Exhibit 99.1
State Street Achieves Solid Growth in Revenues and Earnings Per Share in 2004
BOSTON--(BUSINESS WIRE)--Jan. 18, 2005--
Performance Driven by Strong New Business Growth, Improved Fee
Revenue, and Expanded Geographic Reach
State Street Corporation today announced 2004 fourth-quarter reported
earnings per share of $0.55, or net income of $184 million on revenue of $1.27
billion. These results compare to earnings of $1.33 per share, or net income of
$447 million on revenue of $1.51 billion in the fourth quarter of 2003. The 2003
fourth-quarter results included a $0.68 per share gain on the sale of certain
businesses. This pretax gain of $345 million was reported in 2003 fourth-quarter
revenue. For the fourth quarter of 2004, return on stockholders' equity on a
reported basis was 11.9%.
In the fourth quarter of 2004 operating earnings per share were $0.57,
compared to $0.71 in the fourth quarter of 2003. Several items affected
operating earnings per share in each period. In the fourth quarter of 2004,
operating earnings were reduced by the cost of the reduction in force ($21
million or $0.04 per share) and a loss on a sub-tenant agreement ($16 million or
$0.03 per share), and increased by a reduction in the loan loss provision ($18
million or $0.04 per share). These items resulted in an aggregate reduction of
$0.03 per share. In the fourth quarter of 2003, the company's operating earnings
of $0.71 included $0.04 per share gain from a FX contract settlement with
Deutsche Bank ($18 million) and a $0.07 per share mark-to-market after- tax gain
on SPACES(SM) ($23 million), aggregating an increase of $0.11 per share.
Total operating revenue of $1.28 billion in the fourth quarter of 2004 was
up 10% from the fourth quarter of 2003, principally due to strength in servicing
and management fees, and included an $18 million reduction in the loan loss
provision. The fourth quarter of 2004 was up 8% from $1.18 billion in the third
quarter of 2004 due to a rebound in foreign exchange, brokerage, and securities
lending revenue. Total expenses on an operating basis of $980 million in the
fourth quarter of 2004, including the $21 million cost of the reduction in force
and $16 million due to the loss on a sub-tenant arrangement, were up from $795
million in the fourth quarter of 2003 and up from $890 million in the third
quarter of 2004. Return on stockholders' equity on an operating basis was 12.4%
for the fourth quarter of 2004.
Reported earnings for the full-year 2004 amounted to $2.35 per share, or
net income of $798 million on revenue of $4.95 billion. This result compares to
2003 earnings per share of $2.15, or net income of $722 million on revenue of
$4.73 billion. The 2004 results include $62 million for merger and integration
costs or $0.12 per share; in 2003, merger, integration and divestiture costs,
restructuring charges, and other charges total to $419 million, or $0.82 per
share, plus a $0.04 reduction in earnings per share due to the settlement of a
state tax issue; and 2003 results include a gain of $345 million, or $.68 per
share, on the sale of two businesses and $23 million, or $0.04 per share,
attributable to related operating results. Total reported expenses were $3.76
billion in 2004 compared to $3.62 billion in 2003. Total return on stockholders
equity on a reported basis was 13.3% in 2004 and 13.9% in 2003.
Operating earnings for the full-year 2004 amounted to $2.47 per share, or
net operating income of $839 million. This result compares to 2003 operating
earnings per share of $2.29, or net operating income of $768 million. Total
operating revenue for the year ended December 31, 2004 was up 14%, from $4.39
billion to $5.00 billion, compared to the same period a year ago. Operating
expenses for same period were $3.70 billion, an increase of 16% from $3.18
billion in the year-ago period. Return on equity on an operating basis for 2004
was 14.0% and 14.8% in 2003.
Commenting on the performance, Ronald E. Logue, State Street's chairman and
chief executive officer, said, "In 2004 State Street again demonstrated its
ability to grow its operating revenue--up 14% from 2003, with strength across
the company, particularly in servicing and management fees. We also saw strong
business growth in both Europe and Asia Pacific fueled in part by the expanded
footprint we gained from the successful GSS acquisition and increased customer
demand in those regions for an integrated bundle of investment services. At the
same time, operating earnings per share increased 8% year-over-year and, in the
second half of the year, we made progress toward more efficiently managing
expenses and allocating resources. "
Logue concluded, "We will continue to balance our objectives for growth
with delivering consistency in operating earnings per share in a slow growth
environment. While we may not produce positive operating leverage every quarter,
prudent expense management will be a continuing focus. Having announced our 2005
goals in November 2004, we expect operating earnings per share growth of 10-15%,
operating revenue growth of 8-12%, and an operating return on equity of 14-17%.
In 2005, we continue to expect to deliver at the lower end of this range based
on the current environment."
State Street purchased approximately 4 million shares of its common stock
during the fourth quarter at an average price of $43.37 per share. The Company's
remaining authorization to purchase shares is now approximately 4.3 million
shares.
FOURTH-QUARTER OPERATING RESULTS VS. YEAR-AGO QUARTER
Total operating revenue of $1.28 billion in the fourth quarter of 2004,
which includes $18 million for the reduction in the loan loss provision, was up
from $1.17 billion or 10% from the fourth quarter of 2003 which included the $18
million FX contract settlement with Deutsche Bank and the $23 million
mark-to-market after-tax gain on SPACES(SM) referenced above.
Servicing fees were $570 million, up $45 million or 9%, from $525 million
in the year-ago quarter. The increase was attributable to new business from
existing and new clients and higher equity valuations in 2004. Total assets
under custody were $9.5 trillion, a record level, up 1%, compared with $9.4
trillion in the year-ago quarter.
Management fees, generated by State Street Global Advisors, were $167
million, up $34 million, or 26%, compared to $133 million in the year-ago
quarter. The increase in management fees reflects new business from existing and
new clients and higher equity valuations in 2004. Total assets under management
were at a record level, $1.4 trillion, up 22%, compared to $1.1 trillion in the
previous year.
Average month-end values for the S&P 500 Index were up 9% from the fourth
quarter of 2003; average month-end values for the MSCI(R) EAFE Index(SM) were up
18%.
Securities lending revenue was $58 million in the quarter, compared to $53
million in the year-ago quarter, an increase of 9%. The increase reflects higher
volumes of 16%, offset by reduced spreads.
Foreign exchange trading revenue of $111 million in the quarter, declined
3%, or $4 million from $115 million in the year-ago quarter because the fourth
quarter of 2003 included the $18 million FX contract settlement with Deutsche
Bank. This decrease was partially offset by increased volumes and volatility in
the fourth quarter of 2004.
Brokerage fees were $43 million in the quarter, compared to $37 million in
the year-ago quarter, up 16% due to increases in transition management.
Net interest revenue was $229 million, up 3% from $222 million in last
year's fourth quarter, due to balance sheet growth driven by a higher level of
customer's deposits, offset by reduced spreads. Net interest revenue, after
provision for loan losses, was $247 million, which included an $18 million
reduction in the loan loss provision.
Total expenses on an operating basis of $980 million in the fourth quarter
of 2004, which included the impact of the loss on a sub-tenant agreement and
cost of the reduction in force, were up 23% from the fourth quarter of 2003.
Salaries and benefits expenses increased $75 million to $511 million, driven
principally by the higher incentive compensation, option expenses, merit
increases, and benefits costs. Expenses for transaction processing increased $21
million to $104 million due to increased volumes. Higher expenses also included
a $33 million increase in occupancy, primarily due to the impact of the $16
million loss on a sub-tenant arrangement, and an increase of $45 million in
other expense driven primarily by increased professional services expenses
needed to support growth initiatives and compliance requirements.
The effective tax rate was 34% in the fourth quarters of 2004 and 2003.
FOURTH-QUARTER RESULTS VS. THIRD QUARTER
On a reported basis, fourth-quarter net income per share of $0.55, which
included $12 million, or $0.02 per share of merger and integration charges, was
up 6%, or $0.03, compared to third quarter net income per share of $0.52, which
included $16 million, or $0.03 per share of merger and integration charges.
Total revenue in the fourth quarter of $1.27 billion was up 8% versus $1.17
billion in the third quarter. Total expenses in the fourth quarter of $992
million were up 9%, or $86 million, compared to $906 million in the third
quarter.
On an operating basis, fourth-quarter net income per share was $0.57,
compared to third-quarter net income per share of $0.55. Total operating revenue
increased 8% from $1.18 billion in the third quarter to $1.28 billion, including
the reduction in the loan loss provision. Total expenses on an operating basis
increased 10% from $890 million to $980 million, which included the loss on a
sub-tenant agreement and costs of the reduction in force. Market-driven revenue
was particularly strong--with foreign exchange increasing 48% to $111 million,
and brokerage increasing 39% to $43 million. Securities lending revenue also
strengthened to $58 million, up from $48 million or 21%. Salaries and benefits
were up 8% due to increased incentive compensation and transaction processing
increased 9% due to volumes.
GSS ACQUISITION UPDATE
Fourth-quarter operating results for 2004 included $0.02 earnings per
share, after finance charges, on revenue of $141 million and expenses of $118
million, which includes "out-of-scope" GSS business. For the twelve months ended
December 31, 2004, operating earnings per share totaled $0.10 on revenue of $606
million. Merger and integration costs for the fourth quarter were $12 million
and totaled $62 million in 2004.
FINANCIAL INFORMATION
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 for the three- and
twelve-month periods in 2004 excluding merger and integration costs,
and for the three- and twelve-month periods in 2003 excluding gains on
the sale of divested businesses, merger, integration and divestiture
costs, restructuring costs, and the operating results of a divested
business, and for the twelve-month period in 2003, the loss on the
sale of certain real estate and the settlement of a state tax
legislation issue. Operating results 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. Please
refer to the attached addendum for additional information. All per share amounts
represent fully diluted earnings per share.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today, Tuesday,
January 18, 2005, at 9:30 a.m. EST, available at
www.statestreet.com/stockholder. The conference call will also be available via
telephone, at +1 719/457-2617 (confirmation code 897986). Recorded replays of
the conference call will be available on the web site, and by telephone at +1
402/220-4230 (confirmation code 897986), 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 $9.5 trillion in assets
under custody and $1.4 trillion in assets under management at December 31, 2004,
State Street operates in 25 countries and more than 100 markets worldwide and
employs 19,600 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, January 18, 2005, and the
Corporation will not undertake efforts to revise those forward-looking
statements to reflect events after this date.
STATE STREET CORPORATION
Press Release Addendum
December 31, 2004
Table of Contents
Page
----
Reported Earnings Review
Summary of Reported Results 1
Selected Reported Financial Information
Three months and year ended December 31, 2004 and 2003 2
Three months ended December 31, 2004 and September 30, 2004 3
Supplemental Financial Information
Reconciliation of Reported Results to Operating Results
Three months ended December 31, 2004 and 2003 4
Three months ended December 31, 2004 and September 30, 2004 5
Year ended December 31, 2004 and 2003 6
Reconciliation of Reported Financial Measures to Operating
Financial Measures 7
Consolidated Operating Results
Three months and year ended December 31, 2004 and 2003 8
Three months ended December 31, 2004 and September 30, 2004 9
Consolidated Statement of Condition 10
These financial schedules should be used in conjunction with State
Street's quarterly earnings press release. State Street believes
that non-GAAP supplemental financial information assists investors
and others by providing them with financial information in a
format that presents comparable financial trends of ongoing
business activities.
STATE STREET CORPORATION
Press Release Addendum
SUMMARY OF REPORTED RESULTS (1)
(Dollars in millions, except per share data)
Quarter ended
------------------------------
December 31, December 31,
2004 2003
--------------- ------------
Revenue $1,271 $1,506
Earnings 184 447
Diluted earnings per share .55 1.33
Quarter ended
----------------------------------
December 31, September 30,
2004 2004
--------------- ------------
Revenue $1,271 $1,174
Earnings 184 177
Diluted earnings per share .55 .52
Year ended
----------------------
December 31, December 31,
2004 2003
--------------- ------------
Revenue $4,951 $4,734
Earnings 798 722
Diluted earnings per share 2.35 2.15
- -------------------------------------------------------------------
(1) Information presented in accordance with accounting principles
generally accepted in the United States
STATE STREET CORPORATION
Press Release Addendum
SELECTED REPORTED FINANCIAL INFORMATION
Three months and year ended December 31, 2004 and 2003
CONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH
ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
Reported Results Reported Results
Quarter ended Year ended
------------------- --------------------
December December December December
(Dollars in millions, except 31, 31, 31, 31,
per share data) 2004 2003 2004 2003
- ------------------------------------------------ --------------------
Fee Revenue:
Servicing fees $ 570 $ 525 $ 2,263 $ 1,950
Management fees 167 137 623 533
Securities lending 58 53 259 245
Foreign exchange trading 111 115 420 391
Brokerage fees 43 37 155 122
Processing fees and other 80 90 328 315
--------- --------- --------- ---------
Total Fee Revenue 1,029 957 4,048 3,556
Net Interest Revenue:
Interest revenue 532 377 1,787 1,539
Interest expense 315 167 928 729
--------- --------- --------- ---------
Net interest revenue 217 210 859 810
Provision for loan losses (18) - (18) -
--------- --------- --------- ---------
Net interest revenue after
provision for loan losses 235 210 877 810
Gains on the sales of
available-for-sale
investment securities, net 7 (6) 26 23
Gain on the sale of the
Corporate Trust business,
net of associated costs - 60 - 60
Gain on the sale of the
Private Asset Management
business, net of exit and
other associated costs - 285 - 285
--------- --------- --------- ---------
Total Revenue 1,271 1,506 4,951 4,734
Operating Expenses:
Salaries and employee
benefits 511 437 1,957 1,731
Information systems and
communications 131 141 527 551
Transaction processing
services 104 83 398 314
Occupancy 101 69 363 300
Merger, integration, and
divestiture costs 12 29 62 110
Restructuring costs 21 1 21 296
Other 112 68 431 320
--------- --------- --------- ---------
Total operating expenses 992 828 3,759 3,622
--------- --------- --------- ---------
Income before income taxes 279 678 1,192 1,112
Income taxes 95 231 394 390
--------- --------- --------- ---------
Net Income $ 184 $ 447 $ 798 $ 722
========= ========= ========= =========
Earnings Per Share:
Basic $ .55 $ 1.34 $ 2.38 $ 2.18
Diluted .55 1.33 2.35 2.15
Average Shares Outstanding
(in thousands):
Basic 333,238 333,579 334,606 331,692
Diluted 336,964 338,895 339,605 335,326
Return on equity 11.9 % 15.6 % 13.3 % 13.9 %
Cash dividends declared per
share $ .17 $ .15 $ .64 $ .56
OTHER SELECTED FINANCIAL INFORMATION As of
(Dollars in millions, except --------------------------
per share data or where December 31, December 31,
otherwise indicated) 2004 2003
- ----------------------------------------------------------------
Assets under custody (in billions) $ 9,497 $ 9,370
Assets under management (in billions) 1,354 1,106
Total assets $ 94,040 $ 87,534
Long-term debt 2,458 2,222
Stockholders' equity 6,159 5,747
Closing price per share of common stock $ 49.12 $ 52.08
STATE STREET CORPORATION
Press Release Addendum
SELECTED REPORTED FINANCIAL INFORMATION
Three months ended December 31, 2004 and September 30, 2004
CONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH
ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
Reported Results
Quarter ended
--------------------
(Dollars in millions, except per share December 31, September 30,
data) 2004 2004
- ----------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 570 $ 568
Management fees 167 156
Securities lending 58 48
Foreign exchange trading 111 75
Brokerage fees 43 31
Processing fees and other 80 83
------------- -------------
Total Fee Revenue 1,029 961
Net Interest Revenue:
Interest revenue 532 463
Interest expense 315 250
------------- -------------
Net interest revenue 217 213
Provision for loan losses (18) -
------------- -------------
Net interest revenue after provision for
loan losses 235 213
Gains on the sales of available-for-sale
investment securities, net 7 -
------------- -------------
Total Revenue 1,271 1,174
Operating Expenses:
Salaries and employee benefits 511 474
Information systems and communications 131 127
Transaction processing services 104 95
Occupancy 101 88
Merger, integration, and divestiture
costs 12 16
Restructuring costs 21 -
Other 112 106
------------- -------------
Total operating expenses 992 906
------------- -------------
Income before income taxes 279 268
Income taxes 95 91
------------- -------------
Net Income $ 184 $ 177
============= =============
Earnings Per Share:
Basic $ .55 $ .52
Diluted .55 .52
Average Shares Outstanding (in thousands):
Basic 333,238 335,626
Diluted 336,964 339,348
Return on equity 11.9 % 11.7 %
Cash dividends declared per share $ .17 $ .16
OTHER SELECTED FINANCIAL INFORMATION As of
-----------------------------
December 31, September 30,
(Dollars in millions, except per share
data or where otherwise indicated) 2004 2004
- ----------------------------------------------------------------------
Assets under custody (in billions) $ 9,497 $ 9,000
Assets under management (in billions) 1,354 1,236
Total assets $ 94,040 $ 100,527
Long-term debt 2,458 2,436
Stockholders' equity 6,159 6,151
Closing price per share of common stock $ 49.12 $ 42.71
STATE STREET CORPORATION
Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING RESULTS
Three months ended December 31, 2004 and 2003
--------------------------------
(Dollars in millions)
--------------------------------
Quarter ended December 31, 2004
--------------------------------
Reported Operating
Results Other Results
------------ ------ -----------
Fee Revenue:
Servicing fees $ 570 $ 570
Management fees 167 167
Securities lending 58 58
Foreign exchange trading 111 111
Brokerage fees 43 43
Processing fees and other 80 80
------------ ----------
Total fee revenue 1,029 1,029
Net Interest Revenue:
Net Interest Revenue 217 $ 12 (1) 229
Provision for loan losses (18) - (18)
------------ ------ ----------
Net interest revenue after provision
for loan losses 235 12 247
Gains on the sales of available-for-sale
investment securities, net 7 - 7
Gain on the sale of the Corporate
Trust business, net of associated costs
Gain on the sale of the Private Asset
Management business, net of exit and
other associated costs
------------ ------ ----------
Total Revenue 1,271 12 1,283
Operating Expenses:
Salaries and employee benefits 511 - 511
Information systems and communications 131 - 131
Transaction processing services 104 - 104
Occupancy 101 - 101
Merger, integration and divestiture costs 12 (12)(2) -
Restructuring 21 21
Other 112 - 112
------------ ------ ----------
Total operating expenses 992 (12) 980
------------ ------ ----------
Income before income taxes 279 24 303
Income taxes 95 4 (3) 99
Taxable-equivalent adjustment - 12 (1) 12
------------ ------------------
Net Income $ 184 $ 8 $ 192
============ ====== ==========
Diluted Earnings Per Share $ .55 $ .02 $ .57
Average Diluted Shares (in thousands) 336,964 336,964
Return on equity 11.9 % 12.4 %
---------------------------------------
(Dollars in millions)
---------------------------------------
Quarter ended December 31, 2003
---------------------------------------
Reported Operating
Results PAM(4) Other Results
---------------------------------------
Fee Revenue:
Servicing fees $ 525 $ 525
Management fees 137 $(4) 133
Securities lending 53 - 53
Foreign exchange trading 115 - 115
Brokerage fees 37 - 37
Processing fees and other 90 - 90
--------------- ------------
Total fee revenue 957 (4) 953
Net Interest Revenue:
Net Interest Revenue 210 - $ 12 (1) 222
Provision for loan losses - - - -
-----------------------------------
Net interest revenue after
provision for loan losses 210 - 12 222
Gains on the sales of
available-for-sale
investment securities, net (6) - - (6)
Gain on the sale of the
Corporate Trust business,
net of associated costs 60 - (60) -
Gain on the sale of the
Private Asset Management
business, net of exit and
other associated costs 285 - (285) -
-----------------------------------
Total Revenue 1,506 (4) (333) 1,169
Operating Expenses:
Salaries and employee benefits 437 (1) - 436
Information systems and
communications 141 - - 141
Transaction processing services 83 - - 83
Occupancy 69 (1) - 68
Merger, integration and
divestiture costs 29 - (29)(2) -
Restructuring 1 (1) -
Other 68 (1) - 67
-----------------------------------
Total operating expenses 828 (3) (30) 795
-----------------------------------
Income before income taxes 678 (1) (303) 374
Income taxes 231 (1) (107)(5) 123
Taxable-equivalent adjustment - - 12 (1) 12
-----------------------------------
Net Income $ 447 $ - $(208) $ 239
===================================
Diluted Earnings Per Share $ 1.33 $ - $(.62) $ .71
Average Diluted Shares (in
thousands) 338,895 338,895
Return on equity 15.6 % 18.7 %
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.
(4) Results of the divested Private Asset Management business
(5) Reflects the tax expense on gains on sales of divested businesses,
net of the benefit associated with the merger, integration,
divestiture and restructuring costs.
STATE STREET CORPORATION
Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING RESULTS
Three months ended December 31, 2004 and September 30, 2004
-----------------------------
(Dollars in millions)
-----------------------------
Quarter ended December 31,
2004
-----------------------------
Reported Operating
Results Other Results
--------- ------ -----------
Fee Revenue:
Servicing fees $ 570 $ 570
Management fees 167 167
Securities lending 58 58
Foreign exchange trading 111 111
Brokerage fees 43 43
Processing fees and other 80 80
--------- ----------
Total fee revenue 1,029 1,029
Net Interest Revenue:
Net Interest Revenue 217 $ 12 (1) 229
Provision for loan losses (18) - (18)
--------- ------ ----------
Net interest revenue after provision for
loan losses 235 12 247
Gains on the sales of available-for-sale
investment securities, net 7 - 7
Gain on the sale of the Corporate Trust
business, net of associated costs
Gain on the sale of the Private Asset
Management business, net of exit and
other associated costs
--------- ------ ----------
Total Revenue 1,271 12 1,283
Operating Expenses:
Salaries and employee benefits 511 - 511
Information systems and communications 131 - 131
Transaction processing services 104 - 104
Occupancy 101 - 101
Merger, integration and divestiture
costs 12 (12)(2) -
Restructuring 21 21
Other 112 - 112
--------- ------ ----------
Total operating expenses 992 (12) 980
--------- ------ ----------
Income before income taxes 279 24 303
Income taxes 95 4 (3) 99
Taxable-equivalent adjustment - 12 (1) 12
--------- ------------------
Net Income $ 184 $ 8 $ 192
========= ====== ==========
Diluted Earnings Per Share $ .55 $ .02 $ .57
Average Diluted Shares (in thousands) 336,964 336,964
Return on equity 11.9 % 12.4 %
-----------------------------
(Dollars in millions)
-----------------------------
Quarter ended September 30,
2004
-----------------------------
Reported Operating
Results Other Results
--------- ------ -----------
Fee Revenue:
Servicing fees $ 568 $ 568
Management fees 156 156
Securities lending 48 48
Foreign exchange trading 75 75
Brokerage fees 31 31
Processing fees and other 83 83
--------- ----------
Total fee revenue 961 961
Net Interest Revenue:
Net Interest Revenue 213 $ 10 (1) 223
Provision for loan losses - - -
--------- ------ ----------
Net interest revenue after provision for
loan losses 213 10 223
Gains on the sales of available-for-sale
investment securities, net - - -
Gain on the sale of the Corporate Trust
business, net of associated costs
Gain on the sale of the Private Asset
Management business, net of exit and
other associated costs
--------- ------ ----------
Total Revenue 1,174 10 1,184
Operating Expenses:
Salaries and employee benefits 474 - 474
Information systems and communications 127 - 127
Transaction processing services 95 - 95
Occupancy 88 - 88
Merger, integration and divestiture
costs 16 (16)(2) -
Restructuring - -
Other 106 - 106
--------- ------ ----------
Total operating expenses 906 (16) 890
--------- ------ ----------
Income before income taxes 268 26 294
Income taxes 91 5 (3) 96
Taxable-equivalent adjustment - 10 (1) 10
--------- ------------------
Net Income $ 177 $ 11 $ 188
========= ====== ==========
Diluted Earnings Per Share $ .52 $ .03 $ .55
Average Diluted Shares (in thousands) 339,348 339,348
Return on equity 11.7 % 12.3 %
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
Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING RESULTS
Year ended December 31, 2004 and 2003
------------------------------
(Dollars in millions)
------------------------------
Year ended December 31, 2004
------------------------------
Reported Operating
Results Other Results
--------- ------ -----------
Fee Revenue:
Servicing fees $ 2,263 $ 2,263
Management fees 623 623
Securities lending 259 259
Foreign exchange trading 420 420
Brokerage fees 155 155
Processing fees and other 328 328
--------- ----------
Total fee revenue 4,048 4,048
Net Interest Revenue:
Net Interest Revenue 859 $ 45 (1) 904
Provision for loan losses (18) - (18)
--------- ------ ----------
Net interest revenue after provision for
loan losses 877 45 922
Gains on the sales of available-for-sale
investment securities, net 26 - 26
Gain on the sale of the Corporate Trust
business, net of associated costs - - -
Gain on the sale of the Private Asset
Management business, net of exit and
other associated costs - - -
--------- ------ ----------
Total Revenue 4,951 45 4,996
Operating Expenses:
Salaries and employee benefits 1,957 - 1,957
Information systems and communications 527 - 527
Transaction processing services 398 - 398
Occupancy 363 - 363
Merger and integration costs 62 (62)(2) -
Restructuring 21 - 21
Other 431 - 431
--------- ------ ----------
Total operating expenses 3,759 (62) 3,697
--------- ------ ----------
Income before income taxes 1,192 107 1,299
Income taxes 394 21 (3) 415
Taxable-equivalent adjustment - 45 (1) 45
--------- ------ ----------
Net Income $ 798 $ 41 $ 839
========= ====== ==========
Diluted Earnings Per Share $ 2.35 $ .12 $ 2.47
Average Diluted Shares (in thousands) 339,605 339,605
Return on equity 13.3 % 14.0 %
-------------------------------------
(Dollars in millions)
-------------------------------------
Year ended December 31, 2003
-------------------------------------
Reported Operating
Results PAM(4) Other Results
--------- -------------- -----------
Fee Revenue:
Servicing fees $ 1,950 $ 1,950
Management fees 533 $ (59) 474
Securities lending 245 - 245
Foreign exchange trading 391 - 391
Brokerage fees 122 - 122
Processing fees and other 315 (1) $ 13 327
--------- ------ ------ ----------
Total fee revenue 3,556 (60) 13 3,509
Net Interest Revenue:
Net Interest Revenue 810 - 51 (1) 861
Provision for loan losses - - - -
--------- ------ ------ ----------
Net interest revenue after
provision for loan losses 810 - 51 861
Gains on the sales of available-
for-sale investment securities,
net 23 - - 23
Gain on the sale of the
Corporate Trust business,
net of associated costs 60 - (60) -
Gain on the sale of the Private
Asset Management business, net
of exit and other associated
costs 285 - (285) -
--------- ------ ------ ----------
Total Revenue 4,734 (60) (281) 4,393
Operating Expenses:
Salaries and employee benefits 1,731 (19) - 1,712
Information systems and
communications 551 (1) - 550
Transaction processing services 314 (1) - 313
Occupancy 300 (5) - 295
Merger and integration costs 110 - (110)(2) -
Restructuring 296 - (296) -
Other 320 (11) - 309
--------- ------ ------ ----------
Total operating expenses 3,622 (37) (406) 3,179
--------- ------ ------ ----------
Income before income taxes 1,112 (23) 125 1,214
Income taxes 390 (8) 13 (5) 395
Taxable-equivalent adjustment - - 51 (1) 51
--------- ------ ------------------
Net Income $ 722 $ (15) $ 61 $ 768
========= ====== ====== ==========
Diluted Earnings Per Share $ 2.15 $(.04) $ .18 $ 2.29
Average Diluted Shares (in
thousands) 335,326 335,326
Return on equity 13.9 % 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.
(4) Results of the divested Private Asset Management business
(5) Reflects the tax expense on gains on sales of divested businesses,
net of the benefit associated with the merger, integration,
divestiture and restructuring costs.
STATE STREET CORPORATION
Press Release Addendum
RECONCILIATION OF REPORTED FINANCIAL MEASURES TO OPERATING FINANCIAL
MEASURES
(Dollars in Income Income
millions, except Total Before Tax Earnings
per share data) Total Operating Income Expense Net Per
Revenue Expenses Taxes (Benefit) Income Share
------- --------- ------ --------- ------ --------
QUARTERLY RESULTS
- ------------------
Three months ended
December 31, 2004
Reported results -
GAAP $1,271 $992 $279 $95 $184 $.55
Non-operating
businsess
activities:
Merger and
integration costs - (12) 12 4 8 .02
------- --------- ------- --------- ------ --------
Total non-
operating
business
activities - (12) 12 4 8 .02
Taxable-equivalent
adjustment 12 - 12 12 - -
------- --------- ------- --------- ------ --------
Operating results $1,283 $980 $303 $111 $192 $.57
======= ========= ======= ========= ====== ========
Three months ended
September 30,
2004
Reported results -
GAAP $1,174 $906 $268 $91 $177 $.52
Non-operating
businsess
activities:
Merger and
integration costs - (16) 16 5 11 .03
------- --------- ------- --------- ------ --------
Total non-
operating
business
activities - (16) 16 5 11 .03
Taxable-equivalent
adjustment 10 - 10 10 - -
------- --------- ------- --------- ------ --------
Operating results $1,184 $890 $294 $106 $188 $.55
======= ========= ======= ========= ====== ========
Three months ended
December 31, 2003
Reported results -
GAAP $1,506 $828 $678 $231 $447 $1.33
Results of the
divested Private
Asset Management
business (4) (3) (1) (1) - -
Non-operating
business
activities:
Gain on the sale
of the Corporate
Trust business,
net of associated
costs (60) - (60) (20) (40) (.56)
Gain on the sale of
the Private Asset
Management
business, net of
exit and other
associated costs (285) - (285) (97) (188) (.12)
Restructuring
costs - (1) 1 - 1 -
Merger,
integration, and
divestiture costs - (29) 29 10 19 .06
------- --------- ------- --------- ------ --------
Total non-
operating
business
activities (345) (30) (315) (107) (208) (.62)
Taxable-equivalent
adjustment 12 - 12 12 - -
------- --------- ------- --------- ------ --------
Operating results $1,169 $795 $374 $135 $239 $.71
======= ========= ======= ========= ====== ========
YEAR-TO-DATE
RESULTS
- ------------------
Year ended
December 31, 2004
Reported results -
GAAP $4,951 $3,759 $1,192 $394 $798 $2.35
Non-operating
businsess
activities:
Merger and
integration costs - (62) 62 21 41 .12
------- --------- ------- --------- ------ --------
Total non-
operating
business
activities - (62) 62 21 41 .12
Taxable-equivalent
adjustment 45 - 45 45 - -
------- --------- ------- --------- ------ --------
Operating results $4,996 $3,697 $1,299 $460 $839 $2.47
======= ========= ======= ========= ====== ========
Year ended
December 31, 2003
Reported results -
GAAP $4,734 $3,622 $1,112 $390 $722 $2.15
Results of the
divested Private
Asset Management
business (60) (37) (23) (8) (15) (.04)
Non-operating
business
activities:
Gain on the sale of
the Private Asset
Management
business, net of
exit and other
associated costs (285) - (285) (97) (188) (.56)
Gain on the sale
of the Corporate
Trust business,
net of associated
costs (60) - (60) (20) (40) (.12)
Loss on the sale
of certain real
estate 13 - 13 5 8 .02
Restructuring
costs - (296) 296 101 195 .58
Merger,
integration, and
divestiture costs - (110) 110 37 73 .22
Settlement of a
Massachusetts tax
matter - - - (13) 13 .04
------- --------- ------- --------- ------ --------
Total non-
operating
business
activities (332) (406) 74 13 61 .18
Taxable-equivalent
adjustment 51 - 51 51 - -
------- --------- ------- --------- ------ --------
Operating results $4,393 $3,179 $1,214 $446 $768 $2.29
======= ========= ======= ========= ====== ========
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED OPERATING RESULTS
Three months and year ended December 31, 2004 and 2003
Operating results are a non-GAAP measure defined by State Street as
reported results presented on a taxable-equivalent basis, adjusted
for significant non-operating items and the related tax effects; For
2004, operating results exclude merger and integration costs, and for
2003, exclude the results of a divested business, merger, integration
and divestiture costs, restructuring costs, and for the twelve months
ended December 31, 2003, settlement of a state tax matter and the
loss on sale of certain real estate.
Operating Results
Quarter ended
-----------------------
December December
31, 31,
(Dollars in millions, except per share data) 2004 2003 % Change
------- ------ ---------
Operating Fee Revenue:
Servicing fees $570 $525 9%
Management fees 167 133 26
Securities lending 58 53 9
Foreign exchange trading 111 115 (3)
Brokerage fees 43 37 16
Processing fees and other 80 90 (11)
------- ------
Total Operating Fee Revenue 1,029 953 8
Operating Net Interest Revenue:
Net interest revenue 229 222 3
Provision for loan losses (18) -
------- ------
Operating net interest revenue after
provision for loan losses
(taxable-equivalent basis) 247 222 11
Gains on the sales of available-for-sale
investment securities, net 7 (6) (217)
------- ------
Total Operating Revenue 1,283 1,169 10
Expenses - Operating Results:
Salaries and employee benefits 511 436 17
Information systems and communications 131 141 (7)
Transaction processing services 104 83 25
Occupancy 101 68 49
Restructuring Costs 21 -
Other 112 67 67
------- ------
Total Expenses - Operating Results 980 795 23
------- ------
Operating Income before income taxes 303 374 (19)
Income taxes 99 123
Taxable-equivalent adjustment 12 12
------- ------
Net Operating Income $192 $239 (20)
======= ======
Diluted Operating Earnings Per Share $.57 $.71 (20)
Return on equity 12.4% 18.7%
Operating Results
Year ended
-----------------------------
December December
(Dollars in millions, except 31, 31,
per share data) 2004 2003 % Change
--------- ------- ---------
Operating Fee Revenue:
Servicing fees $2,263 $1,950 16 %
Management fees 623 474 31
Securities lending 259 245 6
Foreign exchange trading 420 391 7
Brokerage fees 155 122 27
Processing fees and other 328 327 -
--------- -------
Total Operating Fee Revenue 4,048 3,509 15
Operating Net Interest Revenue:
Net interest revenue 904 861 5
Provision for loan losses (18) -
--------- -------
Operating net interest revenue after
provision for loan losses 922 861 7
(taxable-equivalent basis)
Gains on the sales of available-for-
sale investment securities, net 26 23 13
--------- -------
Total Operating Revenue 4,996 4,393 14
Expenses - Operating Results:
Salaries and employee benefits 1,957 1,712 14
Information systems and communications 527 550 (4)
Transaction processing services 398 313 27
Occupancy 363 295 23
Restructuring Costs 21 -
Other 431 309 39
--------- -------
Total Expenses - Operating Results 3,697 3,179 16
--------- -------
Operating Income before income taxes 1,299 1,214 7
Income taxes 415 395
Taxable-equivalent adjustment 45 51
--------- -------
Net Operating Income $839 $768 9
========= =======
Diluted Operating Earnings Per Share $2.47 $2.29 8
Return on equity 14.0 % 14.8 %
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED OPERATING RESULTS
Three months ended December 31, 2004 and September 30, 2004
Operating results are a non-GAAP measure defined by State Street as
reported results presented on a taxable-equivalent basis, and in
2004, excluding merger and integration costs and the related tax
effects of such costs.
Operating Results
Quarter ended
----------------------------------
December September
(Dollars in millions, except per 31, 30,
share data) 2004 2004 % Change
------------- ----------------------
Operating Fee Revenue:
Servicing fees $570 $568 - %
Management fees 167 156 7
Securities lending 58 48 21
Foreign exchange trading 111 75 48
Brokerage fees 43 31 39
Processing fees and other 80 83 (4)
------------- -----------
Total Operating Fee Revenue 1,029 961 7
Operating Net Interest Revenue:
Net interest revenue 229 223 3
Provision for loan losses (18) -
------------- -----------
Operating net interest revenue
after provision for loan losses 247 223 11
(taxable-equivalent basis)
Gains on the sales of available-
for-sale investment securities,
net 7 -
------------- -----------
Total Operating Revenue 1,283 1,184 8
Expenses - Operating Results:
Salaries and employee benefits 511 474 8
Information systems and
communications 131 127 3
Transaction processing services 104 95 9
Occupancy 101 88 15
Restructuring 21 -
Other 112 106 6
------------- -----------
Total Expenses - Operating Results 980 890 10
------------- -----------
Operating Income before income
taxes 303 294 3
Income taxes 99 96
Taxable-equivalent adjustment 12 10
------------- -----------
Net Operating Income $192 $188 2
============= ===========
Diluted Operating Earnings Per
Share $.57 $.55 4
Return on equity 12.4 % 12.3 %
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
December 31, December 31,
(Dollars in millions) 2004 2003
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 2,035 $ 3,376
Interest-bearing deposits with banks 20,634 21,738
Securities purchased under resale agreements 12,878 9,447
Federal funds sold 5,450 104
Trading account assets 745 405
Investment securities 37,571 38,215
Loans (less allowance of $18 and $61) 4,611 4,960
Premises and equipment 1,444 1,212
Accrued income receivable 1,204 1,015
Goodwill 1,497 1,326
Other intangible assets 515 525
Other assets 5,456 5,211
------------ ------------
Total Assets $94,040 $87,534
============ ============
Liabilities
Deposits:
Noninterest-bearing $13,671 $ 7,893
Interest-bearing -- U.S. 2,843 5,062
Interest-bearing -- Non-U.S. 38,615 34,561
------------ ------------
Total Deposits 55,129 47,516
Securities sold under repurchase agreements 21,881 22,806
Federal funds purchased 435 1,019
Other short-term borrowings 1,343 1,437
Accrued taxes and other expenses 2,603 2,424
Other liabilities 4,032 4,363
Long-term debt 2,458 2,222
------------ ------------
Total Liabilities 87,881 81,787
Stockholders' Equity
Preferred stock, no par: authorized
3,500,000; issued none
Common stock, $1 par: authorized
500,000,000 shares; issued
337,126,000 and 337,132,000 337 337
Surplus 289 329
Retained earnings 5,590 5,007
Accumulated other comprehensive income 92 192
Treasury stock at cost (3,481,000 and
2,658,000 shares) (149) (118)
------------ ------------
Total Stockholders' Equity 6,159 5,747
------------ ------------
Total Liabilities and Stockholders' Equity $94,040 $87,534
============ ============
CONTACT: State Street Corporation
Edward J. Resch, 617-664-1110
Investors:
Kelley MacDonald, 617-664-3477
Media:
Hannah Grove, 617-664-3377