UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31,June 30, 2011

or

For the transition period from                     to                     

Commission File No. 001-07511

STATE STREET CORPORATION

(Exact name of registrant as specified in its charter)

617-786-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of State Street’s common stock outstanding on AprilJuly 29, 2011 was 504,038,676504,031,728

STATE STREET CORPORATION

Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31,June 30, 2011

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

GENERAL

State Street Corporation, the parent company, is a financial holding company headquartered in Boston, Massachusetts. Unless otherwise indicated or unless the context requires otherwise, all references in this Management’s Discussion and Analysis to “State Street,” “we,” “us,” “our” or similar terms mean State Street Corporation and its subsidiaries on a consolidated basis. Our principal banking subsidiary is State Street Bank and Trust Company, or State Street Bank. At March 31,June 30, 2011, we had consolidated total assets of $171.80$190.46 billion, consolidated total deposits of $107.41$125.41 billion, consolidated total shareholders’ equity of $19.18$19.83 billion and 29,00029,450 employees.

We are a leader in providing financial services and products to meet the needs of institutional investors worldwide, with $22.61$22.76 trillion of assets under custody and administration and $2.12 trillion of assets under management as of March 31,June 30, 2011. Our clients include U.S. mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.

We have two lines of business:

Investment Servicing provides products and services including custody, product- and participant-level accounting; daily pricing and administration; master trust and master custody; recordkeeping; foreign exchange, brokerage and other trading services; securities finance; deposit and short-term investment facilities; loan and lease financing; investment manager and alternative investment manager operations outsourcing; and performance, risk and compliance analytics.

Investment Management, through State Street Global Advisors, or SSgA, provides a broad array of investment management, investment research and other related services, such as securities finance. SSgA offers strategies for managing financial assets, including passive and active, such as enhanced indexing and hedge fund strategies, using quantitative and fundamental methods for both U.S. and global equities and fixed-income securities. SSgA also offers exchange-traded funds.

Financial information about our lines of business is provided in the “Line of Business Information” section of this Management’s Discussion and Analysis and in note 16 to the consolidated financial statements included in this Form 10-Q.

This Management’s Discussion and Analysis is part of our Quarterly Report on Form 10-Q for the firstsecond quarter of 2011, and updates the Management’s Discussion and Analysis in our Annual Report on Form 10-K, or Form 10-K, for the year ended December 31, 2010.2010, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. You should read the financial information in this Management’s Discussion and Analysis and elsewhere in this Form 10-Q in conjunction with the financial and other information contained in our 2010 Form 10-K.those reports. Certain previously reported amounts have been reclassified to conform to current period classifications as presented in this Form 10-Q.

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and we apply accounting policies that affect the determination of amounts reported in those financial statements. The majority of the accounting policies applied by us do not involve difficult, subjective or complex judgments or estimates in their application, or the variability of the estimates is not material to our consolidated financial statements. However, certain of these accounting policies, by their nature, require

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

management to make judgments, involving significant estimates and assumptions, about the effects of matters that are inherently uncertain. These estimates and assumptions are based on information available as of the date

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

of the financial statements, and changes in this information over time could materially affect the amounts of assets, liabilities, equity, revenue and expenses reported in subsequent consolidated financial statements.

Based on the sensitivity of reported financial statement amounts to the underlying estimates and assumptions, the relatively more significant accounting policies applied by State Street have been identified by management as those associated with our accounting for fair value measurements; interest revenue recognition and other-than- temporaryother-than-temporary impairment; and impairment of goodwill and other intangible assets. These accounting policies require the most subjective or complex judgments, and underlying estimates and assumptions could be most subject to revision as new information becomes available. An understanding of the judgments, estimates and assumptions underlying these accounting policies is essential in order to understand our reported consolidated results of operations and financial condition.

Additional information about these accounting policies is included in the “Significant Accounting Estimates” section of Management’s Discussion and Analysis in our 2010 Form 10-K. We did not change these accounting policies during the first quartersix months of 2011.

Certain financial information provided in this Management’s Discussion and Analysis has been prepared on both a GAAP basis and a non-GAAP, or “operating,” basis. Management measures and compares certain financial information on an operating basis, as it believes this presentation supports meaningful comparisons from period to period and the analysis of comparable financial trends with respect to State Street’s normal ongoing business operations. Management believes that operating-basis financial information, which reports revenue from non-taxable sources on a fully taxable-equivalent basis and excludes the effect of revenue and expenses outside of the normal course of our business, facilitates an investor’s understanding and analysis of State Street’s underlying financial performance and trends. Operating-basis financial information should be considered in addition to, not as a substitute for or superior to, financial information prepared in accordance with GAAP. Any non-GAAP, or operating-basis, financial information presented in this Management’s Discussion and Analysis is reconciled to its nearest GAAP-basis measure.

FORWARD-LOOKING STATEMENTS

This Form 10-Q, including this Management’s Discussion and Analysis, as well as other reports filed by us under the Securities Exchange Act of 1934 or registration statements filed by us under the Securities Act of 1933, contain statements that are considered “forward-looking statements” within the meaning of U.S. securities laws, including statements about industry trends, management’s expectations about our financial performance, market growth, acquisitions and divestitures, new technologies, services and opportunities and earnings, management’s confidence in our strategies and other matters that do not relate strictly to historical facts. Forward-looking statements are often identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “estimate,” “forecast,” “seek,” “may,” “will,” “trend,” “target” and “goal,” or similar statements or variations of such terms.

Forward-looking statements are subject to various risks and uncertainties, which change over time, are based on management’s expectations and assumptions at the time the statements are made, and are not guarantees of future results. Management’s expectations and assumptions, and the continued validity of the forward-looking statements, are subject to change due to a broad range of factors affecting the national and

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

global economies, the equity, debt, currency and other financial markets, as well as factors specific to State Street and its subsidiaries, including State Street Bank. Factors that could cause changes in the expectations or assumptions on which forward-looking statements are based include, but are not limited to:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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Therefore, actual outcomes and results may differ materially from what is expressed in our forward-looking statements and from our historical financial results due to the factors discussed in this section and elsewhere in this Form 10-Q or disclosed in our other SEC filings, including the risk factors discussed in our 2010 Form 10-K. Forward-looking statements should not be relied upon as representing our expectations or beliefs as of any date subsequent to the time this Form 10-Q is filed with the SEC. We undertake no obligation to revise the forward-looking statements contained in this Form 10-Q to reflect events after the time it is filed with the SEC. The factors discussed above are not intended to be a complete summary of all risks and uncertainties that may affect our businesses. We cannot anticipate all political, operational, market, financial and other developments that may adversely affect our consolidated results of operations and financial condition.

Forward-looking statements should not be viewed as predictions, and should not be the primary basis upon which investors evaluate State Street. Any investor in State Street should consider all risks and uncertainties disclosed in our SEC filings, including our filings under the Securities Exchange Act of 1934, in particular our reports on Forms 10-K, 10-Q and 8-K, or registration statements filed under the Securities Act of 1933, all of which are accessible on the SEC’s website atwww.sec.gov or on our website atwww.statestreet.com.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

OVERVIEW OF FINANCIAL RESULTS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Highlights

This section provides highlights with respect to our consolidated financial results for the firstsecond quarter of 2011 presented in the preceding table, as well as other information related to the quarter. Additional information about our financial results is provided under “Consolidated Results of Operations,” which follows this section.

Significant Developments

On January 10, 2011,During the second quarter, we completed our acquisition of Bank of Ireland’s asset management business, or BIAM. Our acquisition of BIAM provided SSgA with new Ireland-based clients and employees. In addition, we added $23 billion of assets under management as of March 31, 2011, which provided us with additional

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capabilities with respect to global fundamental equities, fixed-income, cash, asset allocation, property and balanced mandates. Additional information about this acquisition is provided in note 2 to the consolidated financial statements included in this Form 10-Q.

In February 2011, we issued approximately $500 million of 4.956% junior subordinated debentures due 2018, in connection with a remarketing of the 6.001% junior subordinated debentures due 2042 originally issued to State Street Capital Trust III in 2008. The 6.001% junior subordinated debentures were issued in connection with our concurrent offering of the trust’s 8.25% fixed-to-floating rate normal automatic preferred enhanced capital securities, referred to as normal APEX. The 4.956% debentures qualify for inclusion in tier 2 regulatory capital under current federal regulatory capital guidelines. The original 6.001% junior subordinated debentures, which qualified for inclusion in tier 1 regulatory capital as trust preferred securities, were redeemed as a result of the remarketing transaction.

In March 2011, we issued $500 million of our non-cumulative perpetual preferred stock, series A, $100,000 liquidation preference per share, in connection with the above-referenced remarketing transaction. The preferred stock was purchased by State Street Capital Trust III using the ultimate proceeds from the remarketing transaction, and now constitutes the principal asset of the trust. The preferred stock qualifies for inclusion in tier 1 regulatory capital under federal regulatory capital guidelines.

In March 2011, we issued an aggregate of $2 billion of senior notes, composed of $1 billion of 2.875% notes due 2016, $750 million of 4.375% notes due 2021 and $250 million of floating-rate notes due 2014.

Additional information about certain of these debt and equity issuances is provided under “Financial Condition—Capital” in this Management’s Discussion and Analysis and in notes 7 and 10 to the consolidated financial statements included in this Form 10-Q.

In March 2011, our Board of Directors declared a quarterly common stock dividend of $0.18 per share, or approximately $90 million, payable in July 2011. This dividend, together with the $0.18-per-share, or $90 million, dividend declared by us during the first quarter of this year and paid in April 2011. In addition,2011, compares to aggregate dividends of $0.04 per share, or $20 million, paid in Marchall of 2010. The 2011 dividends represented the first increase in our common stock dividend since we announced a reduction of such dividends in the first quarter of 2009, in connection with our plan to strengthen our tangible common equity.

During the second quarter, we purchased approximately 4.9 million shares of our common stock under the program approved by the Board approved a new program authorizingof Directors during the first quarter of 2011, under which we are authorized to purchase by us of up to $675 million of our common stock induring 2011. This new program supersedes the Board’s prior authorization, under which 13.25 million commonThe shares were available for purchasepurchased at an average and aggregate cost of $46.18 and approximately $225 million, respectively. The shares were recorded as treasury stock in our consolidated statement of condition as of December 31, 2010. Additional information aboutJune 30, 2011. We had approximately $450 million of common stock that remained to be purchased under the dividend andprogram as of June 30, 2011. The common stock purchase program is provided under “Financial Condition—Capital”was disclosed in this Management’s Discussion and Analysis.our first-quarter 2011 Form 10-Q.

Financial Results

Total revenue for the firstsecond quarter of 2011 increased 3%8% compared to the same period in 2010; total fee revenue increased 16%12% and net interest revenue decreased 13% in the same comparison.

Servicing and management fees for the firstsecond quarter of 2011 were up 22%16% and 12%24%, respectively, compared to the firstsecond quarter of 2010. ServicingThe increase in servicing fee revenue increasedwas mainly due to the impact of net new business installed, improvements in equity market valuations and the addition of a full quarter of revenue from the acquired Intesa and MIFA businesses,business, which acquisitions wereacquisition was completed duringin the middle of the second quarter of 2010, the impact of new business and improvements2010. The increase in equity market valuations. Managementmanagement fee revenue increased primarilywas mainly due to improvements in equity market valuations, as well as the addition of revenue from the acquired Bank of Ireland Asset Management, or BIAM, business. business, which acquisition was completed in January 2011.

Trading services revenue increased 25%decreased 5% comparing the firstsecond quarter of 2011 with the firstsecond quarter of 2010, primarily as a result of higher levels of client volumesa decline in foreign exchange trading revenue associated with lower volatility, partly offset by lower volatility, as well as higher client volume. This net decline was partly offset by an increase in revenue from electronic trading revenues and strength in transition management, both of which are recorded in brokerage and other fees.trading. In the same comparison, securities finance revenue declined 8%increased 26% as a result of the effect of stronger seasonal activity relative to 2010 related to European equities and annual dividend payment dates, contributing to an improvement in spreads, partly offset by an overall decrease in average lending volumes declined, offset slightly by higher spreads.volumes. Processing fees and other revenue decreased 23%20%, primarily due to netthe result of lower revenue recorded in the first quarter of 2010 related to certain tax-advantaged investments, partly offset by higher levels of revenue in the first quarter of 2011 from ourjoint ventures and structured products business.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

products.

For the firstsecond quarter of 2011, we recorded net interest revenue of $577$572 million, which included $62$51 million of discount accretion related to investment securities added to our consolidated statement of condition in connection with the May 2009 asset-backed commercial paper conduit consolidation. Net The corresponding amounts for the second quarter of 2010 were $658 million and $172 million, respectively. Accordingly, net

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

interest revenue decreaseddeclined 13% and 12% compared to the prior-year firstsecond quarter on a GAAP(refer to the “Net Interest Revenue” section under “Consolidated Results of Operations” in this Management’s Discussion and on a fully taxable-equivalent basis, respectively (the latter $608 million compared to $693 million, reflecting increases from tax-equivalent adjustments of $31 million and $32 million, respectively)Analysis). These decreases wereThis decrease primarily the result ofreflected the impact of lowerthe decline in conduit–related accretion, which was primarily due to paydownssales, particularly the December 2010 investment portfolio repositioning, and sales during the past year (discount accretion of $62 million for the first quarter of 2011 compared to $212 million for the same period in 2010).pay-downs. The decreases were offset, in part, by net interest revenue generated from the investment of the deposits added in May 2010 in connection with the Intesa acquisition, as well as favorable short-term funding costs related to higher client deposit volumes.

Net interest margin, computed on fully taxable-equivalent net interest revenue decreased 49of $605 million ($572 million plus a tax-equivalent adjustment of $33 million), declined 45 basis points from 2.34%2.21% in the firstsecond quarter of 2010 to 1.85%1.76% in the firstsecond quarter of 2011. The above-mentioned $62 million ofconduit-related discount accretion accounted for 1915 basis points of net interest margin for the firstsecond quarter of 2011, compared to 7255 basis points for the firstsecond quarter of 2010. Excluding the effect of discount accretion, fully taxable-equivalent net interest revenue for the firstsecond quarter of 2011 would have been $546$554 million ($608605 million less $62$51 million), an increase of 14%7% from $481$517 million ($693689 million less $212$172 million) for the firstsecond quarter of 2010. Net interest margin for the firstsecond quarter of 2011 computed on the same basis would have been 1.66%1.61% compared to 1.62%1.66% for the firstsecond quarter of 2010.

We recorded net realized gains of $4$62 million from sales of available-for-sale securities during the firstsecond quarter of 2011, compared to net realized gains of $192$3 million during the firstsecond quarter of 2010. Separately, we recorded netcredit-related other-than-temporary impairment of $11$35 million during the firstsecond quarter of 2011, compared to $97$53 million during the firstsecond quarter of 2010, largely related to non-agency mortgage-backed securities. The aggregate net realized gains and net impairment losses resulted in net lossesgains related to investment securities of $7$27 million for the firstsecond quarter of 2011, compared to net gainslosses of $95$50 million for the same period in 2010.

Total expenses increased 8%declined 9% for the firstsecond quarter of 2011 compared to the firstsecond quarter of 2010; however, if the securities lending charge of $414 million recorded in the second quarter of 2010 were excluded, total expenses for the second quarter of 2010 would have been $1.53 billion, representing $1.94 billion less the charge of $414 million, and total expenses would have increased 16% in the same comparison. This adjusted increase mainly asreflected a resultreduction of cash incentive compensation in the 2010 period related to the securities lending charge, increases in salaries and employee benefits expenseexpenses in 2011 associated with the business operations and information technology transformation program and the addition of employees and associated expenses ofin 2011 from the acquired Intesa MIFA(full versus partial quarter) and BIAM businesses and higher benefits expenses.businesses.

We recorded income tax expense of $189$202 million for the firstsecond quarter of 2011, compared to $207a tax benefit of $82 million for the firstsecond quarter of 2010.2010; the 2010 benefit resulted from a discrete tax benefit of $180 million generated by the restructuring of the former non-U.S conduit assets. Our effective tax rate for the firstsecond quarter of 2011 was 28.7%28.2% compared to 29.5%(23.4)% for the firstsecond quarter of 2010. Excluding the tax benefit, the effective tax rate for the second quarter of 2010 with the decrease primarily the result of the geographic mix of earnings.would have been 28%.

During the firstsecond quarter of 2011, we won mandates forwere awarded approximately $300$280 billion of new business in assets to be serviced; of the total, approximately $115$130 billion was installed prior to March 31,June 30, 2011, with approximately $185and most of the remaining $150 billion is expected to be installed in subsequent periods.during the second half of this year. In addition, of the $390 billion of new asset servicing business from 2010 that had not been installed as of December 31, 2010, approximately $115 billion was installed during the first quarter of 2011. In the aggregate, we expect the remaining $460 billion of new asset servicing business to be installedawarded in the remaining three quarters of 2011. The new asset servicing business not installed by March 31, 2011 was not included in our assets under custody2010 and administration at that date, and had no impact on our servicing fee revenue forduring the first quarter of 2011 that had not been installed as of March 31, 2011, approximately $280 billion was installed during the assets are not included until their installationsecond quarter of 2011. The remaining $180 billion is complete and we beginexpected to service them. Oncebe installed during the assets generate servicing fee revenue.second half of this year.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

With respect to the new asset servicing business referenced above, we will provide various services for these assets, including accounting, fund administration, custody, foreign exchange, securities finance, transfer agency,

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AND RESULTS OF OPERATIONS (Continued)

performance analytics, compliance reporting and monitoring, hedge fund servicing, private equity administration, real estate administration, depository banking services, wealth management services and investment manager operations outsourcing.

During the firstsecond quarter of 2011, we had net new business installed ofwere awarded approximately $29 billion in assets to be managed; in addition, we added approximately $23$141 billion of managed assets in connection with our acquisition of BIAM. During the first quarter, we won new mandates for approximately $170 billion of business in assets to be managed, $17managed. We installed $111 billion of whichthis new asset management business during the second quarter, and we expectare scheduled to install in the remaining three quarters$30 billion of this new business later in 2011. TheseThis new mandates arebusiness is composed of a variety of investment strategies, mainly passive equities.and exchange-traded funds.

CONSOLIDATED RESULTS OF OPERATIONS

This section discusses our consolidated results of operations for the second quarter and first quartersix months of 2011 compared to the same periodperiods in 2010, and should be read in conjunction with the consolidated financial statements and accompanying condensed notes included in this Form 10-Q.

TOTAL REVENUE

Information with respect to the sources of our revenue, the products and activities that generate it, and the factors that influence the levels of revenue generated during any period is provided under “Consolidated Results of Operations – Total Revenue” in Management’s Discussion and Analysis included in our 2010 Form 10-K.

Fee Revenue

Servicing and management fees collectively comprised approximately 74% and 72%73% of our total fee revenue for both the second quarter and first quarterssix months of 2011 compared to approximately 69% and 2010, respectively.70% for the corresponding periods in 2010. These fees are influenced by, among other factors, the mix and volume of assets under custody

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and administration and assets under management, securities positions held and the volume of portfolio transactions, and the types of products and services used by our clients, and are generally affected by changes in worldwide equity and fixed-income valuations.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Generally, servicing fees are affected, in part, by changes in daily average valuations of assets under custody and administration, while management fees are affected by changes in month-end valuations of assets under management. Additional factors, such as the level of transaction volumes, changes in service level, balance credits, client minimum balances, pricing concessions and other factors, may have a significant effect on servicing fee revenue.

Generally, management fee revenue is more sensitive to market valuations than servicing fee revenue. Management fees for enhanced index and actively managed products are generally earned at higher rates than those for passive products. Enhanced index and actively managed products may also involve performance fee arrangements.

In light of the above, we estimate, assuming all other factors remain constant, that a 10% increase or decrease in worldwide equity values would result in a corresponding change in our total revenue of approximately 2%. If fixed-income security values were to increase or decrease by 10%, we would anticipate a corresponding change of approximately 1% in our total revenue.

The following table presents selected equity market indices. Daily averages and the averages of month-end indices demonstrate worldwide changes in equity market valuations that affect servicing fee and management fee revenue, respectively. Quarter-end indices affect the value of assets under custody and administration and assets under management at those dates. The index names listed in the table are service marks of their respective owners.

INDEX

Servicing Fees

The 22%16% increase in servicing fees forin the first quarter of 2011 compared to the first quarter of 2010quarterly comparison resulted primarily resulted from the addition of revenue from the acquired Intesa and MIFA businesses, the impact of net new business awarded and installed in prior periods on current period revenue, andas well as increases in daily average equity market valuations. ForIn addition, the firstsecond quarter of 2011 servicing fees generated outside the U.S. were approximately 42% of total servicing fees compared to approximately 38% for the firstreflected a full quarter of 2010.

At March 31, 2011, we had aggregate assets under custody and administration, presented in the tables that follow, of $22.61 trillion, which increased $1.08 trillion from $21.53 trillion at December 31, 2010, and increased $3.57 trillion from $19.04 trillion at March 31, 2010. The increases in both comparisons mainly reflected the installation of new business awarded in prior periods, as well as higher asset valuations associated with the improvement in the global financial markets. In addition, the increase from March 31, 2010 reflected the addition of servicing assetsrevenue from the acquired Intesa and MIFA businesses.business,

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which business was acquired in the middle of the second quarter of 2010. The 19% increase in servicing fees in the six-month comparison resulted primarily from the addition of revenue from the acquired Intesa and MIFA businesses (full versus partial period), the impact of net new business installed and increases in daily average equity market valuations. For the second quarter and first six months of 2011, servicing fees generated outside the U.S. were approximately 43% and 42%, respectively, of total servicing fees compared to approximately 41% and 40% for the second quarter and first six months of 2010, respectively.

At June 30, 2011, we had aggregate assets under custody and administration, presented in the tables that follow, of $22.76 trillion, which increased $1.23 trillion from $21.53 trillion at December 31, 2010, and increased $3.73 trillion from $19.03 trillion at June 30, 2010. The increases in both comparisons mainly reflected the installation of new business, as well as higher asset valuations associated with the improvement in the global financial markets. The new asset servicing business not installed by June 30, 2011 was not included in our assets under custody and administration at that date, and had no impact on our servicing fee revenue for the second quarter of 2011, as the assets are not included until their installation is complete and we begin to service them. The assets do not begin generating servicing fee revenue until they are installed.

ASSETS UNDER CUSTODY AND ADMINISTRATION

FINANCIAL INSTRUMENT MIX OF ASSETS UNDER CUSTODY AND ADMINISTRATION

Management Fees

Management fees increased 12% for24% and 18% during the second quarter and first quartersix months of 2011, respectively, compared to the second quarter and first quartersix months of 2010. The increase wasincreases in both periods were primarily the result of increases in average month-end equity market valuations and the addition of revenue from the acquired BIAM business. Average month-end equity market valuations, individually presented in the foregoing “INDEX” table, were up an average of 18%23% for the firstsecond quarter of 2011 compared to the same periodsecond quarter of 2010, and were up 21% in 2010. Managementthe six-month comparison. For the second quarter and first six months of 2011, management fees generated outside the U.S. were approximately 35%45% and 40%, respectively, of total management fees, compared to approximately 35% for both the second quarter and first quarter of 2011 and the first quartersix months of 2010.

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AND RESULTS OF OPERATIONS (Continued)

At March 31,June 30, 2011, we had aggregate assets under management, presented in the tables that follow, of $2.12 trillion, which increased $110$106 billion from $2.01 trillion at December 31, 2010, and increased $151$281 billion from $1.97$1.84 trillion at March 31,June 30, 2010. The increase from December 31, 2010 primarily reflected increases in asset valuations, net new business installed and assets added from our acquisition of BIAM. The increase from March 31,June 30, 2010 primarily reflected asset appreciation and the addition of assets from the BIAM acquisition, partly offset by net lost business. New asset management business awarded to us but not installed by March 31,June 30, 2011 iswas not reflectedincluded in our assets under management as of March 31,June 30, 2011, and will be included in managed assets as the new business is installed. Once installed, theThe assets generatedo not begin generating management fee revenue.

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revenue until they are installed.

ASSETS UNDER MANAGEMENT

The following table presents the components of the changes in assets under management during the twelve months ended March 31,June 30, 2011:

ASSETS UNDER MANAGEMENT

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Trading Services

Trading services revenue includes revenue from foreign exchange trading, as well as brokerage and other trading services. We earn foreign exchange trading revenue by acting as a market maker. We offer a range of foreign exchange, or FX, products, services to our clients,and execution models which services focus on theirclients’ global requirements for our proprietary research and the execution of trades in any time zone.

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We execute foreign exchange transactions with clients and investments managers that contact our trading desk directly. These types of transactions, which are executed at individually negotiated rates, are referred to as “direct” foreign exchange. In addition, clients may choose to execute foreign exchange transactions through one Most of our FX products and execution models can be grouped into three broad categories: “direct FX,” “indirect FX,” and electronic trading platforms. This type of service generates transaction fees. Finally, clients or their investment managers may elect to route foreign exchange transactions through our asset servicing business. We enter into these types of transactions, which are referred to as “indirect” foreign exchange, as a dealer, and we charge the client a set rate based on a published formula.

trading. We also offer a range of brokerage and other trading products tailored specifically to meet the needs of the global pension community, including transition management, commission recapture and self-directed brokerage. These products are differentiated by our position as an agent of the institutional investor. Direct and indirect FX revenue is recorded in foreign exchange trading revenue; revenue from electronic trading is recorded in brokerage and other trading services revenue.

Trading services revenue increased 25%declined 5% for the firstsecond quarter of 2011 compared to the firstsecond quarter of 2010.2010 and increased 8% in the six-month comparison. Foreign exchange trading revenue declined 9% to $169 million for the firstsecond quarter of 2011 totaled $160 million, a 19% increase from $134$185 million for the firstsecond quarter of 2010 and increased 3% to $329 million from $319 million in the six month comparison. The quarterly decrease was primarily the result of a 24% decline in currency volatility, partly offset by higher client volumes. The increase in the six-month comparison primarily resulted from higher client volumes, partly offset by a decline15% decrease in currency volatility.

We enter into FX transactions with clients and investment managers that contact our trading desk directly. These trades are all executed at negotiated rates. We refer to this activity, and our market-making activities, as direct FX. Alternatively, clients or their investment managers may elect to route FX transactions to our FX desk through our asset servicing operation, to which we refer as indirect FX. We execute indirect FX trades as a principal at rates based on a published formula. We derive our estimated revenue for indirect FX using an attribution methodology based on estimated effective mark-ups/downs and observed client volumes. For the second quarter and first six months of 2011, our estimated indirect FX revenue was approximately $85 million and $171 million, respectively. All other FX revenue not included in this indirect FX revenue estimate, and unrelated to electronic trading, is estimated and considered by us to be direct FX revenue. For the second quarter and first six months of 2011, our estimated direct FX revenue was $84 million and $158 million, respectively.

Brokerage and other trading fees wereservices revenue was $142 million for the firstsecond quarter of 2011, up 31% from $108essentially flat compared to $141 million infor the second quarter of 2010. For the first quartersix months of 2010, with2011, brokerage and other trading services revenue totaled $284 million, up 14% from $249 million for the first six months of 2010. The increase largely attributablerelated to higher electronic trading volumes and higher trading profits, partly offset by lower levels of transition management.

Our clients may choose to execute FX transactions through one of our electronic trading platforms. This service generates revenue through a “click” fee. For the second quarter and first six months of 2011, our estimated direct FX revenue from electronic trading was approximately $61 million and $120 million, respectively. As described above, this revenue was recorded in brokerage and other trading services revenue.

Securities Finance

Information about the agency lending fund and SSgA lending fund components of our securities finance business is included under “Consolidated Results of Operations—Total Revenue—Securities Finance” in Management’s Discussion and Analysis in our 2010 Form 10-K.

Market influences continued to affect our revenue from, and the profitability of, our securities lending activities during the first quarter of 2011, and may do so in future periods.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Securities finance revenue for the firstsecond quarter of 2011 decreased 8%increased 26% compared to the firstsecond quarter of 2010, and for the first six months increased 12% compared to the corresponding period in 2010. The increase in both periods was substantially the result of a 13% declinethe effect of stronger seasonal activity relative to 2010, partly offset by an overall decrease in average lending volumes. The stronger seasonal activity resulted, in large part, from heavy client demand to borrow significant volumes of European equities corresponding to their annual dividend payment dates, and contributed to an improvement in spreads. Spreads increased 35% and 27%, respectively, for the average volumesecond quarter and first six months of securities2011 compared to the same periods in 2010. Securities on loan averaged $379 billion for the second quarter of 2011, down from $412$421 billion for the second quarter of 2010, and averaged $369 billion for the first quartersix months of 2010 to $3592011, down from $417 billion for the first quarter of 2011 (with the average down 2% from $368 billion for the fourth quarter of 2010), partly offset by improved spreads across all lending programs. Spreads, which had declined significantly compared to those earnedcomparable period in late 2007 and throughout 2008, increased 10% for the first quarter of 2011 compared to those for the first quarter of 2010.

As previously reported, in December 2010, we divided certain of the agency lending collateral pools into liquidity pools, from which clients can obtain cash redemptions, and duration pools, which are restricted and operate as liquidating accounts. These actions were taken to provide greater flexibility to participants with respect to their control of their level of participation in our agency lending program. As of March 31,June 30, 2011, the aggregate net assets of the liquidity pools and duration pools were $22.6$23.8 billion and $9.2$7.4 billion, respectively, compared to $26.2 billion and $11.8 billion, respectively, as of December 31, 2010.

The decline in the aggregate net assets of the duration pools from year-end 2010 reflected both paydownspay-downs on securities held by some of the pools and in-kind redemptions by clients into separately managed accounts. These declines were partly offset by improvement in the market value of securities held by the pools. The return obligations of participants in the agency lending program represented by interests in the duration pools exceeded the market value of the assets in the duration pools by approximately $252$219 million as of March 31,June 30, 2011, compared to $319 million as of December 31, 2010. This amount is expected to be eliminated as the assets in the duration pools mature or pay down.

Processing Fees and Other

Processing fees and other revenue was $70 million and $162 million for the second quarter and first six months of 2011, respectively, decreases of 20% and 22%, respectively, compared to the same periods in 2010. The decreases in both comparisons were primarily due to lower income from joint ventures and from our structured products business.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Processing Fees and Other

Processing fees and other revenue decreased to $92 million for the first quarter of 2011 compared to $120 million for the same period in 2010, primarily due to net revenue recorded in the first quarter of 2010 related to certain tax-advantaged investments, including a gain from a buyout of a leasing transaction. This decrease was partly offset by higher levels of revenue in the first quarter of 2011 from our structured products business.

NET INTEREST REVENUE

The following table presentstables present the components of average interest-earning assets and average interest-bearing liabilities, related interest revenue and interest expense, and rates earned and paid, for the quarters ended March 31:periods indicated:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Net interest revenue is defined as the total of interest revenue earned on interest-earning assets less interest expense incurred on interest-bearing liabilities. Interest-earning assets, which principally consist of investment securities, interest-bearing deposits with banks, repurchase agreements, loans and leases and other liquid assets, are financed primarily by client deposits, short-term borrowings and long-term debt. Net interest margin represents the relationship between annualized fully taxable-equivalent net interest revenue and total average interest-earning assets for the period. Revenue that is exempt from income taxes, mainly that earned from certain investment securities (state and political subdivisions), is adjusted to a fully taxable-equivalent basis using a federal statutory income tax rate of 35%, adjusted for applicable state income taxes, net of the related federal tax benefit.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Changes in the components of interest-earning assets and interest-bearing liabilities are discussed in more detail below. Additional detail about the components of interest revenue and interest expense is provided in note 13 to the consolidated financial statements included in this Form 10-Q.

For the second quarter and first quartersix months of 2011, on a GAAP and on a fully taxable-equivalent basis, net interest revenue decreased 13% anddeclined 12%, respectively, compared to the same periodperiods in 2010 (with fully taxable-equivalent2010. On a GAAP basis, net interest revenue reflective of tax-equivalent adjustments of $31 million and $32 million, respectively).declined 13% in both comparisons. The decrease wasdecreases were mainly the result of lower discount accretion recorded in the 2011 periods associated with former conduit securities, more fully described below, as thebelow. The level of accretion recorded was affected by paydowns and sales of securities, particularly the investment portfolio repositioning completed in December 2010. 2010, and pay-downs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

If the conduit-related discount accretion related to former conduit securities waswere excluded, fully taxable-equivalent net interest revenue for the firstsecond quarter of 2011 would have increased to $5467% from $517 million ($608689 million presented in the preceding quarterly table less accretion of $62$172 million) from $481to $554 million ($693605 million presented in the preceding quarterly table less accretion of $212$51 million), an increase. For the six-month period, fully taxable-equivalent net interest revenue would have increased 10% from $998 million ($1.38 billion presented in the preceding six-month table less accretion of 14%$384 million) to $1.10 billion ($1.21 billion presented in the preceding six-month table less accretion of $113 million). The increase excluding discount accretion wasThese increases primarily resulted from the result of net interest revenue generated from the investment of the Intesa-related deposits added in May 2010 in connection with that acquisition, as well as favorable short-term funding costs related to aassociated with higher volumelevels of other non-U.S. client deposits.

Subsequent to the consolidation of the asset-backed commercial paper conduits in May 2009, we have recorded aggregate discount accretion in interest revenue of $1.40$1.45 billion ($621 million in 2009, $712 million in 2010 and $62$113 million in the first quartersix months of 2011). The timing and ultimate recognition of discount accretion depends, in part, on factors that are outside of our control, including anticipated prepayment speeds and credit quality. The impact of these factors is uncertain and can be significantly influenced by general economic and financial market conditions. The timing and recognition of discount accretion can also be influenced by our ongoing management of the riskrisks and other characteristics associated with our investment portfolio, including any resulting sales of securities from which we would otherwise generate accretion, such as the portfolio repositioning that we completed in December 2010.

Depending on the factors discussed above, among others, we anticipate that, until the former conduit securities remaining in our portfolio mature or are sold, discount accretion will continue to contribute to our net interest revenue, and may increase the volatility of our net interest revenue and margin; themargin. The December 2010 portfolio repositioning resulted in a significant decrease in the discount accretion that we expect to recognize in future periods. Assuming that we hold the remaining former conduit securities to maturity, all other things equal, we expect the remaining former conduit securities carried in our investment portfolio as of March 31,June 30, 2011 to generate aggregate discount accretion in future periods of approximately $1.29$1.25 billion over their remaining terms.

Interest-bearing deposits with banks, including cash balances held at the Federal Reserve to satisfy reserve requirements, averaged $14.06$10.33 billion for the firstsecond quarter of 2011 an increase of 36% compared to $10.35$14.09 billion for the firstsecond quarter of 2010. For the first six months of 2011, interest-bearing deposits with banks averaged $12.18 billion, essentially flat compared to $12.23 billion for the same period in 2010. An average of $3.71$3.34 billion was held at the Federal Reserve Bank during the firstsecond quarter of 2011, a decrease of 36% compared to $5.78$3.87 billion held during the firstsecond quarter of 2010, with balances in both periods exceeding minimum reserve requirements.

Average securities purchased under resale agreements increased 81% from $2.70were flat at $2.56 billion for the firstsecond quarter of 2011 compared to $2.57 billion for the second quarter of 2010, and increased from $2.63 billion to $4.88$3.71 billion forin the first quarter of 2011.six-month comparison. Average trading account assets increased from $148$170 million for the firstsecond quarter of 2010 to $2.14$2.42 billion for the firstsecond quarter of 2011.2011, and for the six-month periods increased from $159 million to $2.28 billion. Both averages benefited largely from an increase in client demand associated with respectour trading activities. In connection with these activities, we trade in highly liquid fixed-income securities as principal with our custody clients and other third-parties that trade in these securities. These activities generate fee revenue.

Our average investment securities portfolio increased from $95.31 billion for the second quarter of 2010 to our new interest-rate products.$104.57 billion for the second quarter of 2011, and for the six-month periods increased from $95.07 billion to

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Our average investment securities portfolio increased slightly from $94.81 billion for the first quarter of 2010 to approximately $95.70 billion for the first quarter of 2011,$100.16 billion. The increases in both comparisons were generally the result of continued purchases of securities pursuant to our re-investment strategy, partly offset by maturities and sales of securities during the quarter.sales. In December 2010, we repositioned our portfolio by selling approximately $11 billion of mortgage- and asset-backed securities. By the end of 2010, we hadsecurities and re-invested approximately $7 billion of the proceeds, from the repositioning, primarily in agency mortgage-backed securities. During the second quarter and first quartersix months of 2011, we invested an additional $15purchased $16 billion inand $31 billion, respectively, of highly rated U.S. Treasury securities, agency mortgage-backed securities and asset-backed securities. As of March 31,June 30, 2011, securities rated “AAA” and “AA” comprised approximately 90% of our portfolio (with approximately(approximately 80% rated “AAA”), compared to 81%82% rated “AAA” and “AA” (with approximately 69%(approximately 71% rated “AAA”) as of March 31, 2010, with theJune 30, 2010. The change resultingresulted primarily from the effects of the December 2010 repositioning and subsequent re-investment.

Loans and leases averaged $12.74$12.72 billion for the second quarter of 2011, up slightly compared to $11.93 for the second quarter of 2010, and $12.73 billion for the first quartersix months of 2011, up 15% from $11.10$11.52 billion in the first quarter of 2010.2010 period. The increase wasincreases primarily due toresulted from higher client demand for short-duration liquidity, offset in part by a decrease in the purchased receivables added in connection with the conduit consolidation, mainly from paydowns. pay-downs and maturities.

For the first quartersecond quarters of 2011 and 2010, approximately 28%29% and 27%, respectively, of theour average loan and lease portfolio was composed of U.S. and non-U.S. short-duration advances that provided liquidity to clients in support of their investment activities related to securities settlement. For the first quarter of 2010, these advances comprised approximately 20% of the average loan and lease portfolio. In the aggregate, these short-duration advances averaged approximately $3.56$3.72 billion for the second quarter of 2011, compared to $3.17 billion for the second quarter of 2010, and $3.64 billion for the first quartersix months of 2011 up 64% from $2.17compared to $2.67 billion for the first quarter of 2010. 2010 period.

U.S. short-duration advances averaged approximately $1.83$1.99 billion and $1.91 billion for the second quarter and first quartersix months of 2011, up 16%respectively, compared to $1.58approximately $1.94 billion and $1.76 billion for the second quarter and first quartersix months of 2010. Average non-U.S.2010, respectively. Non-U.S. short-duration advances increased 189% to $1.72averaged approximately $1.73 billion for both the second quarter and first quartersix months of 2011, compared to approximately $1.23 billion and $914 million, respectively, for the comparable periods in 2010. The increase in average non-U.S. short duration advances was mainly due to activity associated with clients added in connection with the Intesa acquisition.

Average interest-bearing depositsother interest-earning assets increased 24%, from $67.73$1.06 billion for the firstsecond quarter of 2010 to $83.87$5.35 billion for the firstsecond quarter of 2011, and from $1.09 billion to $4.59 billion in the six-month comparison. Both increases were primarily the result of higher levels of cash collateral associated with our role as principal in certain securities borrowing activities.

Average interest-bearing deposits increased from $75.40 billion for the second quarter of 2010 to $84.98 billion for the second quarter of 2011. TheFor the six-month periods, average interest-bearing deposits were $84.43 billion in 2011 compared to $71.58 billion in 2010. Both increases reflected the client deposits added in connection with the Intesa acquisition, as well as higher levels of non U.S. transaction accounts associated with new and existing business in assets under custody and administration.

Average other short-term borrowings decreased 66%declined to $5.70$4.98 billion for the second quarter of 2011 compared to $14.94 billion for the second quarter of 2010, and to $5.34 billion for the first quartersix months of 2011 as highercompared to $15.88 billion for the corresponding period in 2010. Higher levels of client deposits provided additional liquidity. Average long-term debt increased slightly to $8.91$9.54 billion for the firstsecond quarter of 2011 reflectingfrom $8.76 billion for the same period in 2010, and increased to $9.23 billion from $8.80 billion in the six-month comparison. These increases

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

primarily reflected the issuance of an aggregate of $2 billion of senior notes by us in March 2011, partly offset by the maturity of $1 billion of senior notes in February 2011 previously issued by State Street Bank under the FDIC’s Temporary Liquidity Guarantee Program. Additional information about our long-term debt is provided in note 7 to the consolidated financial statements included in this Form 10-Q.

Average other interest-bearing liabilities increased from $810 million for the second quarter of 2010 to $3.43 billion for the second quarter of 2011, and increased from $721 million to $2.78 billion in the six-month comparison. The increases in both comparisons were primarily the result of higher levels of client cash collateral held in connection with our role as principal in certain securities lending activities.

Several factors could affect future levels of our net interest revenue and margin, including the mix of client liabilities; actions of the various central banks; changes in U.S. and non-U.S. interest rates; the various yield curves around the world; the amount of discount accretion generated by the former conduit securities that remain in our investment portfolio; and the relative impact of the yields earned on the securities purchased by us with the proceeds from the December 2010 portfolio repositioning compared to the yields earned on the securities sold. Based on market conditions, we have continued to re-invest the proceeds from paydownspay-downs and maturities of securities in highly rated investment securities, such as U.S. Treasuries and federal agency mortgage-backed securities and asset-backed securities. The pace at which we continue to re-invest and the types of securities purchased will depend on market conditions over time. These factors and the level of interest rates worldwide are expected to dictate what effect the re-investment program will have on future levels of our net interest revenue and net interest margin.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Gains (Losses) Related to Investment Securities, Net

InFrom time to time, in connection with our ongoing management of the investment portfolio, we may, from time to time, sell available-for-sale securities, to manage risk, to reduce our risk profile, to take advantage of favorable market conditions, or for other reasons. We recorded net realized gains of $4$62 million from sales of approximately $3.94$5.43 billion of available-for-sale securities in the second quarter of 2011, and $66 million from sales of approximately $9.37 billion of available-for-sale securities during the first quartersix months of 2011, compared to net realized gains of $192$3 million from sales of approximately $5.73 billion of available-for-sale securitiesand $195 million, respectively, in the first quarter of 2010.2010 periods.

Management regularly reviews the investment securities portfolio to identify other-than-temporary impairment of individual securities. The aggregate unrealized losslosses on securities for which other-than-temporary impairment was recorded in the second quarter and first quartersix months of 2011 was $35 million.were $44 million and $79 million, respectively. Of this total, $24$9 million and $33 million, respectively, related to factors other than credit, and waswere recorded, net of related taxes, as a component of other comprehensive income in our consolidated statement of condition,condition. The remaining $35 million and the remaining $11$46 million, wasrespectively, were recorded in our consolidated statement of income.

For the second quarter and first quartersix months of 2011, theother-than-temporary impairment losses werewas largely related to non-agency mortgage-backed securities which management concluded had experienced credit losses resulting from deterioration in financial performance of those securities during the quarter. The securities are reported as asset-backed securities in note 3 to the consolidated financial statements included in this Form 10-Q.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The following table presents net realized gains from sales, and the components of net impairment losses, included in net gains and losses related to investment securities, for the quarters ended March 31:periods indicated: