each was first publicly disclosed. As of June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, the capital component, or numerator, of these ratios was calculated in conformity with the provisions of the Basel III final rule. As of June 30, 2014, September 30, 2014 and December 31, 2014, the total risk-weighted assets component, or denominator, used in the calculation of the CET1, tier 1 risk-based capital and total risk-based capital ratios were each calculated in conformity with both the advanced approaches and transitional provisions of Basel III. As of March 31, 2015, the total risk-weighted assets component, or denominator, used in the calculation of the CET1, tier 1 risk-based capital and total risk-based capital ratios were each calculated in conformity with the advanced approaches and standardized approach provisions of Basel III. |
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 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 banking 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 or other applicable requirements. Reconciliations with respect to the calculation of the TCE ratios as of March 31, 2014, June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, are provided on page 17 of this earnings release addendum. |
The following table presents State Street's regulatory capital ratios and underlying components, calculated in conformity with applicable regulatory requirements as described above. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters | |
| | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | |
(Dollars in millions) | | Basel III Advanced Approach1 | | Basel III Transitional Approach2 | | Basel III Advanced Approach3 | | Basel III Transitional Approach2 | | Basel III Advanced Approach3 | | Basel III Transitional Approach2 | | Basel III Advanced Approach3 | | Basel III Transitional Approach2 | | Basel III Advanced Approach3 | | Basel III Standardized Approach4 | |
RATIOS: | | | | | | | | | | | | | | | | | | | | | |
Common equity tier 1 capital | | N/A | | 16.4 | % | | 12.8 | % | | 16.0 | % | | 12.8 | % | | 15.0 | % | | 12.5 | % | | 14.9 | % | | 12.1 | % | | 10.4 | % | |
Tier 1 capital | | N/A | | 18.3 |
| | 14.1 |
| | 17.7 |
| | 14.2 |
| | 16.7 |
| | 14.6 |
| | 17.4 |
| | 14.1 |
| | 12.1 |
| |
Total capital | | N/A | | 21.0 |
| | 16.1 |
| | 20.2 |
| | 16.2 |
| | 19.1 |
| | 16.6 |
| | 19.8 |
| | 16.2 |
| | 13.8 |
| |
Tier 1 leverage | | N/A | | 7.4 |
| | 6.9 |
| | 6.9 |
| | 6.4 |
| | 6.4 |
| | 6.4 |
| | 6.4 |
| | 5.8 |
| | 5.8 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Supporting Calculations: | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Common equity tier 1 capital | | N/A | | $ | 13,924 |
| | $ | 14,165 |
| | $ | 14,165 |
| | $ | 13,781 |
| | $ | 13,781 |
| | $ | 13,473 |
| | $ | 13,473 |
| | $ | 12,644 |
| | $ | 12,644 |
| |
Total risk-weighted assets | | N/A | | 84,694 |
| | 111,015 |
| | 88,607 |
| | 108,078 |
| | 91,800 |
| | 107,827 |
| | 90,412 |
| | 104,461 |
| | 122,057 |
| |
Common equity tier 1 risk-based capital | | N/A | | 16.4 | % | | 12.8 | % | | 16.0 | % | | 12.8 | % | | 15.0 | % | | 12.5 | % | | 14.9 | % | | 12.1 | % | | 10.4 | % | |
| | | | | | | | | | | | | | | | | | | | | |
Tier 1 capital | | N/A | | $ | 15,487 |
| | $ | 15,708 |
| | $ | 15,708 |
| | $ | 15,318 |
| | $ | 15,318 |
| | $ | 15,764 |
| | $ | 15,764 |
| | $ | 14,748 |
| | $ | 14,748 |
| |
Total risk-weighted assets | | N/A | | 84,694 |
| | 111,015 |
| | 88,607 |
| | 108,078 |
| | 91,800 |
| | 107,827 |
| | 90,412 |
| | 104,461 |
| | 122,057 |
| |
Tier 1 risk-based capital ratio | | N/A | | 18.3 | % | | 14.1 | % | | 17.7 | % | | 14.2 | % | | 16.7 | % | | 14.6 | % | | 17.4 | % | | 14.1 | % | | 12.1 | % | |
| | | | | | | | | | | | | | | | | | | | | |
Total capital | | N/A | | $ | 17,750 |
| | $ | 17,924 |
| | $ | 17,924 |
| | $ | 17,534 |
| | $ | 17,534 |
| | $ | 17,861 |
| | $ | 17,861 |
| | $ | 16,902 |
| | $ | 16,902 |
| |
Total risk-weighted assets | | N/A | | 84,694 |
| | 111,015 |
| | 88,607 |
| | 108,078 |
| | 91,800 |
| | 107,827 |
| | 90,412 |
| | 104,461 |
| | 122,057 |
| |
Total risk-based capital ratio | | N/A | | 21.0 | % | | 16.1 | % | | 20.2 | % | | 16.2 | % | | 19.1 | % | | 16.6 | % | | 19.8 | % | | 16.2 | % | | 13.8 | % | |
| | | | | | | | | | | | | | | | | | | | | |
Tier 1 capital | | N/A | | $ | 15,487 |
| | $ | 15,708 |
| | $ | 15,708 |
| | $ | 15,318 |
| | $ | 15,318 |
| | $ | 15,764 |
| | $ | 15,764 |
| | $ | 14,748 |
| | $ | 14,748 |
| |
Adjusted quarterly average assets | | N/A | | 209,021 |
| | 227,815 |
| | 227,815 |
| | 240,529 |
| | 240,529 |
| | 247,740 |
| | 247,740 |
| | 252,406 |
| | 252,406 |
| |
Tier 1 leverage ratio | | N/A | | 7.4 | % | | 6.9 | % | | 6.9 | % | | 6.4 | % | | 6.4 | % | | 6.4 | % | | 6.4 | % | | 5.8 | % | | 5.8 | % | |
1 Regulatory capital ratios as of March 31, 2014 were calculated under Basel I, are not directly comparable to such ratios as of June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, and are not disclosed.
2 CET1, tier 1 capital, total capital, and tier 1 leverage ratios as of June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015 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 advanced approaches 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 CET1, tier 1 capital, total capital and tier 1 leverage ratios as of June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015 were calculated in conformity with the advanced approaches provisions of the Basel III final rule.
4 CET1, tier 1 capital, total capital and tier 1 leverage ratios as of March 31, 2015 were calculated in conformity with the standardized approaches provisions of the Basel III final rule.
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATION OF TANGIBLE COMMON EQUITY RATIO
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| | | | | | | | | | | | | | | | | | | | | |
The following table presents the calculation of State Street's ratios of tangible common equity to total tangible assets. |
| | Quarters | |
(Dollars in millions) | | 1Q14 | | 2Q14 | | 3Q14 | | 4Q14 | | 1Q15 | |
Consolidated Total Assets | | $ | 256,663 |
| | $ | 282,324 |
| | $ | 274,805 |
| | $ | 274,119 |
| | $ | 279,476 |
| |
Less: | | | | | | | | | | | |
Goodwill | | 6,038 |
| | 6,037 |
| | 5,899 |
| | 5,826 |
| | 5,663 |
| |
Other intangible assets | | 2,306 |
| | 2,247 |
| | 2,121 |
| | 2,025 |
| | 1,892 |
| |
Cash balances held at central banks in excess of required reserves | | 61,980 |
| | 87,081 |
| | 74,570 |
| | 83,402 |
| | 71,740 |
| |
Adjusted assets | | 186,339 |
| | 186,959 |
| | 192,215 |
| | 182,866 |
| | 200,181 |
| |
Plus related deferred tax liabilities | | 900 |
| | 898 |
| | 874 |
| | 821 |
| | 814 |
| |
Total tangible assets | A | 187,239 |
| | 187,857 |
| | 193,089 |
| | 183,687 |
| | 200,995 |
| |
Consolidated Total Common Shareholders' Equity | | $ | 20,040 |
| | $ | 20,467 |
| | $ | 19,923 |
| | $ | 19,512 |
| | $ | 18,858 |
| |
Less: | | | | | | | | | | | |
Goodwill | | 6,038 |
| | 6,037 |
| | 5,899 |
| | 5,826 |
| | 5,663 |
| |
Other intangible assets | | 2,306 |
| | 2,247 |
| | 2,121 |
| | 2,025 |
| | 1,892 |
| |
Adjusted equity | | 11,696 |
| | 12,183 |
| | 11,903 |
| | 11,661 |
| | 11,303 |
| |
Plus related deferred tax liabilities | | 900 |
| | 898 |
| | 874 |
| | 821 |
| | 814 |
| |
Total tangible common equity | B | $ | 12,596 |
| | $ | 13,081 |
| | $ | 12,777 |
| | $ | 12,482 |
| | $ | 12,117 |
| |
Tangible common equity ratio | B/A | 6.7 | % | | 7.0 | % | | 6.6 | % | | 6.8 | % | | 6.0 | % | |
|
| | | | | | | | | | | | | | | | |
STATE STREET CORPORATION |
EARNINGS RELEASE ADDENDUM |
RECONCILIATIONS OF COMMON EQUITY TIER 1 RATIOS |
| | | | | | | | |
Provisions of the Basel III final rule, issued in July 2013, become effective under a transition timetable which began on January 1, 2014. We have used the advanced approaches provisions provided in the Basel III final rule to calculate our regulatory capital ratios beginning with the second quarter of 2014. Beginning with the first quarter of 2015, we began to also use the standardized approach provisions provided in the Basel III final rule to calculate our regulatory capital ratios. |
Prior to the first quarter of 2015, the lower of our regulatory capital ratios calculated under the Basel III advanced approaches and those ratios calculated under the transitional provisions of Basel III were applied in the assessment of our capital adequacy for regulatory purposes. Beginning in the first quarter of 2015, capital ratios calculated under the Basel III standardized approach replaced the transitional ratios in the assessment of our capital adequacy for regulatory purposes. |
The following tables reconcile our estimated pro forma CET1 ratios calculated in conformity with the Basel III final rule, as described, to our CET1 ratios calculated in conformity with applicable regulatory requirements as of the dates indicated. |
| | | | | | | | |
As of March 31, 2015 (Dollars in millions) | | Basel III Final Rule Advanced Approaches1 | | Basel III Final Rule Standardized Approach1 | | Basel III Fully Phased-In Advanced Approaches (Estimated)2 Pro-Forma | | Basel III Fully Phased-In Standardized Approach (Estimated)3 Pro-Forma |
Tier 1 Capital | | $ | 14,748 |
| | $ | 14,748 |
| | $ | 13,921 |
| | $ | 13,921 |
|
Less: | | | | | | | | |
Trust preferred capital securities | | 237 |
| | 237 |
| | — |
| | — |
|
Preferred stock | | 1,961 |
| | 1,961 |
| | 1,961 |
| | 1,961 |
|
Plus: Other | | 94 |
| | 94 |
| | — |
| | — |
|
Common equity tier 1 capital | | 12,644 |
| A | 12,644 |
| | 11,960 |
| | 11,960 |
|
Total Risk-Weighted Assets | | 104,461 |
| B | 122,057 |
| | 103,910 |
| | 121,537 |
|
Common equity tier 1 risk-based capital ratio | | 12.1 | % | A/B | 10.4 | % | | 11.5 | % | | 9.8 | % |
| | | | | | | | |
1 CET 1 ratio as of March 31, 2015 was calculated in conformity with the advanced approaches and standardized approach provisions of the Basel III final rule. |
2 Estimated pro forma fully phased-in Basel III CET1 ratio (advanced approaches) as of March 31, 2015 (fully phased in as of January 1, 2019, as per Basel III phase-in requirements for capital) reflects capital calculated under the Basel III final rule and total risk-weighted assets calculated in conformity with the advanced approaches (fully phased-in) in the Basel III final rule based on our interpretations of the Basel III final rule as of April 24, 2015 and as applied to our businesses and operations as of March 31, 2015. Under such application of the fully phased-in advanced approaches, total risk-weighted assets used in the calculation of the CET1 ratio decreased by $551 million as a result of applying the advanced approaches provisions of the Basel III final rule to total risk-weighted assets of $104.46 billion as of March 31, 2015, calculated in conformity with the advanced approaches provisions of the Basel III final rule. |
3 Estimated pro forma fully phased-in Basel III CET1 ratio (standardized approach) as of March 31, 2015 (fully phased in as of January 1, 2019, as per Basel III phase-in requirements for capital) reflects capital calculated under the Basel III final rule and total risk-weighted assets calculated in conformity with the standardized approach (fully phased-in) in the Basel III final rule based on our interpretations of the Basel III final rule as of April 24, 2015 and as applied to our businesses and operations as of March 31, 2015. Under such application of the fully phased-in standardized approach, total risk-weighted assets used in the calculation of the CET1 ratio decreased by $520 million as a result of applying the standardized approach provisions of the Basel III final rule to total risk-weighted assets of $122.06 billion as of March 31, 2015, calculated in conformity with the standardized approach provisions of the Basel III final rule. |
| | | | | | | | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
STATE STREET CORPORATION |
EARNINGS RELEASE ADDENDUM |
RECONCILIATIONS OF COMMON EQUITY TIER 1 RATIOS (Continued) |
As of December 31, 2014 (Dollars in millions) | | Basel III Final Rule Advanced Approaches4 | | Basel III Final Rule Standardized Approach (Estimated)5 | | Basel III Fully Phased-In Advanced Approaches (Estimated)6 Proforma | | Basel III Fully Phased-In Standardized Approach (Estimated)7 Proforma |
Tier 1 Capital | | $ | 15,764 |
| | $ | 15,764 |
| | $ | 14,261 |
| | $ | 14,261 |
|
Less: | | | | | | | | |
Trust preferred capital securities | | 475 |
| | 475 |
| | — |
| | — |
|
Preferred stock | | 1,961 |
| | 1,961 |
| | 1,961 |
| | 1,961 |
|
Plus: Other | | 145 |
| | 145 |
| | — |
| | — |
|
Common equity tier 1 capital | | 13,473 |
| C | 13,473 |
| | 12,300 |
| | 12,300 |
|
Total Risk-Weighted Assets | | 107,827 |
| D | 125,011 |
| | 106,817 |
| | 124,058 |
|
Common equity tier 1 risk-based capital ratio | | 12.5 | % | C/D | 10.8 | % | | 11.5 | % | | 9.9 | % |
| | | | | | | | |
4 CET1 ratio as of December 31, 2014 was calculated in conformity with the advanced approaches provisions of the Basel III final rule. |
5 Estimated pro forma CET1 ratio (standardized approach) as of December 31, 2014 reflects capital calculated in conformity with the provisions of the Basel III final rule and total risk-weighted assets calculated in conformity with the standardized approach in the Basel III final rule based on our interpretations of the Basel III final rule as of January 23, 2015 and as applied to our businesses and operations as of December 31, 2014. Under such application of the standardized approach, total risk-weighted assets used in the calculation of the CET1 ratio increased by $17.18 billion as a result of applying the standardized approach provisions of the Basel III final rule to total risk-weighted assets of $107.83 billion as of December 31, 2014, calculated in conformity with the advanced approaches provisions of the Basel III final rule. |
6 Estimated pro forma fully phased-in Basel III CET1 ratio (advanced approaches) as of December 31, 2014 (fully phased in as of January 1, 2019, as per Basel III phase-in requirements for capital) reflects capital calculated under the Basel III final rule and total risk-weighted assets calculated in conformity with the advanced approaches (fully phased-in) in the Basel III final rule based on our interpretations of the Basel III final rule as of January 23, 2015 and as applied to our businesses and operations as of December 31, 2014. Under such application of the fully phased-in advanced approaches, total risk-weighted assets used in the calculation of the CET1 ratio decreased by $1.01 billion as a result of applying the advanced approaches provisions of the Basel III final rule to total risk-weighted assets of $107.83 billion as of December 31, 2014, calculated in conformity with the advanced approaches provisions of the Basel III final rule (as of December 31, 2014; i.e., not fully phased-in). |
7 Estimated pro forma fully phased-in Basel III CET1 ratio (standardized approach) as of December 31, 2014 (fully phased in as of January 1, 2019, as per Basel III phase-in requirements for capital) reflects capital calculated under the Basel III final rule and total risk-weighted assets calculated in conformity with the standardized approach (fully phased-in) in the Basel III final rule based on our interpretations of the Basel III final rule as of January 23, 2015 and as applied to our businesses and operations as of December 31, 2014. Under such application of the fully phased-in standardized approach, total risk-weighted assets used in the calculation of the CET1 ratio decreased by $953 million as a result of applying the standardized approach provisions of the Basel III final rule to total risk-weighted assets of $125.01 billion as of December 31, 2014, calculated in conformity with the standardized approach provisions of the Basel III final rule (as of December 31, 2014; i.e., not fully phased-in). |
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| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
STATE STREET CORPORATION |
EARNINGS RELEASE ADDENDUM |
RECONCILIATIONS OF COMMON EQUITY TIER 1 RATIOS (Continued) |
As of September 30, 2014 (Dollars in millions) | | Basel III Final Rule Advanced Approaches8 | | Basel III Final Rule Standardized Approach (Estimated)9 ProForma | | | | |
Tier 1 Capital | | $ | 15,318 |
| | $ | 15,318 |
| | | | |
Less: | | | | | | | | |
Trust preferred capital securities | | 475 |
| | 475 |
| | | | |
Preferred stock | | 1,233 |
| | 1,233 |
| | | | |
Plus: Other | | 171 |
| | 171 |
| | | | |
Common equity tier 1 capital | | 13,781 |
| E | 13,781 |
| | | | |
Total Risk-Weighted Assets | | 108,078 |
| F | 126,356 |
| | | | |
Common equity tier 1 risk-based capital ratio | | 12.8 | % | E/F | 10.9 | % | | | | |
| | | | | | | | |
8 CET1 ratio as of September 30, 2014 was calculated in conformity with the advanced approaches provisions of the Basel III final rule. |
9 Estimated pro forma CET1 ratio (standardized approach) as of September 30, 2014 reflects capital calculated in conformity with the provisions of the Basel III final rule and total risk-weighted assets calculated in conformity with the standardized approach in the Basel III final rule based on our interpretations of the Basel III final rule as of October 24, 2014 and as applied to our businesses and operations as of September 30, 2014. Under such application of the standardized approach, total risk-weighted assets used in the calculation of the CET1 ratio increased by $18.30 billion as a result of applying the standardized approach provisions of the Basel III final rule to total risk-weighted assets of $108.08 billion as of September 30, 2014, calculated in conformity with the advanced approaches provisions of the Basel III final rule. |
| | | | | | | | |
As of June 30, 2014 (Dollars in millions) | | Basel III Final Rule Advanced Approach10 | | Basel III Final Rule Standardized Approach (Estimated)11 | | | | |
Tier 1 Capital | | $ | 15,708 |
| | $ | 15,708 |
| | | | |
Less: | | | | | | | | |
Trust preferred capital securities | | 475 |
| | 475 |
| | | | |
Preferred stock | | 1,233 |
| | 1,233 |
| | | | |
Plus: Other | | 165 |
| | 165 |
| | | | |
Tier 1 common capital | | 14,165 |
| G | 14,165 |
| | | | |
Total Risk-Weighted Assets | | 111,015 |
| H | 125,575 |
| | | | |
Tier 1 common risk-based capital ratio | | 12.8 | % | G/H | 11.3 | % | | | | |
| | | | | | | | |
10 Tier 1 common ratio as of June 30, 2014 was calculated in conformity with the advanced approaches provisions of the Basel III final rule. |
11 Estimated tier 1 common ratio as of June 30, 2014 reflects capital calculated in conformity with the provisions of the Basel III final rule and total risk-weighted assets calculated in conformity with the standardized approach in the Basel III final rule. Under the standardized approach, total risk-weighted assets used in the calculation of the tier 1 common ratio increased by $14.56 billion as a result of applying the standardized provisions of the Basel III final rule to total risk-weighted assets of $111.02 billion as of June 30, 2014, calculated in conformity with the advanced approaches provisions of the Basel III final rule. |
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| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
STATE STREET CORPORATION |
EARNINGS RELEASE ADDENDUM |
RECONCILIATIONS OF COMMON EQUITY TIER 1 RATIOS (Continued) |
As of March 31, 2014 (Dollars in millions) | | Basel III Transitional12 | | | | | | |
Tier 1 Capital | | $ | 15,487 |
| | | | | | |
Less: | | | | | | | | |
Trust preferred capital securities | | 475 |
| | | | | | |
Preferred stock | | 1,233 |
| | | | | | |
Plus: Other | | 145 |
| | | | | | |
Common equity tier 1 capital | | 13,924 |
| I | | | | | |
Total Risk-Weighted Assets | | 84,694 |
| J | | | | | |
Common equity tier 1 risk-based capital ratio | | 16.4 | % | I/J | | | | | |
| | | | | | | | |
12 Tier 1 common ratio as of March 31, 2014 was calculated in conformity with the transitional provisions of the Basel III final rule. Specifically, this ratio reflects tier 1 capital (the numerator) calculated in conformity with the provisions of the Basel III final rule, and total risk-weighted assets (the denominator) calculated in conformity with the provisions of Basel I. |
|
| | | | | | | | | | | | | | | | |
STATE STREET CORPORATION |
EARNINGS RELEASE ADDENDUM |
RECONCILIATIONS OF SUPPLEMENTARY LEVERAGE RATIOS |
| | | | | | | | |
In 2014, U.S. banking regulators issued final rules implementing a supplementary leverage ratio, or SLR, for certain bank holding companies, like State Street, and their insured depository institution subsidiaries, like State Street Bank. We refer to these final rules as the SLR final rule. Under the SLR final rule, upon implementation as of January 1, 2018, (i) State Street Bank must maintain an SLR of at least 6% to be well capitalized under the U.S. banking regulators’ Prompt Corrective Action framework and (ii) if State Street maintains an SLR of at least 5%, it is not subject to limitations on distribution and discretionary bonus payments under the SLR final rule. Beginning with reporting for March 31, 2015, State Street is required to include SLR disclosures with its other Basel disclosures. |
Estimated pro forma fully phased-in SLR ratios as of March 31, 2015 are preliminary estimates by State Street (in each case, fully phased-in as of January 1, 2018, as per the phase-in requirements of the SLR final rule), calculated based on our interpretations of the SLR final rule as of April 24, 2015 and as applied to our businesses and operations as of March 31, 2015. Estimated pro forma fully phased-in SLR ratios as of December 31, 2014 are preliminary estimates by State Street, calculated based on our interpretations of the SLR final rule as of January 23, 2015 and as applied to our businesses and operations as of December 31, 2014. |
The following tables reconcile our estimated pro forma fully-phased in SLR ratios as of March 31, 2015 and December 31, 2014 calculated in conformity with the SLR final rule, as described, to our SLR ratios calculated in conformity with applicable regulatory requirements as of the dates indicated. |
| | State Street | | State Street Bank |
As of March 31, 2015 (Dollars in millions) | | Transitional SLR | | Fully Phased-In SLR | | Transitional SLR | | Fully Phased-In SLR |
Tier 1 Capital | | $ | 14,784 |
| A | $ | 13,921 |
| | $ | 13,920 |
| | $ | 13,394 |
|
On-and off-balance sheet leverage exposure | | 288,989 |
| | 288,989 |
| | 284,117 |
| | 284,117 |
|
Less: regulatory deductions | | (6,088 | ) | | (6,898 | ) | | (5,734 | ) | | (6,489 | ) |
Total assets for SLR | | 282,901 |
| B | 282,091 |
| | 278,383 |
| | 277,628 |
|
Supplementary Leverage Ratio | | 5.2 | % | A/B | 4.9 | % | | 5.0 | % | | 4.8 | % |
| | | | | | | | |
| | | | | | | | |
| | State Street | | State Street Bank |
As of December 31, 2014 (Dollars in millions) | | Transitional SLR | | Fully Phased-In SLR | | Transitional SLR | | Fully Phased-In SLR |
Tier 1 Capital | | $ | 15,764 |
| C | $ | 14,261 |
| | $ | 14,043 |
| | $ | 13,102 |
|
On-and off-balance sheet leverage exposure | | 284,740 |
| | 284,740 |
| | 280,036 |
| | 280,036 |
|
Less: regulatory deductions | | (6,050 | ) | | (7,211 | ) | | (5,705 | ) | | (6,790 | ) |
Total assets for SLR | | 278,690 |
| D | 277,529 |
| | 274,331 |
| | 273,246 |
|
Supplementary Leverage Ratio | | 5.7 | % | C/D | 5.1 | % | | 5.1 | % | | 4.8 | % |
| | | | | | | | |
| | | | | | | | |
| | State Street | | State Street Bank | | | | |
As of September 30, 2014 (Dollars in millions) | | Transitional SLR | | | | |
Tier 1 Capital | | $ | 15,318 |
| E | $ | 14,316 |
| | | | |
On-and off-balance sheet leverage exposure | | 276,529 |
| | 271,547 |
| | | | |
Less: regulatory deductions | | (6,156 | ) | | (5,804 | ) | | | | |
Total assets for SLR | | 270,373 |
| F | 265,743 |
| | | | |
Supplementary Leverage Ratio | | 5.7 | % | E/F | 5.4 | % | | | | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
STATE STREET CORPORATION |
EARNINGS RELEASE ADDENDUM |
RECONCILIATIONS OF SUPPLEMENTARY LEVERAGE RATIOS (Continued) |
| | | | | | | | |
| | State Street | | State Street Bank | | | | |
As of June 30, 2014 (Dollars in millions) | | Transitional SLR | | | | |
Tier 1 Capital | | $ | 15,707 |
| G | $ | 14,767 |
| | | | |
On-and off-balance sheet leverage exposure | | 264,432 |
| | 259,912 |
| | | | |
Less: regulatory deductions | | (6,308 | ) | | (5,942 | ) | | | | |
Total assets for SLR | | 258,124 |
| H | 253,970 |
| | | | |
Supplementary Leverage Ratio | | 6.1 | % | G/H | 5.8 | % | | | | |
| | | | | | | | |
| | | | | | | | |
| | State Street | | State Street Bank | | | | |
As of March 31, 2014 (Dollars in millions) | | Transitional SLR | | | | |
Tier 1 Capital | | $ | 15,486 |
| I | $ | 14,123 |
| | | | |
On-and off-balance sheet leverage exposure | | 246,548 |
| | 242,333 |
| | | | |
Less: regulatory deductions | | (6,304 | ) | | (5,939 | ) | | | | |
Total assets for SLR | | 240,244 |
| J | 236,394 |
| | | | |
Supplementary Leverage Ratio | | 6.4 | % | I/J | 6.0 | % | | | | |
| | | | | | | | |
| | | | | | | | |
State Street Corporation First-Quarter 2015 Financial Highlights April 24, 2015 Exhibit 99.3
2 Forward-Looking Statements This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s (State Street’s) news release announcing its first-quarter 2015 financial results. That news release contains a more detailed discussion of many of the matters described in this presentation and is accompanied by detailed financial tables. This presentation is designed to be reviewed together with that news release, which is available on State Street’s website and is incorporated herein by reference. This presentation 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 “outlook,” “expect,” “objective,” “intend,” “plan,” “forecast,” “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 April 24, 2015. In particular, in the first quarter of 2015, we increased from $185 million to $335 million our legal accrual associated with indirect foreign exchange matters. This accrual reflects continued negotiations in connection with our intention to seek to resolve the outstanding claims asserted in the United States against us by federal governmental entities and civil litigants with regard to our indirect foreign exchange client activities. As of March 31, 2015, our total accrued reserve associated with these matters was $335 million. There can be no assurance that we will reach settlements in these matters or that the cost of any settlements or other resolutions of these matters will not materially exceed our accrual. Our current efforts, even if successful, may not address all of our potential legal exposure arising out of our indirect foreign exchange client activities, and other claims, which may be material, could be asserted against us. An adverse outcome with respect to one or more claims relating to our indirect foreign exchange client activities could have a material adverse effect on our reputation, on our consolidated results of operations for the period in which the adverse outcome occurs (or an accrual is determined to be required), or on our consolidated financial condition. Important factors that may also 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, the valuation of the U.S. dollar relative to other currencies in which we record revenue or accrue expenses 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, the relative portion of our deposits that are determined to be operational under regulatory guidelines 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 changes to the regulatory framework applicable to our operations, including implementation of the Dodd-Frank Act, the Basel III final rule and European legislation (such as the Alternative Investment Fund Managers Directive and Undertakings for Collective Investment in Transferable Securities Directives); among other consequences, these regulatory changes impact the levels of regulatory capital we must maintain, acceptable levels of credit exposure to third parties, margin requirements applicable to derivatives, and restrictions on banking and financial activities. In addition, our regulatory posture and related expenses have been and will continue to be affected by changes in regulatory expectations for global systemically important financial institutions applicable to, among other things, risk management, capital planning and compliance programs, and changes in governmental enforcement approaches to perceived failures to comply with regulatory or legal obligations; adverse changes in the regulatory ratios that we are required or will be required to meet, whether arising under the Dodd-Frank Act or the Basel III final rule, 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 U.S. and non-U.S. regulators for the use, allocation or distribution of our capital or other specific capital actions or programs, including acquisitions, dividends and stock purchases, without which our growth plans, distributions to shareholders, share repurchase 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, governmental or regulatory inquiries and investigations, litigation and similar claims, disputes, or proceedings; 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, 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; our ability to expand our use of technology to enhance the efficiency, accuracy and reliability of our operations and our dependencies on information technology and our abi lity 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, manage expenses, attract and retain highly skilled people and raise the capital necessary to achieve our business goals and comply with regulatory requirements and expectations; 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 the amount of compensation we receive from clients 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 or liabilities 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 2014 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 24, 2015, and we do not undertake efforts to revise those forward-looking statements to reflect events after that date.
3 1 Long-term goals presented on an operating-basis, a non-GAAP presentation, and do not reflect the near- term expectations. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. Focused strategy supports long-term financial goals LONG-TERM SHAREHOLDER VALUE BUILDING ON OUR STRONG CORE ACHIEVING A DIGITAL ENTERPRISE INVESTING IN OPPORTUNITIES FOR GROWTH OPTIMIZING CAPITAL Aligning solutions with client needs, continuing to innovate, capturing value and improving efficiency Driving greater transformation that benefits clients and our shareholders Acting on changes in the market to fuel expansion of products and services and the markets we serve Adapting to new rules and optimizing returns for shareholders TALENT, CULTURE, INNOVATION AND RISK EXCELLENCE Operating-Basis1 Financial Goals: Revenue Growth of 8%-12%, EPS Growth of 10%-15% and ROE of 12%-15%
4 Summary of GAAP-Basis Results $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Revenue 2,485$ 2,598$ 2,582$ 2,630$ 2,605$ 4.8% (1.0%) Expenses 2,028 1,850 1,892 2,057 2,097 3.4 1.9 Earnings per share (EPS) 0.81 1.38 1.26 1.12 0.90 11.1 (19.6) Return on average common equity (ROE) 7.2% 11.9% 10.6% 9.4% 7.9% Net interest margin - fully tax equivalent basis (NIM) 1.30 1.17 1.12 1.09 1.06 Pre-tax operating margin 18.3 28.7 26.6 21.6 19.3 Average diluted common shares outstanding (in thousands) 438.8 435.3 429.7 424.3 418.8 % change vs 1Q15 • In each of the past three fiscal quarters (including 1Q15), we announced charges (due to pre- tax legal accruals recorded in those quarters) to increase our legal reserve associated with indirect foreign exchange matters. We increased this accrual to $335M as of March 31, 2015: – 1Q15 results included pre-tax and after-tax charges of $150M, $0.36 per share – 4Q14 results included pre-tax charges of $115M, after-tax charges of $92M, $0.22 per share – 3Q14 results included pre-tax charges of $70M, after-tax charges of $53M, $0.12 per share
5 GAAP-Basis Revenue $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Servicing fees 1,238$ 1,288$ 1,302$ 1,301$ 1,273$ 2.8% (2.2)% Management fees 292 300 316 299 301 3.1 0.7 Trading services 253 260 278 293 324 28.1 10.6 Securities finance revenue 85 147 99 106 101 18.8 (4.7) Processing fees and other 56 44 17 57 61 8.9 7.0 Total fee revenue 1,924 2,039 2,012 2,056 2,060 7.1 0.2 Net interest revenue (NIR) 555 561 570 574 546 (1.6) (4.9) Net gain/(loss) related to investment securities 6 (2) - - (1) nm nm Total revenue 2,485$ 2,598$ 2,582$ 2,630$ 2,605$ 4.8% (1.0%) % change vs 1Q15 nm – not meaningful.
6 GAAP-Basis Expenses $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Compensation and employee benefits 1,157$ 978$ 953$ 972$ 1,087$ (6.1%) 11.8% Information systems and communications 244 244 242 246 247 1.2 0.4 Transaction processing services 191 193 199 201 197 3.1 (2.0) Occupancy 114 115 119 113 113 (0.9) - Acquisition and restructuring costs 33 28 20 52 6 (81.8) (88.5) Other 289 292 359 473 447 54.7 (5.5) Total expenses 2,028$ 1,850$ 1,892$ 2,057$ 2,097$ 3.4% 1.9% % change vs 1Q15
7 1 Includes operating-basis (non-GAAP) financial information where noted. Refer to the Appendix included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. 2 Stock purchases may be made using various types of mechanisms, including open market purchases or transactions off market, and may be made under Rule 10b5-1 trading programs. The timing of stock purchases, types of transactions and number of shares purchased will depend on several factors, including market conditions and State Street’s capital position, its financial performance and investment opportunities. The common stock purchase program does not have specific price targets and may be suspended at any time. State Street’s 2Q15 common stock and other stock dividends, including the declaration, timing and amount thereof, remain subject to consideration and approval by its Board of Directors at the relevant times. Progress in 1Q15 on key priorities: growing revenue, managing expenses and returning capital to shareholders • EPS: – Operating-basis EPS1 of $1.17 increased 18% from 1Q14 and decreased 15% from 4Q14 – Compared to 4Q14, pre-tax expenses and EPS included an incremental $137M, or $0.23 per share (down from $146M in 1Q14), primarily associated with the seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes • Revenue: – Operating-basis total revenue1 increased 5% from 1Q14 and decreased 2% from 4Q14 – Operating-basis total fee revenue1 increased 7% from 1Q14 and decreased 1% from 4Q14 • Expenses: – Operating-basis total expenses1 increased 1% from 1Q14 and 3% from 4Q14 • Income Taxes: – Operating-basis effective tax rate1 of 28.4% decreased 280 bps from 1Q14 and 10 bps from 4Q14 • Capital: – Purchased approximately $470M of our common stock, completing our March 2014 common stock purchase program authorizing the purchase of up to $1.7B through March 31, 2015 – Declared a common stock dividend during the quarter of $0.30 per share – Announced up to $1.8B in common stock purchases between April 1, 2015 and June 30, 2016 and our intention to increase our quarterly common stock dividend to $0.34 per share in 2Q152 1Q15 Operating-Basis (Non-GAAP) Financial Highlights1
8 Solid growth in operating-basis EPS1 from 1Q14 to 1Q15 driven by revenue growth and impact of share buyback 1.17 1.371.351.39 0.99 1Q15 vs 1Q14 +18.2% 1Q15 4Q14 3Q14 2Q14 1Q14 Operating-Basis EPS1 ($) 1 Includes operating-basis (non-GAAP) financial information where noted. Refer to the Appendix included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. Operating-Basis (Non-GAAP) Results1 • EPS decreased in 1Q15 from 4Q14 primarily driven by the seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes
9 Operating-basis revenue1 growth from 1Q14 to 1Q15 driven by strong fee revenue growth despite stronger U.S. dollar Operating-Basis Revenue1 ($M) 572 587 565 1,981 2,137 2,113 1Q15 vs 4Q14 -1.7% 1Q15 vs 1Q14 4.6% 1Q15 2,677 4Q14 2,724 3Q14 2,678 2Q14 2,676 1Q14 2,559 6 0 -1 NOTE: See slide 23 in the Appendix for additional detail. 1 Includes operating-basis (non-GAAP) financial information where noted. Refer to the Appendix included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. Notable items in 1Q15: • Money market fee waivers of $10.7M • Performance fees of $1.5M Notable variances 1Q15 vs 1Q14: • Servicing fees were up 3% primarily due to net new business and stronger U.S. equity markets, partially offset by the impact of the stronger U.S. dollar • Management fees were up 3% primarily due to net new business and stronger U.S. equity markets, partially offset by the impact of the stronger U.S. dollar • Foreign exchange trading revenue was up 51% due to higher volatility and volumes • Securities finance revenue was up 19% primarily due to new business from enhanced custody and higher volumes Notable variances 1Q15 vs 4Q14: • Servicing fees were down 2% primarily due to the impact of stronger U.S. dollar, partially offset by stronger global equity markets • Management fees were relatively flat as positive revenue contributions from net new business and higher markets were offset by the impact of the stronger U.S. dollar • Foreign exchange trading revenue was up 21% due to higher volatility and volumes • Brokerage and other fees were down 3% primarily due to lower transition management revenue • Securities finance revenue was down 5% primarily due to lower spreads • Processing fees and other revenue were down 17% primarily due to lower equity earnings from joint ventures and lower revenue associated with tax advantaged investments • Net interest revenue was down 4% primarily due to a one-time accelerated loan prepayment recorded in 4Q14, two fewer days in 1Q15 and impact of lower market interest rates, partially offset by higher deposit levels Net gain/(loss) related to investment securities NIR Total fee revenue Operating-Basis (Non-GAAP) Results1 1Q15 vs 1Q14 7% (1)% 1Q15 vs 4Q14 (1)% (4)%
10 Operating-basis NIR1 continues to be challenged in the prolonged low interest-rate environment 226224218206187 1Q15 vs 4Q14 +0.9% 1Q15 vs 1Q14 +20.9% 1Q15 4Q14 3Q14 2Q14 1Q14 Operating-Basis Average Earning Assets1 ($B) 1 Includes operating-basis (non-GAAP) financial information where noted. Refer to the Appendix included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. Operating-Basis NIR1 and NIM1 ($M, %) Operating-Basis (Non-GAAP) Results1 565587580575572 1.011.041.061.12 1.24 0 200 400 600 0.00 1.00 2.00 NIR 1Q15 vs 4Q14 -3.7% NIR 1Q15 vs 1Q14 -1.2% 1Q15 4Q14 3Q14 2Q14 1Q14 NIR NIM • Average earning assets continued to increase; operating-basis NIM1 continued to decrease reflecting the impact of lower market interest rates and the increase in low yielding excess deposits • Continue to expect 2015 operating-basis NIR1 to perform as described in February 25, 2015 Investor Day presentation under the assumptions noted in that presentation (see the Appendix on slide 20 included with this presentation)
11 Managing expenses and stronger U.S. dollar limited operating-basis expense1 growth to 1% from 1Q14 to 1Q15 Operating-Basis Expenses1 ($M) 283 358 297 191 201 197 244 246 247 1,085 962 1,088 113113114 1Q15 vs 4Q14 3.3% 1Q15 vs 1Q14 1.3% 1Q15 1,942 4Q14 1,880 3Q14 1,808 2Q14 1,818 1Q14 1,917 NOTE: See slide 24 in the Appendix for additional detail. 1 Includes operating-basis (non-GAAP) financial information where noted. Refer to the Appendix included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. Other Occupancy Transaction processing services Information systems and communications Compensation and employee benefits Operating-Basis (Non-GAAP) Results1 Notable items in 1Q15: • $137M in the seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes • $20M in securities processing costs included in other expenses • $8M in a new bank levy included in other expenses Notable variances 1Q15 vs 1Q14: • Compensation and employee benefits expenses were relatively flat reflecting increased costs to support new business and regulatory initiatives, mostly offset by the benefit of the stronger U.S. dollar • Transaction processing services expenses were up primarily due to higher volumes • Other expenses were up primarily due to a new bank levy and higher securities processing costs Notable variances 1Q15 vs 4Q14: • Compensation and employee benefits expenses were up primarily due to the seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes, partially offset by the impact of the stronger U.S. dollar • Other expenses were down primarily due to lower professional services and securities processing costs, expenses associated with our withdrawal from derivatives clearing and execution activities in 4Q14 and an impairment primarily associated with an intangible asset in 4Q14, partially offset by higher regulatory and compliance costs 1Q15 vs 1Q14 0% 1% 3% (1)% 5% 1Q15 vs 4Q14 13% 0% (2)% 0% (17)%
12 1 As of period-end where applicable. 2 See Appendix included with this presentation for a description of the investment portfolio. 3 Based on numerous assumptions, including holding the securities to maturity, anticipated prepayment speeds and credit quality. See discussion in State Street’s 2014 Annual Report on Form 10-K filed with the SEC. 4 For additional information, see discussion in State Street’s 2014 Annual Report on Form 10-K filed with the SEC. 5 Total regulatory capital is defined as the sum of tier 1 and tier 2 risk-based capital. Continue to maintain high-quality balance sheet… 1Q151 Balance Sheet Highlights Investment portfolio2 • Size: $112B • Credit profile: ~91% rated AAA/AA • Fixed-rate/floating-rate mix: 55%/45% • Duration: 1.9 years • Unrealized after-tax mark-to-market (MTM) gain: $699M • Purchases: $7.2 billion with average tax-equivalent yield of 1.73% • Discount accretion remaining related to and expected to accrue over the remaining lives of the former conduit securities3: $343M Interest-rate risk metrics • Economic value of equity (EVE)4 in an up 200 bps shock to quarter-end interest rate levels hypothetical scenario: (13.4)% of total regulatory capital5 • Unrealized after-tax MTM loss sensitivity in an up 100 bps shock to quarter-end interest rate levels hypothetical scenario: approximately $1.2B after-tax Senior secured bank loans • Size: $2.7B • Floating rate • Credit: primarily BB/B • Provision for loan losses in 1Q15: $4M • Total allowance for loan losses: ~$41M
13 See Appendix on slide 21 included with this presentation for footnotes 1 to 5. …and remain well-capitalized 1Q15 Quarter-End Capital1 Positions 4Q14 1Q15 Basel III Ratios2,3: Common equity tier 1 ratio (advanced approaches) Common equity tier 1 ratio (standardized approach) Tier 1 leverage ratios: State Street Corporation State Street Bank and Trust Company 12.5% 10.8%2 6.4% 5.8% 12.1% 10.4% 5.8% 5.6% Supplementary leverage ratios4: State Street Corporation State Street Bank and Trust Company 5.7% 5.1% 5.2% 5.0% Estimated pro forma fully phased-in Basel III ratios: Fully phased-in (effective January 1, 2019) common equity tier 1 ratio (advanced approaches)2,5 Fully phased-in (effective January 1, 2019) common equity tier 1 ratio (standardized approach)2,5 Fully phased-in (effective January 1, 2018) supplementary leverage ratios4,5 State Street Corporation State Street Bank and Trust Company 11.5% 9.9% 5.1% 4.8% 11.5% 9.8% 4.9% 4.8% • 1Q15 common equity tier 1 ratios decreased from 4Q14 primarily due to the impact of an additional year’s phase-in and legal accrual related to foreign exchange matters • 1Q15 supplementary leverage ratio for State Street Corporation decreased from 4Q14 primarily due to the impact of an additional year’s phase-in, larger balance sheet and legal accrual related to foreign exchange matters
14 1 State Street’s 2Q15 common stock and other stock dividends, including the declaration, timing and amount thereof, remain subject to consideration and approval by its Board of Directors at the relevant time. Stock purchases may be made using various types of mechanisms, including open market purchases or transactions off market, and may be made under Rule 10b5-1 trading programs. The timing of stock purchases, types of transactions and number of shares purchased will depend on several factors, including, market conditions and State Street’s capital position, its financial performance and investment opportunities. The common stock purchase program does not have specific price targets and may be suspended at any time. Returning capital to shareholders remains a priority and execution of our balance sheet strategy is ongoing • In March 2015 we received a non-objection on our Comprehensive Capital Analysis and Review (CCAR) 2015 capital plan: – Intention to increase quarterly common stock dividend to $0.34 from $0.301 per share in 2Q15 – Up to $1.8 billion in common stock purchases between April 1, 2015 and June 30, 20161 • Our near-term binding constraints are leverage ratios: – Dodd-Frank Act Stress Test (DFAST) 2015 and CCAR 2015 results highlighted tighter leverage constraints than previous years – Growth in balance sheet largely contributing to this constraint – Plan to issue approximately $750M of preferred equity to support leverage ratios in 2015 • No change to our target common equity tier 1 ratio of 10%: – Continue to actively manage to the target by optimizing risk weighted assets and other balance sheet actions • Prudently planning capital actions to be compliant with future phased in regulatory requirements
15 1 See slides 18-20 in the Appendix for further description and related assumptions. Includes operating-basis (non-GAAP) financial information. Operating-basis financial information and financial outlook is a non- GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. Continue to focus on 2015 goals to deliver shareholder value in a challenging environment • 1Q15 operating-basis results1 driven by strong fee revenue, solid expense management and a favorable tax rate • Continue to focus on key priorities: – Delivering value-added solutions to our clients – Investing in growth initiatives – Diligently managing expenses – Returning capital to shareholders • 2015 outlook1 unchanged from Investor Day: – Expecting full-year 2015 operating-basis total fee revenue growth of 4%-7% compared to 2014 – Expecting operating-basis total fee revenue growth to outpace operating-basis expense growth by at least 200 basis points compared to 2014: – Assumes that 4%-7% operating-basis total fee revenue growth objective is achieved – Expecting that NIR headwinds are likely to continue as illustrated in the interest rate and deposit scenarios outlined on slide 20 – Expecting an operating-basis effective tax rate of 30%-32%, which was 29% in 2014
16 Q&A
17 Appendices Illustrative scenarios referenced by slides 10 and 15 Slide 18-20 Footnotes to slide 13 Slide 21 Operating-Basis (Non-GAAP) results Slide 22-24 Investment portfolio Slide 25-28 Definition of metrics Slide 29 Non-GAAP measures and capital ratios Slide 30
18 1 Includes impact of expected currency and market changes. Operating-basis (non-GAAP) financial information, where noted. Operating-basis financial outlook is a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. 2015 Outlook1 - Foreign exchange assumptions using the forward curve as of January 15, 2015 assume that the exchange rates will remain with January 15, 2015 levels; resulting assumptions for U.S. dollar to EUR exchange rate and U.S. dollar to Pound Sterling are shown below as examples: • Expecting that NIR headwinds are likely to continue as illustrated in the interest rate and deposit scenarios outlined on slide 20 • Expecting an operating-basis effective tax rate1 of 30%-32%, which was 29% in 2014 S&P 500 15E vs 14 EAFE 15E vs 14 2013 Year End: 1850 2014 Year End: 2060 2015 Estimated Year End: 2160 4.9% 2013 Year End: 1915 2014 Year End: 1775 2015 Estimated Year End: 1830 3.1% 2014 Average: 1931 2015 Estimated Average: 2050 6.2% 2014 Average: 1888 2015 Estimated Average: 1850 (2.0)% USD vs EUR 15E vs 14 USD vs GBP 15E vs 14 2013 Year End: 1.37 2014 Year End: 1.20 2015 Estimated Year End: 1.16 (3.3)% 2013 Year End: 1.67 2014 Year End: 1.56 2015 Estimated Year End: 1.51 (3.2)% 2014 Average: 1.32 2015 Estimated Average: 1.16 (12.1)% 2014 Average: 1.65 2015 Estimated Average: 1.51 (8.5)% • Aiming for full-year 2015 operating-basis total fee revenue1 growth of 4%-7% compared to 2014: - Equity market assumptions for full-year 2015 based on: Strong growth in our fee revenue, partially offset by the impact of low interest rates and a higher effective tax rate
19 1 Includes operating-basis (non-GAAP) financial information, where noted. Operating-basis financial targets are a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. 2 See slide 18 for related assumptions. 3 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. 2015 Outlook1 • Expense management remains a priority; while there continues to be upward pressure on regulatory compliance costs, our focus will be on: – Controlling expenses and driving further efficiencies – Expanding our capabilities to meet increasing regulatory expectations – Supporting new business growth, including information technology costs – Continuing to fund growth initiatives • Expect operating-basis total fee revenue1 growth to outpace operating-basis expense1 growth by at least 200 basis points compared to 2014: – Assumes that 4%-7% operating basis total fee revenue1 growth objective is achieved2 • Positive operating leverage3 remains a long-term goal; our near-term ability to achieve the goal is likely predicated on higher market interest rates for a significant portion of 2015 Expense management remains a priority
20 Static Scenario Rising Scenario Primary Drivers2 State Street Operating-basis NIR1 $2.07B-$2.17B $2.15B-$2.25B • Short-term and long-term interest rates • Foreign exchange rates • Deposit levels • Regulatory expectations • Geographic and business mix Interest Rate Path Static from December 31, 2014 levels • First administered rate hike: − U.K.: August 2015 − U.S.: December 2015 • Increases of 0.25% per quarter thereafter • No change in European Central Bank (ECB) rates • 1 month and 3 month LIBOR rate increases in advance of rate hikes • Economic outlook • Geopolitical environment USD Deposits at State Street Minimal change from end of 2014 Modest decline relative to 2014 year- end levels as rates rise • U.S. short-term rates • Alternative short-term investment choices Euro Deposits at State Street Minimal change from end of 2014 • Euro short-term rates • Further ECB actions • Levels of competitor deposit charges 1 Includes operating-basis (non-GAAP) financial information, where noted. Operating-basis financial targets are a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non- GAAP financial measures and for reconciliations of our operating-basis financial information. 2 Underlying interest rate and deposit level assumptions are as presented on this slide 20 under the Static Scenario and the Rising Scenario, as applicable. Underlying foreign exchange rate and equity market assumptions are as presented on slide 18. For all other primary drivers, assumptions reflect actual levels and other data, including State Street’s expectations and interpretations, as of year-end 2014. 2015 Outlook1 Illustrative Scenarios As illustrated below, operating-basis NIR1 likely to decline in 2015 from 2014
21 Footnotes to slide 13 1Unless otherwise specified, all capital ratios referenced on slide 13 and elsewhere in this presentation refer to State Street Corporation, or State Street, and not State Street Bank and Trust Company, or State Street Bank. Refer to the addendum linked to this presentation for a further description of these ratios and for reconciliations applicable to State Street’s estimated pro forma fully phased-in Basel III ratios presented on slide 13. All capital ratios are presented as of quarter-end. The advanced approaches-based ratios (actual and estimated) presented in this presentation 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, individually or collectively, precisely 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. 2Provisions of the Basel III final rule, issued by U.S. banking regulators in July 2013, become effective under a transition timetable which began on January 1, 2014. We have used the advanced approaches provisions provided in the Basel III final rule to calculate our regulatory capital ratios beginning with the second quarter of 2014. Beginning with the first quarter of 2015, we began to also use the standardized approach provisions provided in the Basel III final rule to calculate our regulatory capital ratios. Prior to the first quarter of 2015, the lower of our regulatory capital ratios calculated under the Basel III advanced approaches and those ratios calculated under the transitional provisions of Basel III were applied in the assessment of our capital adequacy for regulatory purposes. Beginning in the first quarter of 2015, capital ratios calculated under the Basel III standardized approach replaced the transitional ratios in the assessment of our capital adequacy for regulatory purposes. Common equity tier 1 ratio as of December 31, 2014 under the standardized approach framework was calculated on an estimated pro forma basis, representing a preliminary estimate by State Street, calculated in conformity with the standardized approach provisions of the Basel III final rule, based on our interpretations of the Basel III final rule as of January 23, 2015 and as applied to our businesses and operations as of December 31, 2014. 3Capital for the common equity tier 1 and tier 1 leverage ratios as of December 31, 2014 and March 31, 2015 was calculated in conformity with the transitional provisions of the Basel III Final Rule. Risk weighted assets for the advanced approaches and standardized approach were calculated in accordance with the advanced approaches and standardized approach provisions as prescribed in the Basel III final rule, respectively. 4In 2014, U.S. banking regulators issued final rules implementing a supplementary leverage ratio, or SLR, for certain bank holding companies, like State Street, and their insured depository institution subsidiaries, like State Street Bank. We refer to these final rules as the SLR final rule. Under the SLR final rule, upon implementation as of January 1, 2018, (i) State Street Bank must maintain an SLR of at least 6% to be well capitalized under the U.S. banking regulators’ Prompt Corrective Action framework and (ii) if State Street maintains an SLR of at least 5%, it is not subject to limitations on distribution and discretionary bonus payments under the SLR final rule. Beginning with reporting for March 31, 2015, State Street is required to include SLR disclosures with its other Basel disclosures. Supplementary leverage ratios as of December 31, 2014 are preliminary estimates by State Street presented on a pro forma basis, calculated based on our interpretations of the SLR final rule as of January 23, 2015 and as applied to our businesses and operations as of December 31, 2014. Estimated pro forma fully phased-in supplementary leverage ratios as of March 31, 2015 are preliminary estimates by State Street, calculated based on our interpretations of the SLR final rule as of April 24, 2015 and as applied to our businesses and operations as of March 31, 2015. 5The estimated pro forma fully phased-in Basel III common equity tier 1 ratios (advanced approaches and standardized approach) and the estimated pro forma fully phased-in supplementary leverage ratios as of December 31, 2014 and March 31, 2015 (as the case may be) are preliminary estimates by State Street, calculated, as applicable, in conformity with the advanced approaches or standardized approach provisions, as the case may be, in the Basel III final rule, based on our interpretations of the Basel III final rule and the SLR final rule, as of January 23, 2015 and April 24, 2015, respectively, and as applied to our businesses and operations as of December 31, 2014 and March 31, 2015, respectively. The Basel III advanced approaches used both in the calculation of the common equity tier 1 ratio and the SLR will be fully phased in as of January 1, 2019 and January 1, 2018, respectively, as per Basel III phase-in requirements for capital. Refer to the addendum linked to this presentation for reconciliations of these ratios.
22 1 Results presented on an operating-basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanation of our non-GAAP financial measures and for reconciliations of our operating- basis financial information. Summary of Operating-Basis (Non-GAAP) Results1 $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Revenue 2,559$ 2,676$ 2,678$ 2,724$ 2,677$ 4.6% (1.7%) Expenses 1,917 1,818 1,808 1,880 1,942 1.3 3.3 EPS 0.99 1.39 1.35 1.37 1.17 18.2 (14.6) ROE 8.8% 11.9% 11.4% 11.6% 10.4% NIM 1.24 1.12 1.06 1.04 1.01 Pre-tax operating margin 25.0 32.0 32.4 30.8 27.3 Operating leverage 331 bps (503) bps Average diluted common shares outstanding (in thousands) 438.8 435.3 429.7 424.3 418.8 % change vs 1Q15
23 1 Results presented on an operating-basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanation of our non-GAAP financial measures and for reconciliations of our operating- basis financial information. Operating-Basis (Non-GAAP) Revenue1 $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Servicing fees 1,238$ 1,288$ 1,302$ 1,301$ 1,273$ 2.8% (2.2)% Management fees 292 300 316 299 301 3.1 0.7 Trading services 253 260 278 293 324 28.1 10.6 Securities finance revenue 85 147 99 106 101 18.8 (4.7) Processing fees and other 113 108 103 138 114 0.9 (17.4) Total fee revenue 1,981 2,103 2,098 2,137 2,113 6.7 (1.1) Net interest revenue (NIR) 572 575 580 587 565 (1.2) (3.7) Net gain/(loss) related to investment securities 6 (2) - - (1) nm nm Total revenue 2,559$ 2,676$ 2,678$ 2,724$ 2,677$ 4.6% (1.7)% % change vs 1Q15 nm – not meaningful.
24 1 Results presented on an operating-basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanation of our non-GAAP financial measures and for reconciliations of our operating- basis financial information. Operating-Basis (Non-GAAP) Expenses1 $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Compensation and employee benefits 1,085$ 974$ 955$ 962$ 1,088$ 0.3% 13.1% Information systems and communications 244 244 242 246 247 1.2 0.4 Transaction processing services 191 193 199 201 197 3.1 (2.0) Occupancy 114 115 119 113 113 (0.9) - Other 283 292 293 358 297 4.9 (17.0) Total operating-basis expenses 1,917$ 1,818$ 1,808$ 1,880$ 1,942$ 1.3% 3.3% % change vs 1Q15
25 Investment portfolio consists of government & agency, structured securities and unsecured credit Balances as of March 31, 2015 Government / Agency Structured Securities Unsecured Credit Treasuries Agency debentures Agency mortgages Small Business Administration loans Organization for Economic Cooperation and Development (OECD) governments Federal Family Education Loan Program (FFELP) student loans Asset-backed securities (ABS) Mortgage-backed securities (MBS) Commercial mortgage-backed securities (CMBS) Covered bonds Corporate bonds Municipals $56 billion $39 billion $17 billion
26 1 Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. 2 At 3/31/15: after-tax unrealized MTM gain/(loss) includes after-tax unrealized gain on securities available for sale of $653 million, after-tax unrealized gain on securities held to maturity of $103 million and after-tax unrealized loss primarily related to securities previously transferred from available for sale to held to maturity of $(57) million. 3 Beginning in August 2011, US Treasuries and Agencies/Agency MBS became split rated – AAA by Moody’s and AA+ by S&P. For dates after August 2011, these securities are classified separately and not included in either the AAA or AA classifications. 4 Certain securities previously categorized as Not Rated, are now included in the AAA category, based on Moody’s/S&P ratings. Investment portfolio has high quality assets Investment Portfolio Assets1 ($B) $ in billions U.S. Treasuries & Agencies 3 AAA AA A BBB <BBB Not Rated 4 Total Unrealized After-tax MTM Gain / (Loss) ($M) 03/31/15 $38.8 $44.5 $18.2 $6.7 $2.2 $1.4 $0.1 $111.9 $699 35% 40% 16% 6% 2% 1% 0% 100% 12/31/14 $36.4 $45.8 $18.6 $7.2 $2.2 $1.6 $0.1 $111.9 $487 32% 41% 17% 6% 2% 2% 0% 100% 12/31/13 $29.6 $51.7 $22.4 $7.7 $3.4 $2.2 $0.1 $117.1 $(213) 26% 44% 19% 6% 3% 2% 0% 100% 12/31/12 $37.6 $46.0 $22.7 $8.5 $3.2 $2.1 $0.1 $120.2 $697 31% 38% 19% 7% 3% 2% 0% 100% 12/31/11 $32.6 $49.9 $15.5 $7.0 $2.5 $2.2 $0.1 $109.8 $(374) 30% 45% 14% 7% 2% 2% 0% 100% • 90.7% rated AAA/AA • Unrealized after-tax mark-to-market (MTM) gain of $699 million 2 • Assets selected using rigorous credit process • Diversified by asset class and geography
27 Investment portfolio has high quality assets across asset classes Holdings by Asset Class as of March 31, 2015 1. Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. 2. At 3/31/15: after-tax unrealized MTM gain/(loss) includes after-tax unrealized gain on securities available for sale of $653 million, after-tax unrealized gain on securities held to maturity of $103 million and after-tax unrealized loss primarily related to securities previously transferred from available for sale to held to maturity of $(57) million. 3. Beginning in August 2011, US Treasuries and Agencies/Agency MBS became split rated – AAA by Moody’s and AA+ by S&P. For dates after August 2011, these securities are classified separately and not included in either the AAA or AA classifications. 4. Certain securities previously categorized as Not Rated, are now included in the AAA category, based on Moody’s/S&P ratings. UST/AGY3 AAA AA A BBB <BBB NR4 Book Value ($)1 Book Value (% Total) Government & agency securities 82% 10% 4% 4% — — — $21.9 19.6% $81 97% / 3% Asset-backed securities — 71% 22% 4% 1% 2% — 40.6 36.3 160 4% / 96% Student loans — 37% 58% 5% — — — 13.9 34.2 (5) Credit cards — 100% — — — — — 5.2 12.8 (11) Auto & equipment — 100% — — — — — 4.3 10.6 4 Non-US residential mortgage backed securities — 84% 6% 5% 1% 4% — 11.8 29.1 148 Collaberalized loan obligation — 99% 1% — — — — 4.2 10.3 51 Sub-prime — 3% 3% 23% 21% 50% — 1.0 2.5 (30) Home equity line of credit — — — 100% — — — 0.0 0.0 (1) Other — — — 36% 64% — — 0.2 0.5 4 Mortgage-backed securities 88% 9% — — 1% 2% — 23.8 21.3 134 86% / 14% Agency MBS 100% — — — — — — 20.8 87.4 112 Non-agency MBS — 70% 6% 3% 6% 15% — 3.0 12.6 22 CMBS 3% 87% 6% 3% — 1% — 5.1 4.5 48 64% / 36% Corporate bonds — — 14% 57% 29% — — 5.0 4.5 60 96% / 4% Covered bonds — 100% — — — — — 3.3 2.9 18 21% / 79% Municipal bonds — 24% 68% 8% — — — 8.5 7.6 181 99% / 1% Clipper tax-exempt bonds/other — 44% 43% 12% — — 1% 3.7 3.3 17 21% / 79% TOTAL PORTFOLIO 35% 40% 16% 6% 2% 1% 0% $111.9 100.0% $699 55% / 45% Ratings Unrealized After-tax MTM Gain/(Loss) ($M)2 Fixed Rate/ Floating Rate
28 1 Sovereign debt is reflected in the government agency column. 2 Country of collateral used except for corporates where country of issuer is used; excludes equity securities of approximately $11.0 million. Investment portfolio has high quality assets among Non-U.S. investments Non-U.S. Investment as of March 31, 2015 Average Gov't/ ABS ABS Corporate Covered Rating Agency (1) FRMBS All Other Bonds Bonds Other United Kingdom 8.2$ AAA - 5.3 2.1 0.3 0.5 - Australia 4.9 AAA 0.2 2.4 0.6 0.1 0.7 0.9 Netherlands 3.8 AAA - 3.4 0.1 0.1 0.2 - Canada 2.7 AAA 1.9 - - 0.2 0.6 - Germany 2.0 AAA - - 2.0 - - - France 1.2 AAA - 0.1 0.5 0.1 0.5 - Japan 0.8 A 0.8 - - - - - Korea 0.9 AA 0.9 - - - - - Italy 0.5 AA - 0.5 - - - - Norway 0.5 AAA - - 0.1 - 0.4 - Finland 0.3 AAA - - 0.1 - 0.2 - Spain 0.1 BB - 0.1 - - - - Ireland 0.1 B - 0.1 - - - - Portugal 0.1 BB - 0.1 - - - - Other 0.6 AA 0.1 - 0.1 0.2 0.2 - Non-U.S. Investments2 26.7$ 3.9$ 12.0$ 5.6$ 1.0$ 3.3$ 0.9$ U.S. Investments 85.2 TOTAL PORTFOLIO 111.9$ Book Value ($B)Book Value ($B) BBB, 1.8% <BB, 0.6% A, 7.8% BB, 0.9% AAA, 81.7% AA, 7.2% Gov’t/Agency, 14.6% ABS All Other, 21.0% ABS/FRMBS, 44.9% Covered, 12.4% Corporate, 3.7% Other, 3.4%
29 Definition of Metrics Earnings per share (EPS) Net income available to common shareholders divided by average common shares outstanding Return on equity (ROE) (Net income less dividends on preferred stock) divided by average common equity Pre-tax operating margin Income before income tax expense divided by total revenue Net interest margin (NIM) Net interest revenue divided by average earning assets Operating Leverage Rate of growth of total revenue less the rate of growth of total expenses, each as determined on an operating basis
30 Non-GAAP measures and capital ratios Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. To access the addendum go to www.statestreet.com/stockholder and click on “Filings & Reports – Quarterly Earnings”.
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