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
State Street (STT) 8-KResults of Operations and Financial Condition
Filed: 16 Oct 07, 12:00am