Exhibit 99.1
State Street Corporation Reports Third-Quarter EPS up 10% Including
Investors Financial Integration Costs.
Record Operating EPS up 39% on Revenue Gain of 48% Compared to 2006
Strong Growth from Core Servicing and Management Businesses with
Significant Wins This Quarter
Investors Financial Consolidation Exceeds Expectations; Projected
2007 EPS Dilution Significantly Reduced
BOSTON--(BUSINESS WIRE)--Oct. 16, 2007--State Street Corporation
announced today third-quarter earnings per share of $0.91, an increase
from $0.83 earnings per share in the third quarter of 2006. Earnings
per share in the third quarter of 2007 include $141 million, or $0.24
per share, of merger and integration costs associated with the July 2,
2007, acquisition of Investors Financial Services Corp. ("Investors
Financial"). On an operating basis, which excludes these costs, record
earnings are $1.15 per share, up 39% from the third quarter of 2006.
Revenue of $2.240 billion in the third quarter of 2007 is up 48%,
or $725 million, compared to $1.515 billion in the year-ago quarter.
Total expenses in the third quarter of 2007 are $1.689 billion.
Excluding merger and integration costs associated with the Investors
Financial acquisition, expenses are $1.548 billion, up 42%, or $458
million, compared to $1.090 billion in the year-ago quarter. For the
third quarter of 2007, return on shareholders' equity is 12.6%,
compared to 16.4% in the third quarter of 2006. The return on
shareholders' equity reflects the increase in shareholders' equity due
to the shares issued to shareholders of Investors Financial, net of
shares repurchased in the quarter. Excluding the impact of the merger
and integration costs, return on equity is 15.8%.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "Our core revenue was strong across both investment
servicing and investment management with significant new business from
existing and new customers globally. On a year-over-year basis,
excluding $221 million in revenue during the third quarter from the
acquired Investors Financial business, revenue increased $512 million,
or 34%. Servicing and management fees performed particularly well, up
34% (including Investors Financial) from last year's third quarter. We
won $825 billion of assets in new business in servicing and $26
billion of net new business in asset management. Net interest revenue,
also including Investors Financial, is up $198 million, or 74%. Net
interest margin is 1.73%. Excluding merger and integration costs
associated with the acquisition, we achieved significant positive
operating leverage compared both to the year-ago quarter and to the
second quarter."
Logue continued, "Both State Street and the acquired business from
Investors Financial performed very well during the quarter. Due to the
strong performance of Investors Financial, we now expect this year's
dilution from the acquisition to be approximately $0.06 per share,
reduced by more than half from our original outlook, and modestly
accretive in 2008. Our improved outlook is due to our success in
retaining revenue, converting accounts, and reducing costs."
Commenting on the impact of recent market activity affecting
fixed-income investments, Logue added, "The fixed-income markets have
experienced unprecedented disruption in this past quarter. We believe
we are well positioned with both our portfolio and our asset-backed
commercial paper conduits. While liquidity in the fixed income market
remains challenging, our concentration in high-quality assets in our
own portfolios as well as in the conduits, have limited the impact of
this disruption on our business. We believe that we weathered the
disruption in the fixed-income market well--without significantly
affecting State Street's results. We're disappointed in the
performance of a small number of fixed-income strategies at State
Street Global Advisors which performed below our expectation."
Looking forward, Logue concluded, "Through nine months we are
performing near or above the top of our ranges for growth in earnings
per share (10% - 15%), revenue (20% - 22%), and achievement of return
on equity (14% - 17%), all on an operating basis, which excludes
merger and integration costs in 2007 and tax adjustments in the second
quarter of 2006. We now expect to exceed the top of the ranges for the
year for all three goals, assuming markets remain relatively stable."
In reporting its financial results for the third quarter of 2007,
State Street has prepared information in four categories:
-- "Baseline" results are operating results excluding the
"Investors Financial contribution" and are presented on a
fully taxable-equivalent basis.
-- "Investors Financial" results are the revenue and expenses,
including financing costs and amortization of intangibles,
attributable to the Investors Financial business acquired on
July 2, 2007. Per-share amounts reflect the effect of the
acquisition on outstanding shares.
-- "Operating" results are "reported" results excluding merger
and integration costs. They are presented on a fully
taxable-equivalent basis.
-- "Reported" results are in accordance with U.S. generally
accepted accounting principles (GAAP).
State Street believes that providing financial information in this
format in addition to financial information prepared in accordance
with GAAP, assists investors and others by providing them with
financial trends of ongoing business activities on a comparable basis.
Management believes that providing separate Investors Financial
results and baseline financial information further assists investors
and analysts in understanding the effect of that acquisition.
$ in millions expect per share data
For the three months ended
September
September 30, 2007 30, 2006
- ----------------------------------------------------------------------
Baseline Investors Operating Reported Reported
(a) Financial (c)
(b)
- ----------------------------------------------------------------------
Fee Revenue 1,588 194 1,782 1,782 $1,246
- ----------------------------------------------------------------------
All other revenue 448 27 475 458 269
- ----------------------------------------------------------------------
Total revenue 2,036 221 2,257 2,240 1,515
- ----------------------------------------------------------------------
Total expenses 1,375 173 1,548 1,689 1,090
- ----------------------------------------------------------------------
Income taxes 241 19 260 193 147
- ----------------------------------------------------------------------
Net income 420 29 449 358 $278
- ----------------------------------------------------------------------
Diluted EPS 1.20 (.05) 1.15 $0.91 $0.83
- ----------------------------------------------------------------------
(a) represents State Street excluding Investors Financial
contribution and related merger and integration costs; also presented
on a fully taxable-equivalent basis.
(b) represents revenue and expenses, including financing costs and
amortization of intangibles, attributable to the Investors Financial
business acquired on July 2, 2007, but excluding merger and
integration costs. Presented on a fully taxable equivalent basis.
Per-share amounts reflect the impact on outstanding shares from the
issuance of approximately 61 million shares for the acquisition.
(c) excludes merger and integration costs in 2007, presented on a
fully taxable-equivalent basis.
THIRD-QUARTER RESULTS VS. YEAR-AGO QUARTER
Total revenue in the third quarter increased 47.9% to $2.2
billion, compared to last year's third quarter and total operating
expenses, excluding $141 million of merger and integration costs, grew
42.0% to $1.5 billion over the same period. As a result, excluding
merger and integration costs, State Street generated about 580 basis
points of positive operating leverage.
Servicing fees are up 37%, to $937 million from $685 million in
last year's third quarter. The increase is attributable to business
from customers added from the Investors Financial acquisition,
business from new and existing customers, and higher average equity
market valuations. Total assets under custody are $15.1 trillion at
September 30, 2007, up 34%, compared with $11.3 trillion at September
30, 2006. Daily average values for the S&P 500 Index are up 16%, for
the MSCI(R) EAFE Index(SM) are up 20%, and for the NASDAQ are up 22%
during the third quarter of 2007 from the year-ago quarter.
Investment management fees, generated by State Street Global
Advisors, are $299 million, up 26% from $238 million in last year's
third quarter. Management fees reflect continued new business and an
increase in average month-end equity valuations, partially offset by
lower performance fees. Total assets under management are $2.0
trillion at September 30, 2007, up 22%, compared to $1.6 trillion at
September 30, 2006.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage and other fees is $320 million for the quarter,
up 87% from $171 million a year ago. The increase is driven by
improved volumes and higher FX volatility. Higher brokerage and other
fee revenue is due to the impact of the Currenex acquisition,
increased transition management, and strong trading volumes.
Securities finance revenue is $165 million in the quarter, up 90%
compared to $87 million in the year-ago quarter, reflecting an
improvement in spreads and an increase in volume due to disruption in
the fixed income markets.
Processing fees and other revenue are down 6%, or $4 million, at
$61 million, compared to $65 million a year ago, due to a reduction in
the fee income from the asset- backed commercial paper program
primarily due to disruption in the fixed-income markets as well as the
consolidation of tax-exempt investments onto the balance sheet at the
end of the third quarter of 2006, partially offset by revenue from the
Investors Financial acquisition.
Net interest revenue on a fully taxable-equivalent basis is $481
million, an increase of $206 million, or 75% from $275 million a year
ago. The increase in net interest revenue is due to a favorable mix of
non-US deposits, the impact of the Investors Financial acquisition,
and the improved yields from reinvested assets. Net interest margin
increased to 1.73% from 1.22% a year ago.
Total expenses in the third quarter are $1.7 billion. Excluding
merger and integration costs, total expenses in the third quarter of
2007 increased from $1.090 billion to $1.548 billion, up $458 million,
or 42.0%, from the year-ago quarter primarily due to the inclusion of
Investors Financial's operating expenses as a result of the
acquisition. Baseline expenses increased 26%, while the remainder of
the increase was due to the acquired Investors Financial business.
Salaries and benefits expenses are up 43% to $916 million, primarily
attributable to additions to headcount resulting from the Investors
Financial acquisition, incentive compensation due to improved
year-to-date performance, and increases in benefits. The increase in
expenses also includes higher transaction processing services, up 36%
to $165 million, due to higher volumes. Expenses for information
systems and communications increased $24 million, or 20%, to $145
million. Occupancy expense increased 20%, or $18 million, to $109
million due to costs associated with the acquired Investors Financial
business. Other expenses are up 81% at $213 million due primarily to
costs associated with the acquired Investors Financial business, as
well as increased securities processing costs.
The effective tax rate for the quarter is 35.0% compared with
34.6% in the third quarter of last year.
RESULTS OF THE THIRD QUARTER OF 2007 VS. THE SECOND QUARTER OF
2007
Third-quarter earnings per share of $0.91 compares to earnings per
share of $1.07 per share in the second quarter. Excluding merger and
integration costs associated with the Investors Financial acquisition,
earnings per share in the third quarter are $1.15 per share, up 7%
from the second quarter of 2007. Total revenue in the third quarter of
$2.240 billion is up $319 million, or 16.6% versus $1.921 billion in
the second quarter. Excluding merger and integration costs, total
expenses are $1.548 billion, up 14.0%, or $190 million, versus $1.358
billion in the second quarter. As a result, excluding merger and
integration costs, State Street achieved 260 basis points in positive
operating leverage, comparing the third quarter with the second
quarter. For the third quarter of 2007, return on shareholders' equity
is 12.6% compared to 19.2% in the second quarter and is 15.8%
excluding the impact of the merger and integration costs.
Servicing fees are up 22% at $937 million due to the impact of
revenue from Investors Financial and new business. Management fees are
up 5% to $299 million principally due to new business. Trading
services revenue increased 23% to $320 million due to higher
volatility and volumes in foreign exchange, as well as the impact of
the Currenex acquisition and strong trading volumes. Securities
finance revenue was up 2% at $165 million, due to the impact of
revenue from the Investors Financial acquisition, offset partially by
lower volumes and slightly lower spreads, compared to a seasonally
high second quarter. Processing fees and other decreased 6% from $65
million to $61 million due primarily to the impact of lower revenue
from the asset-backed commercial paper program, partially offset by
the impact of the Investors Financial acquisition. Net interest
revenue on a fully taxable-equivalent basis was up 21% at $481
million, compared to the second quarter, due primarily to the impact
of the Investors Financial acquisition, the mix of non-U.S. deposits,
and the re-investment of maturing securities at higher yields.
All expense categories increased compared to the second quarter
primarily due to the impact of the Investors Financial acquisition.
Salaries and employee benefits expense total $916 million, an increase
of $108 million, or 13%, from $808 million, attributable primarily to
headcount growth from Investors Financial and increases in incentive
compensation. Transaction processing services expense increased $24
million, or 17%, to $165 million due to higher volumes. Due primarily
to Investors Financial, information systems and communication expense
was up 13%, or $17 million, to $145 million and occupancy expense was
up 11%, or $11 million, to $109 million. Other expenses are up $30
million, or 16%, from $183 million to $213 million also due primarily
to costs associated with the Investors Financial acquisition.
ADDITIONAL INFORMATION
All per share amounts represent diluted earnings per share.
On July 2, 2007, the Corporation issued 60.8 million shares to
former shareholders of Investors Financial. As previously disclosed,
State Street entered into a $1 billion accelerated share repurchase of
its common stock with an affiliate of Lehman Brothers Inc. To date,
the Corporation has repurchased approximately 13.3 million shares and
has 13.9 million shares of remaining capacity under its existing stock
repurchase programs.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Tuesday, October 16, 2007, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 719/457-2727 (confirmation code
9741244). Recorded replays of the conference call will be available on
the web site, and by telephone at +1 402/220-4230 (passcode 9741244),
beginning at 2:00 PM today. This press release and additional
financial information is available on State Street's website, at
www.statestreet.com/stockholder, under "Financial Reports."
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 $15.1 trillion in assets under custody and $2.0
trillion in assets under management, State Street operates in 26
countries and more than 100 geographic markets worldwide and employs
26,425 worldwide. For more information, visit State Street's web site
at www.statestreet.com or call 877/639-7788 (NEWS STT) toll-free in
the United States and Canada, or +1 678/999/4577 outside those
countries.
FORWARD-LOOKING STATEMENTS
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements about
the recently completed acquisition of Investors Financial Services
Corporation, as well as about our financial goals, the financial
outlook and business environment. 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 State
Street's expectations or beliefs as of any date subsequent to the date
of this release.
Important factors that may affect future results and outcomes
include:
-- State Street's ability to integrate and convert acquisitions
into its business, including the acquisition of Investors
Financial Services Corp.;
-- the level and volatility of interest rates, particularly in
the U.S. and Europe; the performance and volatility of
securities, currency and other markets in the U.S. and
internationally; economic conditions and monetary and other
governmental actions designed to address those conditions;
-- the liquidity of the US and European securities markets,
particularly the markets for fixed income securities,
including asset-backed commercial paper; and the liquidity
requirements of our customers;
-- State Street's ability to attract non-interest bearing
deposits and other low-cost funds;
-- The performance and demand for the investment products we
offer;
-- the competitive environment in which State Street operates;
-- the enactment of legislation and changes in regulation and
enforcement that impact State Street and its customers;
-- State Street's ability to continue to grow revenue, control
expenses and attract the capital necessary to achieve its
business goals and comply with regulatory requirements;
-- State Street's ability to control systemic and operating risk;
-- trends in the globalization of investment activity and the
growth on a worldwide basis in financial assets;
-- trends in governmental and corporate pension plans and savings
rates;
-- changes in accounting standards and practices, including
changes in the interpretation of existing standards, that
impact State Street's consolidated financial statements;
-- and changes in tax legislation and in the interpretation of
existing tax laws by U.S. and non-U.S. tax authorities that
impact 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 State Street's 2006 Annual Report on Form 10-K and its
subsequent SEC filings. State Street encourages investors to read its
10-K, particularly the section on Risk Factors, and its subsequent SEC
filings for additional information with respect to any forward-looking
statements and prior to making any investment decision. The
forward-looking statements contained in this press release speak only
as of the date hereof, October 16, 2007, and State Street will not
undertake efforts to revise those forward-looking statements to
reflect events after this date.
STATE STREET CORPORATION
Earnings Press Release Addendum
Financial Highlights
September 30, 2007
Quarters Ended % Change
-------------------------------------------
Q3 Q3
2007 2007
vs. vs.
(Dollars in millions, September June
except per share amounts 30, 30, September Q2 Q3
or where otherwise noted) 2007 (1) 2007 30, 2006 2007 2006
- ----------------------------------------------------------------------
Total Revenue $ 2,240 $1,921 $ 1,515 17% 48%
Total Expenses (2) 1,689 1,358 1,090 24 55
Net Income 358 366 278 (2) 29
Diluted Earnings Per Share
(3) $ .91 $ 1.07 $ .83 (15) 10
Cash Dividends Declared Per
Share $ .22 $ .22 $ .20
Closing Price Per Share of
Common Stock (at quarter
end) 68.16 68.40 62.40
Return on Equity 12.6% 19.2% 16.4%
At Quarter End:
Assets Under Custody
(AUC) (in trillions) $ 15.1 $ 13.0 $ 11.3
Assets Under Management
(AUM) (in trillions) 2.0 1.9 1.6
Nine Months Ended % Change
--------------------------------
2007
vs.
September
(Dollars in millions, except per 30, September
share amounts) 2007 (4) 30, 2006 2006
- ----------------------------------------------------------------------
Total Revenue $ 5,857 $ 4,689 25%
Total Expenses (2) 4,260 3,362 27
Income Tax Expense 559 540 4
Income from Continuing Operations 1,038 787 32
Income from Discontinued Operations - 10
Net Income 1,038 797
Diluted Earnings Per Share:
From Continuing Operations $ 2.91 $ 2.35 24
From Discontinued Operations - .03
Net Income 2.91 2.38
Cash Dividends Declared Per Share .65 .59 10
Return on Equity from Continuing
Operations 15.9% 16.0%
Return on Equity 15.9 16.2
(1) Quarter ended September 30, 2007 includes financial results of
Investors Financial, which State Street acquired on July 2, 2007.
(2) Total expenses for the quarter and nine months ended September 30,
2007 include merger and integration costs of $141 million, or $91
million after-tax, recorded in connection with the acquisition of
Investors Financial.
(3) Diluted earnings per share for the quarter ended September 30,
2007 reflect the issuance of 60.8 million shares on July 2, 2007 in
connection with the completion of the acquisition of Investors
Financial.
(4) Financial results for the nine months ended September 30, 2007
include results of the acquired Investors Financial business for the
quarter ended September 30, 2007.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters and Nine Months Ended September 30, 2007 and September 30,
2006
Quarters Ended Nine Months Ended
---------------------------- --------------------------
(Dollars in
millions, September September
except per 30, 2007 September % 30, 2007 September %
share amounts) (1) 30, 2006 Change (2) 30, 2006 Change
- ---------------------------------- ------- ------------------- ------
Fee Revenue:
Servicing fees $ 937 $ 685 37% $ 2,421 $ 2,025 20%
Management fees 299 238 26 844 690 22
Trading
services 320 171 87 800 659 21
Securities
finance 165 87 90 425 296 44
Processing fees
and other 61 65 (6) 199 211 (6)
--------- --------- --------- ---------
Total fee
revenue 1,782 1,246 43 4,689 3,881 21
Net Interest
Revenue:
Interest
revenue 1,383 1,103 25 3,758 3,098 21
Interest
expense 919 837 10 2,584 2,304 12
--------- --------- --------- ---------
Net interest
revenue (3) 464 266 74 1,174 794 48
Provision for
loan losses - - - -
--------- --------- --------- ---------
Net interest
revenue
after
provision
for loan
losses 464 266 74 1,174 794 48
Gains (Losses)
on sales of
available-for-
sale
investment
securities,
net (6) 3 (6) 14
--------- --------- --------- ---------
Total revenue 2,240 1,515 47.9 5,857 4,689 24.9
Operating
Expenses:
Salaries and
employee
benefits 916 639 43 2,463 1,958 26
Information
systems and
communications 145 121 20 398 382 4
Transaction
processing
services 165 121 36 435 375 16
Occupancy 109 91 20 301 279 8
Merger and
integration 141 - - 141 - -
Other 213 118 81 522 368 42
--------- --------- --------- ---------
Total
operating
expenses 1,689 1,090 55.0 4,260 3,362 26.7
--------- --------- --------- ---------
Income from
continuing
operations
before
income tax
expense 551 425 30 1,597 1,327 20
Income tax
expense from
continuing
operations 193 147 559 540 4
--------- --------- --------- ---------
Income from
continuing
operations 358 278 29 1,038 787 32
Income from
discontinued
operations
before income
tax expense - - - 16
Income tax
expense from
discontinued
operations - - - 6
--------- --------- --------- ---------
Income from
discontinued
operations - - - 10
--------- --------- --------- ---------
Net income $ 358 $ 278 $ 1,038 $ 797
========= ========= ========= =========
Earnings Per
Share From
Continuing
Operations:
Basic $ .92 $ .84 10 $ 2.95 $ 2.38 24
Diluted .91 .83 10 2.91 2.35 24
Earnings Per
Share From
Discontinued
Operations:
Basic $ - $ - $ - $ .03
Diluted - - - .03
Earnings Per
Share:
Basic $ .92 $ .84 $ 2.95 $ 2.41
Diluted .91 .83 2.91 2.38
Average Shares
Outstanding
(in
thousands):
Basic 386,843 330,440 352,410 331,326
Diluted 392,150 335,513 356,695 335,566
Consolidated Selected Financial Information presented above was
prepared in accordance with accounting principles generally accepted
in the United States.
(1) Quarter ended September 30, 2007 includes financial results of
Investors Financial, which State Street acquired on July 2, 2007.
(2) Financial results for the nine months ended September 30, 2007
include results of the acquired Investors Financial business for the
quarter ended September 30, 2007.
(3) Net interest revenue on a fully taxable-equivalent basis was $481
million and $275 million for the quarters ended September 30, 2007
and 2006, respectively, and $1.22 billion and $827 million for the
nine months ended September 30, 2007 and 2006, respectively. These
amounts include taxable-equivalent adjustments of $17 million and $9
million for the quarters ended September 30, 2007 and 2006,
respectively, and $41 million and $33 million for the nine months
ended September 30, 2007 and 2006.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters Ended September 30, 2007 and June 30, 2007
Quarters Ended
----------------------------
September
(Dollars in millions, except per share 30, 2007 June 30,
amounts) (1) 2007 % Change
- ----------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 937 $ 766 22%
Management fees 299 284 5
Trading services 320 260 23
Securities finance 165 162 2
Processing fees and other 61 65 (6)
--------- ---------
Total fee revenue 1,782 1,537 16
Net Interest Revenue:
Interest revenue 1,383 1,203 15
Interest expense 919 818 12
--------- ---------
Net interest revenue (2) 464 385 21
Provision for loan losses - -
--------- ---------
Net interest revenue after provision
for loan losses 464 385 21
Gains (Losses) on sales of available-for-
sale investment securities, net (6) (1)
--------- ---------
Total revenue 2,240 1,921 16.6
Operating Expenses:
Salaries and employee benefits 916 808 13
Information systems and communications 145 128 13
Transaction processing services 165 141 17
Occupancy 109 98 11
Merger and integration 141 -
Other 213 183 16
--------- ---------
Total operating expenses 1,689 1,358 24.4
--------- ---------
Income before income tax expense 551 563 (2)
Income tax expense 193 197 (2)
--------- ---------
Net income $ 358 $ 366 (2)
========= =========
Earnings Per Share:
Basic $ .92 $ 1.09 (16)
Diluted .91 1.07 (15)
Average Shares Outstanding (in
thousands):
Basic 386,843 335,769
Diluted 392,150 341,101
Consolidated Selected Financial Information presented above was
prepared in accordance with accounting principles generally accepted
in the United States.
(1) Quarter ended September 30, 2007 includes financial results of
Investors Financial, which State Street acquired on July 2, 2007.
(2) Net interest revenue on a fully taxable-equivalent basis was $481
million and $397 million for the quarters ended September 30, 2007
and June 30, 2007, respectively. These amounts include taxable-
equivalent adjustments of $17 million and $12 million, respectively.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED OPERATING-BASIS FINANCIAL INFORMATION
Quarters and Nine Months Ended September 30, 2007 and September 30,
2006
Quarters Ended (1) Nine Months Ended (1)
---------------------------- ---------------------------
(Dollars in
millions,
except per
share September September % September September %
amounts) 30, 2007 30, 2006 Change 30, 2007 30, 2006 Change
- ---------------------------------- ------- ------------------- ------
Fee Revenue:
Servicing
fees $ 937 $ 685 37% $ 2,421 $ 2,025 20%
Management
fees 299 238 26 844 690 22
Trading
services 320 171 87 800 659 21
Securities
finance 165 87 90 425 296 44
Processing
fees and
other 61 65 (6) 199 211 (6)
--------- --------- --------- ---------
Total fee
revenue 1,782 1,246 43 4,689 3,881 21
Net Interest
Revenue:
Interest
revenue 1,400 1,112 26 3,799 3,131 21
Interest
expense 919 837 10 2,584 2,304 12
--------- --------- --------- ---------
Net
interest
revenue 481 275 75 1,215 827 47
Provision for
loan losses - - - -
--------- --------- --------- ---------
Net
interest
revenue
after
provision
for loan
losses 481 275 75 1,215 827 47
Gains
(Losses) on
sales of
available-
for-sale
investment
securities,
net (6) 3 (6) 14
--------- --------- --------- ---------
Total
revenue 2,257 1,524 48.1 5,898 4,722 24.9
Operating
Expenses:
Salaries and
employee
benefits 916 639 43 2,463 1,958 26
Information
systems and
communi-
cations 145 121 20 398 382 4
Transaction
processing
services 165 121 36 435 375 16
Occupancy 109 91 20 301 279 8
Other 213 118 81 522 368 42
--------- --------- --------- ---------
Total
operating
expenses 1,548 1,090 42.0 4,119 3,362 22.5
--------- --------- --------- ---------
Income
from
continuing
operations
before
income
taxes 709 434 63 1,779 1,360 31
Income taxes
from
continuing
operations 243 147 609 457
Taxable-
equivalent
adjustment 17 9 41 33
--------- --------- --------- ---------
Net income
from
continuing
operations $ 449 $ 278 62 $ 1,129 $ 870 30
========= ========= ========= =========
Diluted
earnings per
share from
continuing
operations $ 1.15 $ .83 39 $ 3.15 $ 2.60 21
Return on
equity from
continuing
operations 15.8% 16.4% 17.3% 17.7%
(1) Refer to reconciliation of reported results to operating-basis
results on pages 6 and 7.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED OPERATING-BASIS FINANCIAL INFORMATION
Quarters Ended September 30, 2007 and June 30, 2007
Quarters Ended
---------------------------
September June
(Dollars in millions, except per share 30, 2007 30,
amounts) (1) 2007 % Change
- ----------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 937 $ 766 22%
Management fees 299 284 5
Trading services 320 260 23
Securities finance 165 162 2
Processing fees and other 61 65 (6)
--------- -------
Total fee revenue 1,782 1,537 16
Net Interest Revenue:
Interest revenue 1,400 1,215 15
Interest expense 919 818 12
--------- -------
Net interest revenue 481 397 21
Provision for loan losses - - -
--------- -------
Net interest revenue after provision for
loan losses 481 397 21
Gains (Losses) on sales of available-for-
sale investment securities, net (6) (1)
--------- -------
Total revenue 2,257 1,933 17.0
Operating Expenses:
Salaries and employee benefits 916 808 13
Information systems and communications 145 128 13
Transaction processing services 165 141 17
Occupancy 109 98 11
Other 213 183 16
--------- -------
Total operating expenses 1,548 1,358 14.0
--------- -------
Income from continuing operations before
income taxes 709 575 23
Income taxes from continuing operations 243 197
Taxable-equivalent adjustment 17 12
--------- -------
Net income from continuing operations $ 449 $ 366 23
========= =======
Diluted earnings per share from continuing
operations $ 1.15 $ 1.07 7
Return on equity from continuing
operations 15.8% 19.2%
(1) Refer to reconciliation of reported results to operating-basis
results on page 6.
STATE STREET CORPORATION
Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter and Nine Months Ended September 30, 2007
---------------------------------
(Dollars in millions, except per
share amounts) Quarter Ended September 30, 2007
- ------------------------------------ ---------------------------------
Reported Operating
Results Adjustments Results
-------- ----------- ---------
Fee Revenue:
Servicing fees $ 937 $ 937
Management fees 299 299
Trading services 320 320
Securities finance 165 165
Processing fees and other 61 61
-------- ---------
Total fee revenue 1,782 1,782
Net Interest Revenue:
Interest revenue 1,383 $ 17 (1) 1,400
Interest expense 919 - 919
-------- ----------- ---------
Net interest revenue (1) 464 17 481
Provision for loan losses - - -
-------- ----------- ---------
Net interest revenue after
provision for loan losses 464 17 481
Losses on sales of available-for-
sale investment securities, net (6) - (6)
-------- ----------- ---------
Total revenue 2,240 17 2,257
Operating Expenses:
Salaries and employee benefits 916 - 916
Information systems and communi-
cations 145 - 145
Transaction processing services 165 - 165
Occupancy 109 - 109
Merger and integration 141 (141)(2) -
Other 213 - 213
-------- ----------- ---------
Total operating expenses 1,689 (141) 1,548
-------- ----------- ---------
Income from continuing operations
before income taxes 551 158 709
Income taxes from continuing
operations 193 50 243
Taxable-equivalent adjustment - 17 (1) 17
-------- ----------- ---------
Net income from continuing
operations $ 358 $ 91 $ 449
======== =========== =========
Diluted earnings per share from
continuing operations $ .91 $ .24 $ 1.15
Return on equity from continuing
operations 12.6% 3.2% 15.8%
---------------------------------
(Dollars in millions, except per Nine Months Ended September 30,
share amounts) 2007
- ------------------------------------ ---------------------------------
Reported Operating
Results Adjustments Results
-------- ----------- ---------
Fee Revenue:
Servicing fees $2,421 $2,421
Management fees 844 844
Trading services 800 800
Securities finance 425 425
Processing fees and other 199 199
-------- ---------
Total fee revenue 4,689 4,689
Net Interest Revenue:
Interest revenue 3,758 $ 41 (1) 3,799
Interest expense 2,584 - 2,584
-------- ----------- ---------
Net interest revenue (1) 1,174 41 1,215
Provision for loan losses - - -
-------- ----------- ---------
Net interest revenue after
provision for loan losses 1,174 41 1,215
Losses on sales of available-for-
sale investment securities, net (6) - (6)
-------- ----------- ---------
Total revenue 5,857 41 5,898
Operating Expenses:
Salaries and employee benefits 2,463 - 2,463
Information systems and communi-
cations 398 - 398
Transaction processing services 435 - 435
Occupancy 301 - 301
Merger and integration 141 (141)(2) -
Other 522 - 522
-------- ----------- ---------
Total operating expenses 4,260 (141) 4,119
-------- ----------- ---------
Income from continuing operations
before income taxes 1,597 182 1,779
Income taxes from continuing
operations 559 50 609
Taxable-equivalent adjustment - 41 (1) 41
-------- ----------- ---------
Net income from continuing
operations $1,038 $ 91 $1,129
======== =========== =========
Diluted earnings per share from
continuing operations $ 2.91 $ .24 $ 3.15
Return on equity from continuing
operations 15.9% 1.4% 17.3%
Reported results reflect State Street's Consolidated Statement of
Income prepared in accordance with accounting principles generally
accepted in the United States.
(1) Taxable-equivalent adjustment is not included in reported results.
(2) Merger and integration expenses are direct and incremental costs
associated with the acquisition of Investors Financial, and do not
include ongoing expenses of the combined organization.
STATE STREET CORPORATION
Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter and Nine Months Ended September 30, 2006
----------------------------------
(Dollars in millions, except per
share amounts) Quarter Ended September 30, 2006
- ---------------------------------- ----------------------------------
Reported Operating
Results Adjustments Results
-------- ----------- ---------
Fee Revenue:
Servicing fees $ 685 $ 685
Management fees 238 238
Trading services 171 171
Securities finance 87 87
Processing fees and other 65 65
-------- ---------
Total fee revenue 1,246 1,246
Net Interest Revenue:
Interest revenue 1,103 $9(1) 1,112
Interest expense 837 - 837
-------- ----------- ---------
Net interest revenue (1) 266 9 275
Provision for loan losses - - -
-------- ----------- ---------
Net interest revenue after
provision for loan losses 266 9 275
Gains on sales of available-for-
sale investment securities, net 3 - 3
-------- ----------- ---------
Total revenue 1,515 9 1,524
Operating Expenses:
Salaries and employee benefits 639 - 639
Information systems and
communications 121 - 121
Transaction processing services 121 - 121
Occupancy 91 - 91
Merger and integration costs - - -
Other 118 - 118
-------- ----------- ---------
Total operating expenses 1,090 - 1,090
-------- ----------- ---------
Income from continuing
operations before income taxes 425 9 434
Income taxes from continuing
operations 147 - 147
Taxable-equivalent adjustment - 9(1) 9
-------- ----------- ---------
Net income from continuing
operations $ 278 $- $ 278
======== =========== =========
Diluted earnings per share from
continuing operations $ .83 $- $ .83
Return on equity from continuing
operations 16.4% - 16.4%
-------------------------------------
(Dollars in millions, except per Nine Months Ended September 30,
share amounts) 2006
- ----------------------------------------------------------------------
Reported Operating
Results Adjustments Results
---------- ------------ ----------
Fee Revenue:
Servicing fees $ 2,025 $ 2,025
Management fees 690 690
Trading services 659 659
Securities finance 296 296
Processing fees and other 211 211
-------- ---------
Total fee revenue 3,881 3,881
Net Interest Revenue:
Interest revenue 3,098 $ 33 (1) 3,131
Interest expense 2,304 - 2,304
-------- ------------ ---------
Net interest revenue (1) 794 33 827
Provision for loan losses - - -
-------- ------------ ---------
Net interest revenue after
provision for loan losses 794 33 827
Gains on sales of available-for-
sale investment securities, net 14 - 14
-------- ------------ ---------
Total revenue 4,689 33 4,722
Operating Expenses:
Salaries and employee benefits 1,958 - 1,958
Information systems and
communications 382 - 382
Transaction processing services 375 - 375
Occupancy 279 - 279
Merger and integration costs - - -
Other 368 - 368
-------- ------------ ---------
Total operating expenses 3,362 - 3,362
-------- ------------ ---------
Income from continuing
operations before income taxes 1,327 33 1,360
Income taxes from continuing
operations 540 (83)(2) 457
Taxable-equivalent adjustment - 33 (1) 33
-------- ------------ ---------
Net income from continuing
operations $ 787 $ 83 $ 870
======== ============ =========
Diluted earnings per share from
continuing operations $ 2.35 $ .25 $ 2.60
Return on equity from continuing
operations 16.2% 1.5% 17.7%
Reported results reflect State Street's Consolidated Statement of
Income prepared in accordance with accounting principles generally
accepted in the United States.
(1) Taxable-equivalent adjustment is not included in reported results.
(2) Tax-related adjustments related to the impact of TIPRA and to
issues associated with leveraged lease transactions.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
September December September
30, 31, 30,
(Dollars in millions, except per share
amounts) 2007 2006 2006
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 4,610 $ 2,368 $ 3,482
Interest-bearing deposits with banks 6,559 5,236 8,767
Securities purchased under resale
agreements 16,151 14,678 13,910
Federal funds sold 2,575
Trading account assets 1,305 785 921
Investment securities available for sale 72,789 60,445 61,304
Investment securities held to maturity 4,294 4,547 4,645
Loans and leases (net of allowance of
$18) 11,292 8,928 9,206
Premises and equipment 1,824 1,560 1,551
Accrued income receivable 1,883 1,617 1,544
Goodwill 4,601 1,384 1,370
Other intangible assets 1,994 434 458
Other assets 10,011 5,371 5,152
--------- --------- ---------
Total assets $139,888 $107,353 $112,310
========= ========= =========
Liabilities
Deposits:
Noninterest-bearing $ 13,779 $ 10,194 $ 8,042
Interest-bearing -- U.S. 15,838 1,272 2,185
Interest-bearing -- Non-U.S. 63,384 54,180 53,225
--------- --------- ---------
Total deposits 93,001 65,646 63,452
Securities sold under repurchase
agreements 14,008 19,147 21,532
Federal funds purchased 320 2,147 8,040
Other short-term borrowings 4,802 2,835 2,658
Accrued taxes and other expenses 3,953 3,143 2,940
Other liabilities 8,938 4,567 4,053
Long-term debt 3,616 2,616 2,620
--------- --------- ---------
Total liabilities 128,638 100,101 105,295
Shareholders' Equity
Preferred stock, no par: authorized
3,500,000; issued none
Common stock, $1 par: authorized
750,000,000 shares; issued 398,370,000,
337,126,000 and 337,126,000 shares 398 337 337
Surplus 4,616 399 368
Retained earnings 7,610 7,030 6,791
Accumulated other comprehensive loss (369) (224) (113)
Treasury stock (at cost 13,576,000,
4,688,000 and 6,001,000 shares) (1,005) (290) (368)
--------- --------- ---------
Total shareholders' equity 11,250 7,252 7,015
--------- --------- ---------
Total liabilities and shareholders'
equity $139,888 $107,353 $112,310
========= ========= =========
CONTACT: State Street Corporation
Edward J. Resch, +1 617-664-1110
or
Investors:
Kelley MacDonald, +1 617-664-3477
or
Media:
Hannah Grove, +1 617-664-3377
