Exhibit 99.1
State Street Corporation Reports First-Quarter Earnings Per Share of $1.02 on Total Revenue of $2.0 Billion;
Ongoing Expense Controls Drive Positive Operating Leverage;
Progress Made On TCE Improvement Plan
BOSTON--(BUSINESS WIRE)--April 21, 2009--State Street Corporation today announced first-quarter earnings per common share of $1.02, a decline from earnings per share of $1.35 in last year’s first quarter. Revenue of $2.002 billion in the first quarter of 2009 is down 22.3% from $2.577 billion in the year-ago first quarter. Total expenses in the first quarter of 2009 of $1.304 billion are down 26.5% from $1.774 billion compared to the year-ago first quarter. For the first quarter of 2009, return on common shareholders’ equity was 15.7%, down from 18.7% in the first quarter of 2008.
In addition to presenting State Street’s financial results in conformity with US generally accepted accounting principles (GAAP), management also presents results on an operating basis in order to highlight comparable financial trends and other characteristics with respect to State Street’s ongoing business operations from period to period. A full reconciliation of operating-basis results to GAAP results is included in the addendum at the end of this press release.
“Operating-basis” results in the first quarter of 2009 exclude $(17) million in merger and integration costs associated with the 2007 acquisition of Investors Financial Services Corp. (“Investors Financial”), partly offset by net interest revenue of $7 million related to State Street’s participation in the Federal Reserve Bank’s Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (“AMLF”). “Operating-basis” results for the first quarter of 2008 excluded merger and integration costs of $(26) million associated with the Investors Financial acquisition. “Operating-basis” results for the fourth quarter of 2008 exclude the net effects of pre-tax adjustments of $(723) million, or $(1.04) per common share, including $(450) million related to a transaction with certain stable value funds managed by State Street Global Advisors; restructuring charges of $(306) million, primarily associated with our reduction in force; and merger and integration costs of $(27) million associated with the Investors Financial acquisition; partially offset by net interest revenue of $60 million related to the AMLF. “Operating-basis” revenue for all periods is presented on a fully taxable-equivalent basis.
Operating-basis earnings per common share in the first quarter of 2009 are $1.04, down 25.2% from $1.39 per share in the first quarter of 2008. Operating-basis revenue of $2.027 billion in the first quarter of 2009 is down 22.0% from $2.600 billion in the first quarter a year ago. Operating-basis expenses of $1.287 billion in the first quarter of 2009 are down 26.4% from $1.748 billion in the year-ago quarter. These first quarter 2009 revenue and expense results represent 440 basis points of positive operating leverage compared to the first quarter of 2008. For the first quarter of 2009, operating-basis return on common shareholders’ equity is 15.9%, down from 19.4% for the first quarter of 2008.
The balance sheet is $142 billion at March 31, 2009, compared to $174 billion at December 31, 2008. Excluding $30 billion in excess deposits held at central banks at March 31, 2009, compared with $52 billion at December 31, 2008, and $740 million of investment securities related to the AMLF, compared to $6 billion at December 31, 2008, the normalized balance sheet was $111 billion at March 31, 2009, compared to a normalized balance sheet of $116 billion at December 31, 2008. At March 31, 2008, the balance sheet was $154 billion. Our regulatory capital ratios continue to be strong as of March 31, 2009, with our tier-1 capital ratio at 19.13% and our tier-1 leverage ratio at 10.44%.
Reflecting the ongoing illiquidity in the financial markets, at March 31, 2009, the after-tax, unrealized mark-to-market losses in the investment portfolio are $5.9 billion, down from $6.3 billion at December 31, 2008, and in the State Street-administered asset-backed commercial paper conduits are $3.6 billion, flat with December 31, 2008. Since March 31, 2009, the unrealized after-tax losses in the investment portfolio have improved $91 million to $5.8 billion as of Friday, April 17, 2009.
Ronald E. Logue, State Street's chairman and chief executive officer, said, "In one of the toughest operating environments in decades, the strength in new business from prior quarters benefited our results. This momentum combined with expense controls, comparing the first quarter of 2009 with the first quarter of 2008, enabled us to achieve 440 basis points of operating leverage, demonstrating our ability to reduce expenses in line with market-driven reductions in revenue. While our servicing fee and management fee revenue declined 20% and 35% respectively from the year-ago quarter, both compared with the more than 40% decline in the equity markets for the same periods. In servicing this quarter we won $111 billion in assets, demonstrating continued strength in our core business and increased demand for servicing driven by the stressed markets and heightened product complexity. At State Street Global Advisors, we are seeing a continuing move to passive strategies and ETF strategies, as the $37 billion in net new business in the first quarter demonstrates. We expect our continuing investment in solutions and products for our customers to put us in a strong position when markets return to a more normalized state.”
Regarding capital, Logue commented, “Our regulatory capital ratios remain high, and we are making progress on our TCE improvement plan. Our tangible common equity ratio at March 31, 2009, stands at 5.87% and our pro forma TCE ratio, assuming consolidation of the asset-backed commercial paper conduits we administer, has improved 103 basis points from 1.19% at December 31, 2008, to 2.22% when calculated as a percentage of total assets. Our TCE ratio calculated as a percentage of risk-weighted assets is 8.15% at March 31, 2009, an increase from 7.29% at December 31, 2008 and on a pro forma basis is 3.34% as of March 31, 2009, up from 2.18% at December 31. 2008. Assuming prospective stability or improvement in fixed-income markets and operating results consistent with expectations, we expect to achieve an estimated pro forma TCE ratio calculated as a percentage of total assets of about 4.57% by year-end 2009, approximately in line with our long-range target for TCE of 4.25% to 4.75%. We expect the pro forma TCE ratio calculated as a percentage of risk-weighted assets to be about 6.57% by December 31, 2009. Our unrealized losses improved at the end of the first quarter, compared with December 31, and this improvement continues through April 17.”
Logue concluded, “We have taken steps to align our expenses to a weaker market environment, so we believe we’re well positioned for an economic recovery. Given the continued unsettled economic environment and more weakness in the first quarter than we expected, we now believe that in 2009 we will achieve nearer the weaker end of the ranges we established at our Investor and Analyst Forum in February: operating revenue to decline between 8% and 12%; operating earnings per share to decline between 12% and 16%; and operating return on equity to be between 14% and 17%.”
FIRST QUARTER 2009 RESULTS VS. YEAR-AGO FIRST QUARTER
Servicing fees are only down 20% to $766 million from $960 million in last year’s first quarter. The decrease is attributable primarily to a more than 40% decline in daily average asset valuations. Total assets under custody are $11.337 trillion at March 31, 2009, down 24%, compared with $14.900 trillion at March 31, 2008. Daily average values for the S&P 500 Index are down 40% from the first quarter of 2008; daily average values for the MSCI® EAFE IndexSM are down 47%.
Investment management fees, generated by State Street Global Advisors, are $181 million, down 35% from $278 million in the year-ago quarter. The decline in management fees primarily reflects the greater than 40% decrease in average month-end equity valuations and lower performance fees. Total assets under management at March 31, 2009, are $1.395 trillion, down 29%, compared to $1.955 trillion at March 31, 2008.
Trading services revenue, which includes foreign exchange trading revenue and brokerage and other fees, is $245 million for the first quarter of 2009, down 33% from $366 million in a very strong first quarter a year-ago. The 28% decrease in foreign exchange revenue is due to lower volumes, partially offset by higher volatility. Brokerage and other fees decreased 47% due primarily to the impact of lower market valuations on several securities held in the trading account.
Securities finance revenue is $181 million in the quarter, down 40% from $303 million in the year-ago first quarter. This significant decline is due primarily to lower volumes, offset very modestly by a slight improvement in spreads.
Processing fees and other is $49 million, down 9% from $54 million in the first quarter of 2008.
Net interest revenue on an operating basis is $589 million, a decrease of 9% from $648 million the year-ago first quarter. The decline is due primarily to the decrease in customer deposit volumes and spreads, partially offset by a decline in interest rates worldwide.
We recorded a provision for loan losses of $84 million during the first quarter due to deteriorating economic conditions, in order to provide for expected losses related to the commercial mortgage loans held on our balance sheet that were acquired in the fourth quarter of 2008.
Operating-basis expenses decreased to $1.287 billion, down 26% from $1.748 billion a year ago, due primarily to a 31% reduction in salaries and benefits expense, as well as measures to reduce other expenses by 45%.
The decrease in total expenses also includes lower transaction processing services, down 19% to $131 million from $162 million a year ago, due to lower volumes in the investment servicing business. Expenses for information systems & communications increased to $161 million from $155 million and occupancy increased 10% to $121 million from $110 million. Other expenses were down 45%, or $116 million to $143 million from $259 million due primarily to lower professional fees and lower securities processing costs.
The effective tax rate in the first quarter of 2009 is 22.5%, down from 34.0% in 2008, and is expected to be about 31.5% for full-year 2009. Consistent with our business strategy, our intent to reinvest the earnings in certain of our non-US subsidiaries overseas allowed us to reduce taxes accrued with respect to 2009 earnings as well as certain taxes accrued in prior periods by $63 million.
FIRST-QUARTER 2009 RESULTS VS. FOURTH QUARTER 2008
Earnings per share of $1.02 in the first quarter of 2009 on revenue of $2.002 billion, compares with $0.54 per share in the fourth quarter of 2008 on revenue of $2.673 billion. Expenses in the first quarter of 2009 are $1.304 billion compared with $2.311 billion in the fourth quarter of 2008. Return on common shareholders’ equity is 15.7% in the first quarter of 2009 compared to 8.4% in the fourth quarter of 2008. References to fourth-quarter 2008 results are to the updated results announced on February 5, 2009.
On an operating basis earnings per common share in the first quarter of 2009 of $1.04 is down from $1.58 per share in the fourth quarter of 2008. On an operating basis, total revenue in the first quarter is $2.027 billion, down 23.2% versus $2.641 billion in the fourth quarter of 2008. On an operating basis, total expenses for the first quarter of 2009 are $1.287 billion versus $1.528 billion in the fourth quarter of 2008. Operating-basis return on common shareholders’ equity of 15.9% in the first quarter compares with 24.3% in the fourth quarter.
Servicing fees are $766 million, down 9% from $842 million in the fourth quarter and includes the impact of an 11% decline in daily average equity valuations. Management fees are $181 million, down 13% from $209 million primarily due to a 15% decline in average month-end equity valuations. Trading services revenue is $245 million, down 41% from $418 million primarily due to decreased volatility and lower volumes in the foreign exchange markets and to a decline in our core brokerage business as well as the impact of market values on the trading account. Securities finance revenue is $181 million, down 45% from the prior quarter primarily due to lower spreads as the benefit of the Federal Reserve’s December rate reductions dissipates as well as lower demand. Processing fees and other revenue declined to $49 million from $83 million due to lower revenue from structured products. Net interest revenue on an operating basis is $589 million, down 27% from $811 million, due primarily to the decline in Libor rates after year end and narrower spreads in both the investment portfolio and on customer deposits.
Salaries and employee benefits expense increased 5% to $731 million from $698 million due to the impact of the significant reduction in 2008 incentive compensation recorded in the fourth quarter of 2008, partially offset by the impact of the headcount reduction. Transaction processing expense is down 10% from $145 million to $131 million due to lower volumes in the asset servicing (or securities processing) business. Other expenses are down 64% from $398 million to $143 million due primarily to reduced securities processing costs and a decline in professional fees.
ADDITIONAL INFORMATION
All per share amounts represent fully diluted earnings per common share.
This press release includes financial information presented on a GAAP-basis as well as on an operating basis. Management measures and compares certain financial information on an operating basis, as it believes that this presentation supports meaningful comparisons from period to period and the analysis of comparable financial trends with respect to State Street’s normal ongoing business operations. Management believes that operating-basis financial information, which reports revenue from non-taxable sources on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of the normal course of business, facilitates an investor’s understanding and analysis of State Street’s underlying financial performance and trends in addition to financial information prepared in accordance with GAAP. A full reconciliation of operating-basis results to GAAP results is included in the addendum at the end of this press release.
Positive operating leverage is defined as the excess rate of growth of total revenue over the rate of growth of total expenses, each separately determined on a GAAP or an operating basis.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today, Tuesday, April 21, 2009, at 9:00 a.m. EDT, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 706/679-5594 or +1 888/391-4233 (Conference ID #92487352). Recorded replays of the conference call will be available on the web site, and by telephone at +1 706/645-9291 or +1 800/642-1687 (Conference ID#92487352) , beginning approximately two hours after the call’s completion. The telephone replay will be available for two weeks following the conference call. This press release, presentation materials referred to on the conference call, and additional financial information are available on State Street’s website, at www.statestreet.com/stockholder under “Investor Information--Latest News, Annual Reports and Financial Trends—Financial Trends,” and “Investor Events and Presentations.”
State Street Corporation (NYSE: STT) is the world's leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $11.337 trillion in assets under custody and $1.395 trillion in assets under management at March 31, 2009, State Street operates in 27 countries and more than 100 geographic markets and employs 27,500 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 our goals and expectations regarding our business, financial condition, results of operations and strategies, the financial and market outlook, governmental and regulatory initiatives and developments, and the 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 our expectations or beliefs as of any date subsequent to the date of this release.
Important factors that may affect future results and outcomes include:
Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in our 2008 Annual Report on Form 10-K and our subsequent SEC filings. We encourage investors to read our 10-K, particularly the section on Risk Factors, and our 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, April 21, 2009, and we do not undertake efforts to revise those forward-looking statements to reflect events after this date.
| STATE STREET CORPORATION | ||||||||||||||||
| Earnings Press Release Addendum | ||||||||||||||||
| Consolidated Financial Highlights | ||||||||||||||||
| March 31, 2009 | ||||||||||||||||
| Quarters Ended | % Change | |||||||||||||||
| Q1 2009 | Q1 2009 | |||||||||||||||
| (Dollars in millions, except per share amounts | March 31, | December 31, | March 31, | vs. | vs. | |||||||||||
| or where otherwise noted) | 2009 | 2008 | 2008 | Q4 2008 | Q1 2008 | |||||||||||
| Total Revenue | $ | 2,002 | $ | 2,673 | $ | 2,577 | (25) | % | (22) | % | ||||||
| Provision for Loan Losses | 84 | - | - | |||||||||||||
| Total Expenses: | ||||||||||||||||
| Expenses from operations | 1,287 | 1,528 | 1,748 | (16) | (26) | |||||||||||
| Provision for investment account infusion | - | 450 | - | |||||||||||||
| Restructuring charges | - | 306 | - | |||||||||||||
| Merger and integration costs | 17 | 27 | 26 | |||||||||||||
| Net Income | 476 | 256 | 530 | 86 | (10) | |||||||||||
| Net Income Available to Common Shareholders | 445 | 234 | 530 | |||||||||||||
| Diluted Earnings Per Common Share | $ | 1.02 | $ | .54 | $ | 1.35 | 89 | (24) | ||||||||
| Average Diluted Common Shares Outstanding (in thousands) | 435,299 | 431,902 | 393,647 | |||||||||||||
| Cash Dividends Declared Per Common Share | $ | .01 | $ | .24 | $ | .23 | ||||||||||
| Closing Price Per Share of Common Stock (at quarter end) | 30.78 | 39.33 | 79.00 | |||||||||||||
| Ratios: | ||||||||||||||||
| Return on common equity | 15.7 | % | 8.4 | % | 18.7 | % | ||||||||||
| Net interest margin, fully taxable-equivalent basis | 2.01 | 2.00 | 2.20 | |||||||||||||
| Tier 1 risk-based capital | 19.1 | 20.3 | 12.4 | |||||||||||||
| Total risk-based capital | 20.5 | 21.6 | 13.8 | |||||||||||||
| Tier 1 leverage | 10.4 | 7.8 | 6.1 | |||||||||||||
| Tangible common equity to adjusted tangible assets | 5.9 | 4.6 | 3.3 | |||||||||||||
| At Quarter End: | ||||||||||||||||
| Assets Under Custody (AUC) (in trillions) | $ | 11.34 | $ | 12.04 | $ | 14.90 | ||||||||||
| Assets Under Management (AUM) (in trillions) | 1.40 | 1.44 | 1.96 | |||||||||||||
| STATE STREET CORPORATION | ||||||||||||
| Earnings Press Release Addendum | ||||||||||||
| SELECTED CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||
| Quarters Ended March 31, 2009 and March 31, 2008 | ||||||||||||
| Quarters Ended | ||||||||||||
| March 31, | March 31, | |||||||||||
| (Dollars in millions, except per share amounts) | 2009 | 2008 | % Change | |||||||||
| Fee Revenue: | ||||||||||||
| Servicing fees | $ | 766 | $ | 960 | (20 | ) | % | |||||
| Management fees | 181 | 278 | (35 | ) | ||||||||
| Trading services | 245 | 366 | (33 | ) | ||||||||
| Securities finance | 181 | 303 | (40 | ) | ||||||||
| Processing fees and other | 49 | 54 | (9 | ) | ||||||||
| Total fee revenue | 1,422 | 1,961 | (27 | ) | ||||||||
| Net Interest Revenue: | ||||||||||||
| Interest revenue | 738 | 1,288 | (43 | ) | ||||||||
| Interest expense | 174 | 663 | (74 | ) | ||||||||
| Net interest revenue (1) | 564 | 625 | (10 | ) | ||||||||
| Gains (Losses) related to investment securities, net | 16 | (9 | ) | |||||||||
| Total revenue | 2,002 | 2,577 | (22.3 | ) | ||||||||
| Provision for loan losses | 84 | - | ||||||||||
| Expenses: | ||||||||||||
| Salaries and employee benefits | 731 | 1,062 | (31 | ) | ||||||||
| Information systems and communications | 161 | 155 | 4 | |||||||||
| Transaction processing services | 131 | 162 | (19 | ) | ||||||||
| Occupancy | 121 | 110 | 10 | |||||||||
| Merger and integration costs | 17 | 26 | (35 | ) | ||||||||
| Other | 143 | 259 | (45 | ) | ||||||||
| Total expenses | 1,304 | 1,774 | (26.5 | ) | ||||||||
| Income before income tax expense | 614 | 803 | (24 | ) | ||||||||
| Income tax expense | 138 | 273 | ||||||||||
| Net income | $ | 476 | $ | 530 | (10 | ) | ||||||
| Net income available to common shareholders | $ | 445 | $ | 530 | (16 | ) | ||||||
| Earnings Per Common Share: | ||||||||||||
| Basic (2) | $ | 1.03 | $ | 1.36 | (24 | ) | ||||||
| Diluted | 1.02 | 1.35 | (24 | ) | ||||||||
| Average Common Shares Outstanding (in thousands): | ||||||||||||
| Basic | 432,179 | 387,942 | ||||||||||
| Diluted | 435,299 | 393,647 | ||||||||||
Selected consolidated financial information presented above was prepared in accordance with accounting principles generally accepted in the United States.
| ||||||||||||
(1) Net interest revenue on a fully taxable-equivalent basis was $596 million and $648 million for the quarters ended March 31, 2009 and 2008, respectively. These amounts include taxable-equivalent adjustments of $32 million and $23 million for the quarters ended March 31, 2009 and 2008, respectively. | ||||||||||||
(2) Basic earnings per common share on distributed earnings were $.24 and $.23 for the quarters ended March 31, 2009 and 2008, respectively, and on undistributed earnings were $.79 and $1.13 for the quarters ended March 31, 2009 and 2008, respectively.
| ||||||||||||
| STATE STREET CORPORATION | ||||||||||||
| Earnings Press Release Addendum | ||||||||||||
| SELECTED CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||
| Quarters Ended March 31, 2009 and December 31, 2008 | ||||||||||||
| Quarters Ended | ||||||||||||
| March 31, | December 31, | |||||||||||
| (Dollars in millions, except per share amounts) | 2009 | 2008 | % Change | |||||||||
| Fee Revenue: | ||||||||||||
| Servicing fees | $ | 766 | $ | 842 | (9 | ) | % | |||||
| Management fees | 181 | 209 | (13 | ) | ||||||||
| Trading services | 245 | 418 | (41 | ) | ||||||||
| Securities finance | 181 | 329 | (45 | ) | ||||||||
| Processing fees and other | 49 | 83 | (41 | ) | ||||||||
| Total fee revenue | 1,422 | 1,881 | (24 | ) | ||||||||
| Net Interest Revenue: | ||||||||||||
| Interest revenue | 738 | 1,427 | (48 | ) | ||||||||
| Interest expense | 174 | 584 | (70 | ) | ||||||||
| Net interest revenue (1) | 564 | 843 | (33 | ) | ||||||||
| Gains (Losses) related to investment securities, net | 16 | (51 | ) | |||||||||
| Total revenue | 2,002 | 2,673 | (25.1 | ) | ||||||||
| Provision for loan losses | 84 | - | ||||||||||
| Expenses: | ||||||||||||
| Salaries and employee benefits | 731 | 698 | 5 | |||||||||
| Information systems and communications | 161 | 163 | (1 | ) | ||||||||
| Transaction processing services | 131 | 145 | (10 | ) | ||||||||
| Occupancy | 121 | 124 | (2 | ) | ||||||||
| Provision for investment account infusion | - | 450 | ||||||||||
| Restructuring charges | - | 306 | ||||||||||
| Merger and integration costs | 17 | 27 | (37 | ) | ||||||||
| Other | 143 | 398 | (64 | ) | ||||||||
| Total expenses | 1,304 | 2,311 | (43.6 | ) | ||||||||
| Income before income tax expense | 614 | 362 | 70 | |||||||||
| Income tax expense | 138 | 106 | ||||||||||
| Net income | $ | 476 | $ | 256 | 86 | |||||||
| Net income available to common shareholders | $ | 445 | $ | 234 | 90 | |||||||
| Earnings Per Common Share: | ||||||||||||
| Basic (2) | $ | 1.03 | $ | .54 | 91 | |||||||
| Diluted | 1.02 | .54 | 89 | |||||||||
| Average Common Shares Outstanding (in thousands): | ||||||||||||
| Basic | 432,179 | 431,042 | ||||||||||
| Diluted | 435,299 | 431,902 | ||||||||||
Selected consolidated financial Information presented above was prepared in accordance with accounting principles generally accepted in the United States. | ||||||||||||
(1) Net interest revenue on a fully taxable-equivalent basis was $596 million and $871 million for the quarters ended March 31, 2009 and December 31, 2008, respectively. These amounts include taxable-equivalent adjustments of $32 million and $28 million for the quarters ended March 31, 2009 and December 31, 2008, respectively. | ||||||||||||
(2) Basic earnings per common share on distributed earnings were $.24 for each of the quarters ended March 31, 2009 and December 31, 2008, and on undistributed earnings were $.79 and $.30 for the quarters ended March 31, 2009 and December 3, 2008, respectively. | ||||||||||||
| STATE STREET CORPORATION | ||||||||||||
| Earnings Press Release Addendum | ||||||||||||
| SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION | ||||||||||||
| Quarters Ended March 31, 2009 and March 31, 2008 | ||||||||||||
Quarters Ended(1) | ||||||||||||
| March 31, | March 31, | |||||||||||
| (Dollars in millions, except per share amounts) | 2009 | 2008 | % Change | |||||||||
| Fee Revenue: | ||||||||||||
| Servicing fees | $ | 766 | $ | 960 | (20 | ) | % | |||||
| Management fees | 181 | 278 | (35 | ) | ||||||||
| Trading services | 245 | 366 | (33 | ) | ||||||||
| Securities finance | 181 | 303 | (40 | ) | ||||||||
| Processing fees and other | 49 | 54 | (9 | ) | ||||||||
| Total fee revenue | 1,422 | 1,961 | (27 | ) | ||||||||
| Net Interest Revenue: | ||||||||||||
| Interest revenue, operating basis | 746 | 1,311 | (43 | ) | ||||||||
| Interest expense | 157 | 663 | (76 | ) | ||||||||
| Net interest revenue, operating basis | 589 | 648 | (9 | ) | ||||||||
| Gains (Losses) related to investment securities, net | 16 | (9 | ) | |||||||||
| Total revenue, operating basis (2) | 2,027 | 2,600 | (22.0 | ) | ||||||||
| Provision for loan losses | 84 | - | ||||||||||
| Expenses: | ||||||||||||
| Salaries and employee benefits | 731 | 1,062 | (31 | ) | ||||||||
| Information systems and communications | 161 | 155 | 4 | |||||||||
| Transaction processing services | 131 | 162 | (19 | ) | ||||||||
| Occupancy | 121 | 110 | 10 | |||||||||
| Other | 143 | 259 | (45 | ) | ||||||||
| Total expenses, operating basis (2) | 1,287 | 1,748 | (26.4 | ) | ||||||||
| Income before income tax expense, operating basis | 656 | 852 | (23 | ) | ||||||||
| Income tax expense, operating basis | 142 | 282 | ||||||||||
| Tax-equivalent adjustment | 32 | 23 | ||||||||||
| Net income, operating basis | $ | 482 | $ | 547 | (12 | ) | ||||||
| Net income available to common shareholders, operating basis | $ | 451 | $ | 547 | (18 | ) | ||||||
| Diluted earnings per common share, operating basis | $ | 1.04 | $ | 1.39 | (25 | ) | ||||||
| Average diluted common shares outstanding (in thousands) | 435,299 | 393,647 | ||||||||||
| Return on common equity, operating basis | 15.9 | % | 19.4 | % | ||||||||
| (1) Refer to the accompanying reconciliation of reported results to operating-basis results. | ||||||||||||
(2) For the quarter ended March 31, 2009, positive operating leverage in the year-over-year comparison was 440 basis points, based on a decline in total operating-basis revenue of 22.0% and a decline in total operating-basis expenses of 26.4%. | ||||||||||||
| STATE STREET CORPORATION | ||||||||||||
| Earnings Press Release Addendum | ||||||||||||
| SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION | ||||||||||||
| Quarters Ended March 31, 2009 and December 31, 2008 | ||||||||||||
| Quarters Ended (1) | ||||||||||||
| March 31, | December 31, | |||||||||||
| (Dollars in millions, except per share amounts) | 2009 | 2008 | % Change | |||||||||
| Fee Revenue: | ||||||||||||
| Servicing fees | $ | 766 | $ | 842 | (9 | ) | % | |||||
| Management fees | 181 | 209 | (13 | ) | ||||||||
| Trading services | 245 | 418 | (41 | ) | ||||||||
| Securities finance | 181 | 329 | (45 | ) | ||||||||
| Processing fees and other | 49 | 83 | (41 | ) | ||||||||
| Total fee revenue | 1,422 | 1,881 | (24 | ) | ||||||||
| Net Interest Revenue: | ||||||||||||
| Interest revenue, operating basis | 746 | 1,133 | (34 | ) | ||||||||
| Interest expense | 157 | 322 | (51 | ) | ||||||||
| Net interest revenue, operating basis | 589 | 811 | (27 | ) | ||||||||
| Gains (Losses) related to investment securities, net | 16 | (51 | ) | |||||||||
| Total revenue, operating basis (2) | 2,027 | 2,641 | (23.2 | ) | ||||||||
| Provision for loan losses | 84 | - | ||||||||||
| Expenses: | ||||||||||||
| Salaries and employee benefits | 731 | 698 | 5 | |||||||||
| Information systems and communications | 161 | 163 | (1 | ) | ||||||||
| Transaction processing services | 131 | 145 | (10 | ) | ||||||||
| Occupancy | 121 | 124 | (2 | ) | ||||||||
| Other | 143 | 398 | (64 | ) | ||||||||
| Total expenses, operating basis (2) | 1,287 | 1,528 | (15.8 | ) | ||||||||
| Income before income tax expense, operating basis | 656 | 1,113 | (41 | ) | ||||||||
| Income tax expense | 142 | 383 | ||||||||||
| Tax-equivalent adjustment | 32 | 28 | ||||||||||
| Net income, operating basis | $ | 482 | $ | 702 | (31 | ) | ||||||
| Net income available to common shareholders, operating basis | $ | 451 | $ | 680 | (34 | ) | ||||||
| Diluted earnings per common share, operating basis | $ | 1.04 | $ | 1.58 | (34.2 | ) | ||||||
| Average diluted common shares outstanding (in thousands) | 435,299 | 431,902 | ||||||||||
| Return on common equity, operating basis | 15.9 | % | 24.3 | % | ||||||||
| (1) Refer to the accompanying reconciliation of reported results to operating-basis results. | ||||||||||||
(2) For the quarter ended March 31, 2009, negative operating leverage in the quarter-over-quarter comparison was 740 basis points, based on a decline in total operating-basis revenue of 23.2% and a decline in total operating-basis expenses of 15.8%. | ||||||||||||
| STATE STREET CORPORATION | ||||||||||||||||||||||||||
| Earnings Press Release Addendum | ||||||||||||||||||||||||||
| RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS | ||||||||||||||||||||||||||
| Quarters Ended March 31, 2009 and March 31, 2008 | ||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Quarter Ended March 31, 2009 | Quarter Ended March 31, 2008 | ||||||||||||||||||||||||
| Reported | Operating | Reported | Operating | |||||||||||||||||||||||
| Results | Adjustments | Results | Results | Adjustments | Results | |||||||||||||||||||||
| Fee Revenue: | ||||||||||||||||||||||||||
| Servicing fees | $ | 766 | $ | 766 | $ | 960 | $ | 960 | ||||||||||||||||||
| Management fees | 181 | 181 | 278 | 278 | ||||||||||||||||||||||
| Trading services | 245 | 245 | 366 | 366 | ||||||||||||||||||||||
| Securities finance | 181 | 181 | 303 | 303 | ||||||||||||||||||||||
| Processing fees and other | 49 | 49 | 54 | 54 | ||||||||||||||||||||||
| Total fee revenue | 1,422 | 1,422 | 1,961 | 1,961 | ||||||||||||||||||||||
| Net Interest Revenue: | ||||||||||||||||||||||||||
| Interest revenue | 738 | $ | 8 | (1) | 746 | 1,288 | $ | 23 | (5) | 1,311 | ||||||||||||||||
| Interest expense | 174 | (17 | ) | (2) | 157 | 663 | - | 663 | ||||||||||||||||||
| Net interest revenue | 564 | 25 | 589 | 625 | 23 | 648 | ||||||||||||||||||||
| Gains (Losses) related to investment securities, net | 16 | - | 16 | (9 | ) | - | (9 | ) | ||||||||||||||||||
| Total revenue | 2,002 | 25 | 2,027 | 2,577 | 23 | 2,600 | ||||||||||||||||||||
| Provision for loan losses | 84 | - | 84 | - | - | - | ||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Salaries and employee benefits | 731 | - | 731 | 1,062 | - | 1,062 | ||||||||||||||||||||
| Information systems and communications | 161 | - | 161 | 155 | - | 155 | ||||||||||||||||||||
| Transaction processing services | 131 | - | 131 | 162 | - | 162 | ||||||||||||||||||||
| Occupancy | 121 | - | 121 | 110 | - | 110 | ||||||||||||||||||||
| Merger and integration costs | 17 | (17 | ) | (3) | - | 26 | (26 | ) | (3) | - | ||||||||||||||||
| Other | 143 | - | 143 | 259 | - | 259 | ||||||||||||||||||||
| Total expenses | 1,304 | (17 | ) | 1,287 | 1,774 | (26 | ) | 1,748 | ||||||||||||||||||
| Income before income taxes | 614 | 42 | 656 | 803 | 49 | 852 | ||||||||||||||||||||
| Income tax expense | 138 | 4 | (4) | 142 | 273 | 9 | (6) | 282 | ||||||||||||||||||
| Tax-equivalent adjustment | - | 32 | (5) | 32 | - | 23 | (5) | 23 | ||||||||||||||||||
| Net income | $ | 476 | $ | 6 | $ | 482 | $ | 530 | $ | 17 | $ | 547 | ||||||||||||||
| Net income available to common shareholders | $ | 445 | $ | 6 | $ | 451 | $ | 530 | $ | 17 | $ | 547 | ||||||||||||||
| Diluted earnings per common share | $ | 1.02 | $ | .02 | $ | 1.04 | $ | 1.35 | $ | .04 | $ | 1.39 | ||||||||||||||
| Average diluted common shares outstanding (in thousands) | 435,299 | 435,299 | 435,299 | 393,647 | 393,647 | 393,647 | ||||||||||||||||||||
| Return on common equity | 15.7 | % | 0.2 | % | 15.9 | % | 18.7 | % | 0.7 | % | 19.4 | % | ||||||||||||||
| Reported results reflect State Street's consolidated statement of income prepared in accordance with accounting principles generally accepted in the United States. | ||||||||||||||||||||||||||
(1) Represents tax-equivalent adjustment of $32 million, which is not included in reported results, net of $24 million of revenue related to the Boston Federal Reserve Bank's Asset-Backed Commercial Paper Money Market Liquidity Facility (AMLF). | ||||||||||||||||||||||||||
| (2) Represents interest expense related to the AMLF. | ||||||||||||||||||||||||||
(3) Represents merger and integration costs recorded in connection with the July 2007 acquisition of Investors Financial, which are direct and incremental costs associated with the acquisition and do not include ongoing expenses of the combined organization. | ||||||||||||||||||||||||||
| (4) Represents $3 million of income tax expense related to the AMLF net of $7 million of income tax benefit related to merger and integration costs. | ||||||||||||||||||||||||||
| (5) Represents tax-equivalent adjustment, which is not included in reported results. | ||||||||||||||||||||||||||
| (6) Represents income tax benefit related to merger and integration costs. | ||||||||||||||||||||||||||
| STATE STREET CORPORATION | ||||||||||||||
| Earnings Press Release Addendum | ||||||||||||||
| RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS | ||||||||||||||
| Quarter Ended December 31, 2008 | ||||||||||||||
| (Dollars in millions, except per share amounts) | Quarter Ended December 31, 2008 | |||||||||||||
| Reported | Operating | |||||||||||||
| Results | Adjustments | Results | ||||||||||||
| Fee Revenue: | ||||||||||||||
| Servicing fees | $ | 842 | $ | 842 | ||||||||||
| Management fees | 209 | 209 | ||||||||||||
| Trading services | 418 | 418 | ||||||||||||
| Securities finance | 329 | 329 | ||||||||||||
| Processing fees and other | 83 | 83 | ||||||||||||
| Total fee revenue | 1,881 | 1,881 | ||||||||||||
| Net Interest Revenue: | ||||||||||||||
| Interest revenue | 1,427 | $ | (294 | ) | (1) | 1,133 | ||||||||
| Interest expense | 584 | (262 | ) | (2) | 322 | |||||||||
| Net interest revenue | 843 | (32 | ) | 811 | ||||||||||
| Gains (Losses) related to investment securities, net | (51 | ) | - | (51 | ) | |||||||||
| Total revenue | 2,673 | (32 | ) | 2,641 | ||||||||||
| Provision for loan losses | - | - | - | |||||||||||
| Expenses: | ||||||||||||||
| Salaries and employee benefits | 698 | - | 698 | |||||||||||
| Information systems and communications | 163 | - | 163 | |||||||||||
| Transaction processing services | 145 | - | 145 | |||||||||||
| Occupancy | 124 | - | 124 | |||||||||||
| Provision for investment account infusion | 450 | (450 | ) | (3) | - | |||||||||
| Restructuring charges | 306 | (306 | ) | (4) | - | |||||||||
| Merger and integration costs | 27 | (27 | ) | (5) | - | |||||||||
| Other | 398 | - | 398 | |||||||||||
| Total expenses | 2,311 | (783 | ) | 1,528 | ||||||||||
| Income before income taxes | 362 | 751 | 1,113 | |||||||||||
| Income tax expense | 106 | 277 | (6) | 383 | ||||||||||
| Tax-equivalent adjustment | - | 28 | (7) | 28 | ||||||||||
| Net income | $ | 256 | $ | 446 | $ | 702 | ||||||||
| Net income available to common shareholders | $ | 234 | $ | 446 | $ | 680 | ||||||||
| Diluted earnings per common share | $ | .54 | $ | 1.04 | $ | 1.58 | ||||||||
| Average diluted common shares outstanding (in thousands) | 431,902 | 431,902 | 431,902 | |||||||||||
| Return on common equity | 8.4 | % | 15.9 | % | 24.3 | % | ||||||||
Reported results reflect State Street's consolidated statement of income prepared in accordance with accounting principles generally accepted in the United States. | ||||||||||||||
(1) Represents tax-equivalent adjustment of $28 million, which is not included in reported results, net of $322 million of revenue related to the AMLF. | ||||||||||||||
| (2) Represents interest expense related to the AMLF. | ||||||||||||||
| (3) Represents a charge associated with SSgA Stable Value Funds. | ||||||||||||||
| (4)Represents restructuring charges associated with reduction in workforce and other cost initiatives. | ||||||||||||||
(5) Represents merger and integration costs recorded in connection with the July 2007 acquisition of Investors Financial, which are direct and incremental costs associated with the acquisition and do not include ongoing expenses of the combined organization. | ||||||||||||||
(6) Represents $24 million of income tax expense related to the AMLF, net of $180 million of income tax benefit related to SSgA Stable Value Funds, $112 million of income tax benefit related to restructuring charges, and $9 million of income tax benefit related to merger and integration costs. | ||||||||||||||
| (7) Represents tax-equivalent adjustment, which is not included in reported results. | ||||||||||||||
| STATE STREET CORPORATION | |||||||||||||
| Press Release Addendum | |||||||||||||
| CONSOLIDATED STATEMENT OF CONDITION | |||||||||||||
| March 31, | December 31, | March 31, | |||||||||||
| (Dollars in millions, except per share amounts) | 2009 | 2008 | 2008 | ||||||||||
| Assets | |||||||||||||
| Cash and due from banks | $ | 3,539 | $ | 3,181 | $ | 6,349 | |||||||
| Interest-bearing deposits with banks | 34,906 | 55,733 | 13,540 | ||||||||||
| Securities purchased under resale agreements | 1,291 | 1,635 | 19,958 | ||||||||||
| Federal funds sold | - | - | 3,290 | ||||||||||
| Trading account assets | 4,872 | 815 | 857 | ||||||||||
| Investment securities available for sale | 54,295 | 54,163 | 68,009 | ||||||||||
| Investment securities held to maturity purchased under money | |||||||||||||
| market liquidity facility | 740 | 6,087 | - | ||||||||||
| Investment securities held to maturity | 15,439 | 15,767 | 4,295 | ||||||||||
| Loans and leases (net of allowance of $94, $18 and $18) | 7,644 | 9,113 | 14,886 | ||||||||||
| Premises and equipment | 2,029 | 2,011 | 1,965 | ||||||||||
| Accrued income receivable | 1,498 | 1,738 | 2,090 | ||||||||||
| Goodwill | 4,493 | 4,527 | 4,533 | ||||||||||
| Other intangible assets | 1,809 | 1,851 | 1,953 | ||||||||||
| Other assets | 9,589 | 17,010 | 12,624 | ||||||||||
| Total assets | $ | 142,144 | $ | 173,631 | $ | 154,349 | |||||||
| Liabilities | |||||||||||||
| Deposits: | |||||||||||||
| Noninterest-bearing | $ | 13,247 | $ | 32,785 | $ | 19,054 | |||||||
| Interest-bearing -- U.S. | 12,691 | 4,558 | 15,070 | ||||||||||
| Interest-bearing -- Non-U.S. | 57,978 | 74,882 | 70,583 | ||||||||||
| Total deposits | 83,916 | 112,225 | 104,707 | ||||||||||
| Securities sold under repurchase agreements | 10,388 | 11,154 | 13,441 | ||||||||||
| Federal funds purchased | 1,402 | 1,082 | 1,225 | ||||||||||
| Short-term borrowings under money market liquidity facility | 740 | 6,042 | - | ||||||||||
| Other short-term borrowings | 15,646 | 11,555 | 6,371 | ||||||||||
| Accrued taxes and other liabilities | 7,789 | 14,380 | 13,637 | ||||||||||
| Long-term debt | 8,405 | 4,419 | 4,162 | ||||||||||
| Total liabilities | 128,286 | 160,857 | 143,543 | ||||||||||
| Shareholders' Equity | |||||||||||||
| Preferred stock, no par: authorized 3,500,000; 20,000 shares | |||||||||||||
| issued and outstanding | 1,889 | 1,883 | - | ||||||||||
| Common stock, $1 par: authorized 750,000,000 shares; | |||||||||||||
| 434,798,034, 431,976,032 and 398,366,326 shares issued | 435 | 432 | 398 | ||||||||||
| Surplus | 6,964 | 6,992 | 4,455 | ||||||||||
| Retained earnings | 9,575 | 9,135 | 8,185 | ||||||||||
| Accumulated other comprehensive loss | (4,987 | ) | (5,650 | ) | (1,658 | ) | |||||||
| Treasury stock (at cost 421,803, 418,354 and 8,047,683 shares) | (18 | ) | (18 | ) | (574 | ) | |||||||
| Total shareholders' equity | 13,858 | 12,774 | 10,806 | ||||||||||
| Total liabilities and shareholders' equity | $ | 142,144 | $ | 173,631 | $ | 154,349 | |||||||
CONTACT:
Edward J. Resch, 617-664-1110
or
Investors:
State Street Corporation
Kelley MacDonald, 617-664-3477
or
Media:
Hannah Grove, 617-664-3377
