Exhibit 99.1
State Street Corporation Announces Strong
Increases in Servicing and Management Fees in First Quarter of 2005;
Expense Initiatives Implemented in Second Half of 2004 Showing Results
BOSTON--(BUSINESS WIRE)--April 19, 2005--State Street Corporation
announced today first-quarter earnings per share of $0.67, up 6% from
$0.63 in last year's first quarter which included $0.04 per share for
merger and integration costs associated with the acquisition of a
substantial portion of Deutsche Bank's Global Securities Services
(GSS) business. Revenue of $1.3 billion in the first quarter of 2005
is up 7%, or $89 million, compared to $1.2 billion in the year-ago
quarter. Total expenses in the first quarter of 2005 of $966 million
are up 6%, or $58 million, compared to $908 million in the year-ago
quarter. Net income of $226 million was up $9 million, or 4% from $217
million a year ago. For the first quarter of 2005, return on
stockholders' equity was 15.0% compared to 14.8% in the first quarter
of 2004.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "I am pleased with our overall results. We're making
progress in some key areas, most notably expense controls, which has
resulted in positive operating leverage in the first quarter on a
consecutive quarter basis. We continue to see significant increases in
fee revenue, both on a year-over-year and on a consecutive quarter
basis. We are still dealing with some issues that will temper our
results for the remainder of the year, particularly rising interest
rates and the ongoing repositioning of our real estate.
"Looking to the rest of the year, we are focused on achieving our
operating goals for revenue and earnings per share growth, as well as
return on equity, and continue to expect that they will fall toward
the lower end of the previously announced ranges."
FIRST QUARTER RESULTS VS. YEAR-AGO QUARTER
Servicing fees were up 8%, to $599 million from $555 million in
last year's first quarter. The increase was attributable to new
business from existing and new clients in 2005 and higher equity
market valuations. Total assets under custody were $9.5 trillion, up
1%, compared with $9.4 trillion in the year-ago quarter. Daily average
values for the S&P 500 Index were up 5% from the first quarter of
2004; daily average values for the MSCI(R) EAFE Index(SM) were up 14%.
Investment management fees, generated by State Street Global
Advisors, were $177 million, up 20% from $147 million a year ago.
Management fees reflected continued new business and an increase in
average month-end equity valuations. Total assets under management
were $1.4 trillion, up 11%, compared to $1.2 trillion the previous
year.
Securities lending revenue was $70 million in the quarter, up 9%
compared to $64 million in the year-ago quarter, reflecting an
increase in the volume of securities lent.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage and other fees, was $167 million for the
quarter, flat with a year ago. The increase in brokerage fees and
other revenue, driven by strong transition management business, was
offset by lower foreign exchange trading revenue, attributable to
lower volatilities.
Net interest revenue on a fully taxable-equivalent basis was $223
million, an increase of $9 million from $214 million a year ago. Net
interest revenue from leveraged leases in the first quarter of 2004
included a $19 million reduction in interest revenue due to a change
in the applicable state tax rate. Excluding this reduction from last
year's results, net interest income would have declined due to the
rising rate environment driven by the seven rate increases over the
past fifteen months.
Expenses increased from $908 million to $966 million, up $58
million, or 6%. Salaries and benefits expenses were up 13% to $524
million, primarily due to the significant new business wins in the
second half of 2004 and the impact of merit adjustments and benefits
expense, net of the effect of the reduction in force in the fourth
quarter. Expenses for information systems & communications declined
$13 million, or 9%, to $126 million due to reductions related to the
conversion of the Deutsche Bank's Global Securities Services business,
partially offset by increases due to the new data center coming fully
on line in the fourth quarter of 2004. The increase in expenses also
included higher transaction processing services, up 13% to $108
million, due to higher volumes in the investment servicing business.
Other expenses rose 13%, or $13 million to $116 million due to
increases in professional services related to growth initiatives.
The effective tax rate in the first quarter of 2005 was 34.0%,
compared to 30.4% in the first quarter of 2004. The lower effective
tax rate in the prior year's first quarter was due to an $18 million
benefit related to a cumulative state tax rate adjustment for
leveraged leases.
State Street purchased approximately 2.9 million shares of its
common stock during the first quarter at an average price of $45.35
per share. The remaining authorization to purchase shares is 15
million shares.
FIRST-QUARTER RESULTS VS. FOURTH QUARTER
First-quarter net income per share of $0.67 compares to net income
per share of $0.55 in the fourth quarter, an increase of 22%, driven
by positive operating leverage. Included in the fourth quarter results
is a $12 million charge, or $0.02 per share, for merger and
integration costs associated with the GSS business. Total revenue in
the first quarter of $1.31 billion is up 3% versus $1.27 billion in
the fourth quarter which included gains of $7 million in securities
sales and $18 million from a reduction in the loan loss provision.
Total expenses were $966 million, down 3% versus $992 in the fourth
quarter. Return on stockholders equity of 15.0% in the first quarter
compared with 11.9% in the fourth quarter.
Servicing fees were up 5% to $599 million and management fees were
up 6% to $177 million primarily due to new business. Securities
lending revenue increased 21%, from $58 million to $70 million, due to
increased volumes and improved spreads. Trading services revenue was
up from $161 million to $167 million. Processing fees and other were
up $11 million, or 15%, from $73 million to $84 million.
Salaries and employee benefits totaled $524 million, an increase
of $13 million, or 3%, from $511 million. In addition, the results of
the fourth quarter of 2004 included a $21 million cost of a reduction
in force. Other expenses were up $4 million from $112 million to $116
million. Occupancy expense decreased to $92 million from $101 million
(which included a $16 million loss on a sub-tenant agreement).
ADDITIONAL INFORMATION
The Company continues to implement plans to reduce its real estate
portfolio and expects to sublease on a long-term basis approximately
150,000 square feet in its headquarters building. During the second
quarter, it anticipates recognizing a pretax charge of $23 to $25
million due to this transaction.
All per share amounts represent fully diluted earnings per share.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Tuesday, April 19, 2005, 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
859081). 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 $9.5 trillion in assets under custody and $1.4 trillion in assets
under management, State Street operates in 25 countries and more than
100 markets worldwide and employs 19,850 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 2004 annual report on Form 10-K 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 19, 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
Financial Highlights
March 31, 2005
Quarter ended % Change
---------------------------------
Q1 Q1
(Dollars in millions, except March 31, Dec. 31, March 31, vs. vs.
per share information) 2005 2004 2004 Q4 Q1
- ----------------------------------------------------------------------
Total Revenue $1,308 $ 1,271 $1,219 3% 7%
Total Expenses 966 992 908 (3) 6
Net Income 226 184 217 23 4
Earning Per Share:
Basic .68 .55 .65 24 5
Diluted .67 .55 .63 22 6
Cash dividends Declared Per Share .17 .17 .15
Closing price per share of common
stock 43.72 49.12 52.13
Return on Equity 15.0% 11.9% 14.8%
Assets under custody (AUC) (in
billions) 9,519 9,497 9,422
Assets under management (AUM) (in
billions) 1,374 1,354 1,241
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Three months ended March 31, 2005 and 2004
Quarter Ended
----------------------------
(Dollars in millions, except per share March 31, March 31,
information) 2005 2004 (3) % Change
- ------------------------------------------------------------ ---------
Fee Revenue:
Servicing fees $ 599 $ 555 8%
Management fees 177 147 20
Securities lending 70 64 9
Trading services 167 167 -
Processing fees and other 84 80 5
--------- ---------
Total fee revenue 1,097 1,013 8
Net Interest Revenue:
Interest revenue 603 384 57
Interest expense 391 181 116
--------- ---------
Net interest revenue (1) 212 203 4
Provision for loan losses - -
--------- ---------
Net interest revenue after provision for
loan losses 212 203 4
Gain (loss) on the sales of available-for-
sale investment securities, net (1) 3 (133)
-------- --------
Total revenue 1,308 1,219 7
Operating Expenses:
Salaries and employee benefits 524 462 13
Information systems and communications 126 139 (9)
Transaction processing services 108 96 13
Occupancy 92 90 2
Merger and integration costs (2) - 18 (100)
Other 116 103 13
--------- ---------
Total operating expenses 966 908 6
--------- ---------
Income before income tax expense 342 311
Income tax expense 116 94
--------- ---------
Net income $ 226 $ 217 4
========= =========
Earnings Per Share:
Basic $ .68 $ .65 5
Diluted .67 .63 6
OTHER SELECTED FINANCIAL INFORMATION
Average Shares Outstanding (in thousands):
Basic 331,563 334,635
Diluted 334,653 342,129
Consolidated Statement of Income prepared in accordance with
accounting principles generally accepted in the United States.
(1) Net interest revenue on a fully taxable-equivalent basis was $223
million and $214 million for the three months ended March 31, 2005
and 2004.
(2) Reported earnings for March 31, 2004 included $18 million of
pre-tax merger and integration costs ($.04 per share) relating to
the integration of the Deutsche Bank Global Securities Service
Business (GSS).
(3) Certain prior period amounts have been reclassified to conform to
current period presentation.
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Three months ended March 31, 2005 and December 31, 2004
Quarter Ended
----------------------------
March December
(Dollars in millions, except per share 31, 31,
information) 2005 2004 (3) % Change
- ---------------------------------------------------------- ---------
Fee Revenue:
Servicing fees $ 599 $ 570 5%
Management fees 177 167 6
Securities lending 70 58 21
Trading services 167 161 4
Processing fees and other 84 73 15
--------- ---------
Total fee revenue 1,097 1,029 7
Net Interest Revenue:
Interest revenue 603 532 13
Interest expense 391 315 24
--------- ---------
Net interest revenue (1) 212 217 (2)
Provision for loan losses - (18) (100)
--------- ---------
Net interest revenue after provision
for loan losses 212 235 (10)
Gain (loss) on the sales of available-
for-sale investment securities, net (1) 7 (114)
--------- ---------
Total revenue 1,308 1,271 3
Operating Expenses:
Salaries and employee benefits 524 511 3
Information systems and communications 126 131 (4)
Transaction processing services 108 104 4
Occupancy 92 101 (9)
Merger and integration costs (2) - 12 (100)
Restructuring costs - 21 (100)
Other 116 112 4
--------- ---------
Total operating expenses 966 992 (3)
--------- ---------
Income before income tax expense 342 279
Income tax expense 116 95
--------- ---------
Net income $ 226 $ 184 23
========= =========
Earnings Per Share:
Basic $ .68 $ .55 24
Diluted .67 .55 22
OTHER SELECTED FINANCIAL INFORMATION
Average Shares Outstanding (in thousands):
Basic 331,563 333,238
Diluted 334,653 336,964
Consolidated Statement of Income prepared in accordance with
accounting principles generally accepted in the United States.
(1) Net interest revenue on a fully taxable-equivalent basis was $223
million and $229 million for the three months ended March 31, 2005
and December 31, 2004.
(2) Reported earnings for December 31, 2004 included $12 million of
pre-tax merger and integration costs ($.02 per share) related to
the integration of the Deutsche Bank Global Securities Service
Business (GSS).
(3) Certain prior period amounts have been reclassified to conform to
current period presentation.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
(Dollars in millions, except March 31, December 31, March 31,
share information) 2005 2004 2004
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 2,926 $ 2,035 $ 2,379
Interest-bearing deposits with
banks 20,160 20,634 27,228
Securities purchased under
resale agreements 12,699 12,878 13,968
Federal funds sold 1,000 5,450 1,000
Trading account assets 521 745 347
Investment securities 48,213 37,571 34,605
Loans (less allowance of $18,
$18 and $36) 4,830 4,611 4,968
Premises and equipment 1,450 1,444 1,238
Accrued income receivable 1,174 1,204 1,014
Goodwill 1,472 1,497 1,329
Other intangible assets 485 494 542
Other assets 5,164 5,477 4,278
------------- ------------ ------------
Total assets $100,094 $94,040 $92,896
============= ============ ============
Liabilities
Deposits:
Noninterest-bearing $ 10,301 $13,671 $ 9,352
Interest-bearing -- U.S. 2,711 2,843 6,826
Interest-bearing -- Non-U.S. 45,306 38,615 37,334
------------- ------------ ------------
Total deposits 58,318 55,129 53,512
Securities sold under
repurchase agreements 20,698 21,881 21,811
Federal funds purchased 1,739 435 2,083
Other short-term borrowings 2,840 1,343 1,434
Accrued taxes and other
expenses 2,410 2,603 2,386
Other liabilities 5,628 4,032 3,484
Long-term debt 2,436 2,458 2,244
------------- ------------ ------------
Total liabilities 94,069 87,881 86,954
Shareholders' Equity
Preferred stock, no par:
authorized 3,500,000; issued
none
Common stock, $1 par:
authorized 500,000,000 shares;
issued 337,126,000,
337,126,000 and 337,130,000 337 337 337
Surplus 282 289 298
Retained earnings 5,759 5,590 5,174
Accumulated other comprehensive
income (95) 92 207
Treasury stock (at cost 5,849,000,
3,481,000 and 1,705,000 shares) (258) (149) (74)
- -------------------------------------------- ------------ ------------
Total shareholders' equity 6,025 6,159 5,942
------------- ------------ ------------
Total liabilities and
shareholders' equity $100,094 $94,040 $92,896
============= ============ ============
CONTACT: State Street Corporation
Edward J. Resch, 617-664-1110
Investors:
Kelley MacDonald, 617-664-3477
Media:
Hannah Grove, 617-664-3377