Exhibit 99.1
State Street Corporation Announces First-Quarter Results
BOSTON--(BUSINESS WIRE)--April 13, 2004--State Street Corporation
announced today first-quarter earnings per diluted share of $0.63, or
net income of $217 million, on revenue of $1.2 billion. These results
compare to earnings per diluted share of $0.29, or net income of $96
million, on revenue of $1.0 billion in the first quarter of last year.
Total expenses in the first quarter of 2004 of $908 million are up $74
million compared to the year-ago quarter.
Results for the first quarter of 2004 include pre-tax merger and
integration costs of $18 million, or $0.04 per diluted share due to
the continuing integration of the Deutsche Bank Global Securities
Services business (GSS), acquired in January, 2003. Results for the
first quarter of 2003 included pre-tax merger and integration costs of
$37 million, or $0.07 per diluted share, related to the GSS
acquisition and an after tax charge of $25 million, or $0.08 per
diluted share, related to a tax matter with the Commonwealth of
Massachusetts. First quarter 2003 results also include the operating
results of the divested Private Asset Management business.
For the first quarter of 2004, return on stockholders' equity was
14.8% compared to 10.0% for 2003.
In reporting its financial results, State Street has prepared
information in two categories:
-- "Reported" results are in accordance with generally accepted
accounting principles (GAAP).
-- "Operating" results are "reported" results excluding merger
and integration costs, the impact of the state tax matter in
2003, and the results of divested businesses. They are
presented on a taxable-equivalent basis.
State Street believes that non-GAAP financial information assists
investors and others by providing them with financial information in a
format that presents comparable financial trends of ongoing business
activities.
Operating earnings per share for the first quarter were $0.67, up
56% compared to operating earnings per share of $0.43 for the first
quarter of 2003. Operating results for 2003 have been reduced from the
previously reported $0.44 per share reflecting the impact of the
divested Private Asset Management business.
Operating revenue of $1.2 billion in the first quarter of 2004 was
up 21% from the first quarter of 2003, primarily due to increases in
servicing and management fees, foreign exchange, brokerage fees, and
processing fees and other, offset in part by lower securities gains.
Operating expenses of $890 million in the first quarter of 2004 were
up $105 million, or 13%, from the first quarter of 2003. This
comparison reflects two months of recorded operating activity for the
GSS business acquired on January 31, 2003, compared with three full
months in 2004. Return on stockholders' equity on an operating basis
was 15.6% for the quarter.
The following table summarizes State Street's reported and
operating results for the first quarters of 2004 and 2003. Detailed
information is available in the Addendum Selected Financial
Information tables included with this press release.
Dollars in millions, except per share data; shares in
millions
For the three months ended
March 31, 2004 March 31, 2003
Reported Operating(a) Reported Operating(b)
----------------------- -----------------------
Fee revenue $1,013 $1,013 $790 $772
All other
revenue 206 217 230 243
----------------------- -----------------------
Total revenue 1,219 1,230 1,020 1,015
Total
expenses 908 890 834 785
Taxes 94 112 90 89
----------------------- -----------------------
Net income $217 $228 $96 $141
======================= =======================
Diluted eps $0.63 $0.67 $0.29 $0.43
Diluted
shares 342 342 332 332
(a) excludes merger and integration costs, presented on a
taxable-equivalent basis.
(b) excludes merger and integration costs, the results of the
divested Private Asset Management business, and the impact of a state
tax matter, presented on a taxable-equivalent basis.
David A. Spina, State Street's chairman and chief executive
officer, said, "I am pleased with our first-quarter performance. We
are winning a significant amount of new business, both from new
clients and from clients with whom we have long-term relationships. We
are beginning to see additional large wins in our investment
management outsourcing business and our equity execution business is
growing at a very encouraging pace. State Street Global Advisors
continues to achieve excellent results.
The integration of the Global Securities Services business is
continuing to run smoothly and is on track with regard to timing and
our financial projections. The acquisition of GSS was truly
transformational for State Street in strengthening our leadership
position in Europe. I believe we're also balancing our near-term
objective of cost containment with our need to make long-term
strategic investments. Based on our first-quarter results, I am
confident that we are stronger than ever and well positioned for the
future."
FIRST QUARTER RESULTS VS. YEAR-AGO QUARTER
The following review of specific revenue and expense categories
uses operating results to provide consistent comparable data to the
year-earlier period.
Servicing fees were up 27%, to $555 million from $438 million. The
increase was attributable to the extra month of GSS revenue, higher
equity market valuations, and new business from existing and new
clients in 2004. Total assets under custody were $9.4 trillion, up
19%, compared with $7.9 trillion in the year-ago quarter. Daily
average values for the S&P 500 Index were up 32% from the first
quarter of 2003; daily average values for the MSCI(R) EAFE Index(SM)
were up 46%.
Investment management fees, generated by State Street Global
Advisors, were $147 million, up 36% compared to $108 million a year
ago. Management fees reflected an increase in average month-end equity
valuations and continued new business success. Total assets under
management were $1.2 trillion, up 58%, compared to $788 billion the
previous year.
Securities lending revenue was $64 million in the quarter,
compared to $55 million in the year-ago quarter, an increase of 16%.
The increase in securities lending revenue reflects a 35% improvement
in volume of securities lent, partially offset by significantly
narrower interest-rate spreads.
Foreign exchange trading revenue was $118 million for the quarter,
compared to $72 million a year ago, a 63% increase. The increase was
attributable to significantly higher volatilities, reflecting higher
cross-border investment activities by our clients, and improved
volumes.
Brokerage fees were $45 million in the first quarter, up 51% from
$30 million a year ago due to an increase in transition management and
growth in electronic trade execution.
Processing fees and other increased $15 million, or 21% to $84
million primarily due to improved performance of the company's joint
ventures.
Net interest revenue was $214 million, a decrease of $3 million,
or 1%, from a year ago. Net interest revenue from leveraged leases in
the first quarter of 2004 included a $19 million reduction in interest
income due to a change in the applicable state tax rate. This charge
was partially offset by an increase in net interest revenue resulting
from a larger average balance sheet during the quarter.
Gains on the sale of securities of $3 million compares with gains
of $26 million from the year-ago quarter.
Operating expenses increased from $785 million to $890 million, up
$105 million, or 13%. Approximately half of the increase was due to
the extra month of GSS operations in 2004. Higher salaries and
benefits expenses were due to increased incentive compensation. The
increase in expenses also included higher transaction processing
services, due to substantially higher brokerage volumes and higher
occupancy expenses.
On an operating basis, the effective tax rate in the first quarter
of 2004 was 30%, compared to 35% in the first quarter of 2003. The
reduced effective state tax rate in the first quarter was due to an
$18 million benefit related to the leveraged lease state tax rate
adjustment. State Street's estimated full-year tax rate including this
adjustment is 33%, and is estimated to be 34% excluding this
adjustment.
FIRST-QUARTER RESULTS VS. FOURTH QUARTER
On a reported basis, first-quarter net income per diluted share of
$0.63, which included $18 million, or $0.04 per diluted share of
merger and integration charges, compares to a net income per diluted
share of $1.33 in the fourth quarter. Fourth quarter 2003 results
included a gain of $0.56 per diluted share on the sale of the Private
Asset Management business and $0.12 per diluted share due to the
settlement of the residual escrow from the 2002 sale of the Corporate
Trust business, offset by $0.06 per diluted share in merger and
integration charges. Total revenue in the first quarter of $1.2
billion is down 19% versus $1.5 billion in the fourth quarter which
included $345 million in gains on the sale of divested businesses.
Total expenses in the first quarter of $908 million are up $80 million
compared to the fourth quarter.
On an operating basis, first-quarter net income of $228 million,
or $0.67 per share, is down 6% from $239 million, or $0.71 per share
in the fourth quarter. First quarter 2004 included a gain of $4
million resulting from the final mark-to-market of a variable share
repurchase contract entered into in conjunction with the GSS
acquisition, compared with a mark-to-market gain of $23 million in the
fourth quarter of 2003. Fourth quarter 2003 results also included $19
million due to a settlement of a foreign exchange matter with Deutsche
Bank associated with the GSS operations. Revenue rose from $1.17
billion to $1.23 billion and expenses rose from $795 million to $890
million.
GSS ACQUISITION UPDATE
On an operating basis, State Street's 2004 first-quarter results
include $0.02 earnings per share, after finance charges, on revenues
of $160 million and expenses of $138 million, associated with the GSS
business. The first quarter of 2003 reflected a loss of $0.02 in
earnings per share after finance charges, on revenues of $92 million
and expenses of $92 million, excluding merger and integration costs.
The first quarter of 2003 represented two months of recorded activity
compared with the full quarter of activity in 2004.
To date, State Street has completed about 70% of the world-wide
client conversions, and we expect to be substantially complete by the
end of 2004. The pre-tax merger and integration costs associated with
the acquisition in the first quarter of 2004 totaled $18 million. The
Company expects pretax merger and integration costs related to these
conversions to be about $50 to $60 million this year.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Tuesday, April 13, 2004, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 719/457-2617 (confirmation code
565585). Recorded replays of the conference call will be available on
the web site, and by telephone at +1 402/220-4230, 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
specialist in providing institutional investors with investment
servicing, investment management and investment research and trading.
With $9.4 trillion in assets under custody and $1.2 trillion in assets
under management, State Street operates in 24 countries and more than
100 markets worldwide and employs 19,800 people 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 +1 202/266-3340 outside those countries.
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements about
the financial outlook and business environment. Those statements are
based on current expectations and involve a number of risks and
uncertainties, including those related to the pace at which State
Street adds new clients or at which existing clients use additional
services, the value of global and regional financial markets, the pace
of cross-border investment activity, changes in interest rates, the
pace of worldwide economic growth and rates of inflation, the extent
of volatility in currency markets, consolidations among clients and
competitors, State Street's business mix, the dynamics of markets
State Street serves, and State Street's success at integrating and
converting acquisitions into its business. 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 2003 annual report and subsequent SEC filings. State Street
encourages investors to read the Corporation's annual report,
particularly the section on factors that may affect financial results,
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, April 13, 2004, and the
company will not undertake efforts to revise those forward-looking
statements to reflect events after this date.
STATE STREET CORPORATION
Addendum Earnings Digest(1)
(Dollars in millions, except per share data)
Quarter ended March 31,
2004 2003 % Change
Revenue $1,219 $1,020 20
Earnings 217 96 125
Diluted earnings per share .63 .29 117
(1) Information presented in accordance with accounting principles
generally accepted in the United States
STATE STREET CORPORATION
Addendum Selected Financial Information
I. CONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH
ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
Reported Results
Quarter Ended March 31,
(Dollars in millions, except per share data) 2004 2003
Fee Revenue:
Servicing fees $ 555 $ 438
Management fees 147 125
Global securities lending 64 55
Foreign exchange trading 118 72
Brokerage fees 45 30
Processing fees and other 84 70
Total Fee Revenue 1,013 790
Net Interest Revenue:
Interest revenue 384 397
Interest expense 181 193
Net interest revenue 203 204
Provision for loan losses - -
Net interest revenue after provision for loan
losses 203 204
Gains on the sales of available-for-sale
investment securities, net 3 26
Total Revenue 1,219 1,020
Operating Expenses:
Salaries and employee benefits 462 443
Information systems and communications 139 130
Transaction processing services 96 72
Occupancy 90 71
Merger and integration costs 18 37
Other 103 81
Total operating expenses 908 834
Income before income taxes 311 186
Income taxes 94 90
Net Income $ 217 $ 96
Earnings Per Share:
Basic $ .65 $ .29
Diluted .63 .29
Average Shares Outstanding (in thousands):
Basic 334,635 329,569
Diluted 342,129 332,054
Return on equity 14.8% 10.0%
Cash dividends declared per share $ .15 $ .13
II. OTHER SELECTED FINANCIAL INFORMATION
Quarter ended
(Dollars in millions, except per share data or March 31,
where otherwise indicated) 2004 2003
Assets under custody (in billions) $ 9,422 $ 7,910
Assets under management (in billions) 1,241 788
Total assets $92,896 $79,109
Long-term debt 2,244 1,616
Stockholders' equity 5,942 5,051
Closing price per share of common stock $ 52.13 $ 31.63
STATE STREET CORPORATION
Addendum Selected Financial Information
III. SUPPLEMENTAL INCOME STATEMENT INFORMATION - RECONCILIATION OF
OPERATING RESULTS
Reconciliation of Financial Results
(Dollars in millions)
Quarter Ended March 31, 2004
Operating Reported
Results Other Results
Fee Revenue:
Servicing fees $ 555 $ 555
Management fees 147 147
Global securities lending 64 64
Foreign exchange trading 118 118
Brokerage fees 45 45
Processing fees and other 84 84
Total fee revenue 1,013 1,013
Net Interest Revenue:
Net Interest Revenue 214 $ (11) 203
Provision for loan losses - - -
Net interest revenue after provision
for loan losses 214 (11)(1) 203
Gains on the sales of available-for-
sale investment securities, net 3 - 3
Total Revenue 1,230 (11) 1,219
Operating Expenses:
Salaries and employee benefits 462 - 462
Information systems and
communications 139 - 139
Transaction processing services 96 - 96
Occupancy 90 - 90
Merger and integration costs - 18(2) 18
Other 103 - 103
Total operating expenses 890 18 908
Income before income taxes 340 (29) 311
Income taxes 101 (7)(3) 94
Taxable-equivalent adjustment 11 (11)(1) -
Net Income $ 228 $ (11) $ 217
Diluted Earnings Per Share $ .67 $(.04) $ .63
Average Diluted Shares (in
thousands) 342,129 342,129
Return on equity 15.6% 14.8%
Notes:
Reported results agree with the Corporation's Consolidated
Statement of Income.
(1) Taxable-equivalent adjustment is not included in reported
results.
(2) Merger and integration costs associated with the acquisition
of the GSS business.
(3) Reflects the tax benefit associated with the merger and
integration costs.
STATE STREET CORPORATION
Addendum Selected Financial Information
IV. SUPPLEMENTAL INCOME STATEMENT INFORMATION - OPERATING RESULTS YEAR
OVER YEAR COMPARISON
Operating results are a non-GAAP measure defined by State Street as
reported results excluding merger and integration costs, impact of a
state tax matter and results of a divested business and are presented
on a taxable-equivalent basis.
Operating Results
(Dollars in millions, except per share Quarter Ended March 31,
data) 2004 2003(1) % Change
Operating Fee Revenue:
Servicing fees $555 $438 27%
Management fees 147 108 36
Global securities lending 64 55 16
Foreign exchange trading 118 72 63
Brokerage fees 45 30 51
Processing fees and other 84 69 21
Total Operating Fee Revenue 1,013 772 31
Operating Net Interest Revenue:
Net Interest Revenue 214 217
Provision for loan losses - -
Operating net interest revenue after
provision for loan losses 214 217 (1)
(taxable-equivalent basis)
Gains on the sales of available-for-sale
investment securities, net 3 26 (89)
Total Operating Revenue 1,230 1,015 21
Expenses - Operating Results:
Salaries and employee benefits 462 436 6
Information systems and communications 139 130 7
Transaction processing services 96 72 33
Occupancy 90 70 29
Other 103 77 34
Total Expenses - Operating Results 890 785 13
Operating Income before income taxes 340 230 48
Income taxes 101 76
Taxable-equivalent adjustment 11 13
Net Operating Income $228 $141 63
Diluted Operating Earnings Per Share $.67 $.43 56
Notes:
(1) Reflects restatement of previously issued operating-basis
supplemental financial information to exclude the results of the
divested Private Asset Management business, including $18 million
of revenue, $12 million of expenses and $.01 in diluted operating
earnings per share.
STATE STREET CORPORATION
Addendum Consolidated Statement of Condition
March 31, December 31, March 31,
(Dollars in millions) 2004 2003 2003
Assets
Cash and due from banks $ 2,379 $ 3,376 $ 1,581
Interest-bearing deposits with
banks 27,228 21,738 21,007
Securities purchased under
resale agreements 13,968 9,447 14,221
Federal funds sold 1,000 104 1,450
Trading account assets 347 405 1,316
Investment securities 34,605 38,215 28,600
Loans (less allowance of $36,
$61 and $61) 4,968 4,960 4,639
Premises and equipment 1,238 1,212 948
Accrued income receivable 1,014 1,015 829
Goodwill 1,329 1,326 1,191
Other intangible assets 542 525 486
Other assets 4,278 5,211 2,841
Total Assets $92,896 $87,534 $79,109
Liabilities
Deposits:
Noninterest-bearing $ 9,352 $ 7,893 $ 7,026
Interest-bearing -- U.S. 6,826 5,062 6,114
Interest-bearing -- Non-U.S. 37,334 34,561 25,265
Total Deposits 53,512 47,516 38,405
Securities sold under repurchase
agreements 21,811 22,806 23,435
Federal funds purchased 2,083 1,019 4,690
Other short-term borrowings 1,434 1,437 2,004
Accrued taxes and other expenses 2,386 2,424 1,991
Other liabilities 3,484 4,363 1,917
Long-term debt 2,244 2,222 1,616
Total Liabilities 86,954 81,787 74,058
Stockholders' Equity
Preferred stock, no par:
authorized 3,500,000; issued
none
Common stock, $1 par: authorized
500,000,000; issued
337,130,000, 337,132,000 and
337,145,000 337 337 337
Surplus 298 329 305
Retained earnings 5,174 5,007 4,525
Accumulated other comprehensive
income 207 192 94
Treasury stock at cost (1,705,000,
2,658,000 and 4,749,000 shares) (74) (118) (210)
Total Stockholders' Equity 5,942 5,747 5,051
Total Liabilities and
Stockholders' Equity $92,896 $87,534 $79,109
CONTACT: State Street Corporation
Contact:
Edward J. Resch, 617-664-1110
Investors:
Kelley MacDonald, 617-664-3477
Media:
Hannah Grove, 617-664-3377