Exhibit 99.1
State Street Corporation Achieves 9% Increase in Fee Revenue in Second Quarter
Compared to 2004 Sequential-Quarter Positive Operating Leverage Continues
BOSTON--(BUSINESS WIRE)--July 19, 2005--State Street Corporation
announced today second-quarter earnings per share of $0.66. This
result is up 2% from $0.65 in last year's second quarter, which
included $0.03 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 $1.36 billion in
the second quarter of 2005 is up 6%, or $74 million, compared to $1.29
billion in the year-ago quarter. Total expenses in the second quarter
of 2005 of $1.03 billion are up 8%, or $75 million, which includes $26
million for a previously announced subleasing agreement, compared to
$953 million in the year-ago quarter. Net income is $220 million, the
same as in the year-ago quarter. For the second quarter of 2005,
return on stockholders' equity is 14.4% compared to 14.9% in the
second quarter of 2004.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "We are pleased with the results of the quarter, which
were driven by continued strong fee revenue growth in investment
servicing and management. Excluding the impact of the sub-lease
agreement, we achieved sequential-quarter positive operating leverage
again this quarter, helped by our strong focus on expense control. We
are also pleased with our progress in creating opportunities to more
actively manage our balance sheet in the face of a challenging
interest-rate environment."
Looking forward, Logue concluded, "As in past years, we expect
seasonal weakness in market-driven revenue in the third quarter,
however, we are positioned to achieve our financial goals and continue
to expect that our results will fall toward the lower end of the
previously announced ranges."
SECOND QUARTER RESULTS VS. YEAR-AGO QUARTER
Servicing fees are up 8%, to $618 million from $570 million in
last year's second quarter. The increase is attributable to new
business from existing and new clients in 2005 and higher equity
market valuations. Total assets under custody are $9.6 trillion, up
5%, compared with $9.1 trillion in the year-ago quarter. Daily average
values for the S&P 500 Index are up 5% from the second quarter of
2004; daily average values for the MSCI(R) EAFE Index(SM) are up 13%.
The average values for the NASDAQ are up about 1%.
Investment management fees, generated by State Street Global
Advisors, are $173 million, up 13% from $153 million a year ago.
Management fees reflect continued new business and an increase in
average month-end equity valuations. Total assets under management are
$1.4 trillion, up 12%, compared to $1.2 trillion the previous year.
Securities lending revenue is $113 million in the quarter, up 27%
compared to $89 million in the year-ago quarter, reflecting improved
spreads and an increase in demand. Both quarters' results represent
seasonally high activity.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage and other fees, is $169 million for the quarter,
up 8% from $156 million a year ago. The increase was driven by strong
transition management business.
Processing fees and other revenue decreased $7 million, or 9%, to
$70 million primarily due to a decline in payments from Deutsche Bank
in consideration of net interest revenue for assets that are in
transition to the State Street balance sheet.
Net interest revenue on a fully taxable-equivalent basis is $228
million, a decrease of $10 million from $238 million a year ago. The
reduction of net interest revenue is attributed to a flatter yield
curve and narrower spreads, slightly offset by an increase in average
balance sheet size.
Expenses increased from $953 million to $1.03 billion, up $75
million, or 8%. Salaries and benefits expenses are up 8% to $552
million, primarily due to the impact of merit adjustments and benefits
expense. Expenses for information systems & communications declined $9
million, or 7%, to $121 million due to reductions related to the
conversion of Deutsche Bank's Global Securities Services business. The
increase in expenses also includes higher transaction processing
services, up 9% to $112 million, due to higher non-US volumes in the
brokerage business. Occupancy expense increased 36%, or $30 million,
to $114 million primarily due to the impact of the previously
announced agreement to sub-lease several floors at the Corporation's
headquarters building. Due to this transaction, the Corporation
recorded a pre-tax charge of $26 million, or $0.05 per share, in the
second quarter. Other expenses rose 17%, or $19 million, to $129
million due to increases in professional services related to the
planned expansion of the Treasury group function, as well as
compliance, regulatory requirements, and growth initiatives.
The effective tax rate was 34.0% in both quarters.
State Street purchased approximately 2.2 million shares of its
common stock during the second quarter at an average price of $46.36
per share. The remaining authorization to purchase shares is 12.8
million shares.
SECOND-QUARTER RESULTS VS. FIRST QUARTER
Second-quarter net income per share of $0.66 compares to net
income per share of $0.67 in the first quarter. Total revenue in the
second quarter of $1.36 billion is up 4.1% versus $1.31 billion in the
first quarter. Total expenses, including $26 million for the sub-lease
agreement, are $1.03 billion, up 6.4% versus $966 million in the first
quarter. Excluding the impact of the sub-lease agreement, expenses
rose 3.7%. Return on stockholders equity of 14.4% in the second
quarter compares with 15.0% in the first quarter.
Servicing fees are up 3% to $618 million due to new business and
management fees are down 2% to $173 million due a slight decline in
equity valuations. Securities lending revenue increased 61%, from $70
million to $113 million, due to improved spreads and seasonally high
volumes. Processing fees and other are down $14 million, or 17%, from
$84 million to $70 million. Net interest revenue on a fully
taxable-equivalent basis increased $5 million, or 2%, to $228 million,
due to a slightly larger balance sheet, offset somewhat by a flatter
yield curve.
Salaries and employee benefits total $552 million, an increase of
$28 million, or 5%, from $524 million, due to the impact of slightly
higher staff levels, benefit costs, and merit increases. Other
expenses are up $13 million, or 11%, from $116 million to $129 million
primarily due to costs associated with expansion of the Treasury group
infrastructure, compliance and regulatory requirements, and growth
initiatives. Occupancy expense increased to $114 million from $92
million due to the charge associated with the previously announced
agreement to sub-lease several floors at the Corporation's
headquarters.
ADDITIONAL INFORMATION
All per share amounts represent diluted earnings per share.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Tuesday, July 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
815851). 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 $9.6 trillion in assets under custody and $1.4 trillion in assets
under management, State Street operates in 25 countries and more than
100 geographic markets worldwide and employs 20,100 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, July 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
June 30, 2005
Quarter Ended % Change
------------------------------------------
Q2 Q2
(Dollars in millions, except June 30, March 31, June 30, vs. vs.
per share information) 2005 2005 2004 Q1 Q2
- ----------------------------------------------------------------------
Total Revenue $ 1,361 $ 1,308 $ 1,287 4% 6%
Total Expenses 1,028 966 953 6 8
Net Income 220 226 220 (3) -
Earning Per Share:
Basic $ .67 $ .68 $ .66 (1) 2
Diluted .66 .67 .65 (1) 2
Cash dividends Declared Per
Share .18 .17 .16
Return on Equity 14.4% 15.0% 14.9%
Closing price per share of
common stock $ 48.25 $ 43.72 $ 49.04
Assets under custody (AUC)
(in trillions) $ 9.62 $ 9.52 $ 9.15
Assets under management (AUM)
(in trillions) 1.37 1.37 1.22
Six Months Ended % Change
-------------------------------
2005
(Dollars in millions, except June 30, June 30, vs.
per share information) 2005 2004 2004
- -----------------------------------------------------------
Total Revenue $ 2,669 $ 2,506 7
Total Expenses 1,994 1,861 7
Net Income 446 437 2
Earning Per Share:
Basic $ 1.35 $ 1.31 3
Diluted 1.33 1.28 4
Cash dividends Declared Per
Share .35 .31
Return on Equity 14.7% 14.9%
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
(Dollars in
millions, Quarter Ended Six Months Ended
except per ----------------------- -------------------------
share June 30, June 30, % June 30, June 30, %
information) 2005 2004(3) Change 2005 2004(3) Change
------------------------ -------------------------
Fee Revenue:
Servicing fees $ 618 $ 570 8% $ 1,217 $ 1,125 8%
Management fees 173 153 13 350 300 17
Securities
lending 113 89 27 183 153 20
Trading
services 169 156 8 336 323 4
Processing fees
and other 70 77 (9) 154 157 (2)
------- ------- -------- --------
Total fee revenue 1,143 1,045 9 2,240 2,058 9
Net Interest Revenue:
Interest revenue 693 408 70 1,296 792 64
Interest expense 476 182 162 867 363 139
------- ------- -------- --------
Net interest
revenue (1) 217 226 (4) 429 429 -
Provision for
loan losses - - - -
------- ------- -------- --------
Net interest
revenue after
provision for
loan losses 217 226 (4) 429 429 -
Gain on the sales
of available-for-
sale investment
securities, net 1 16 (94) - 19 (100)
------- ------ -------- -------
Total revenue 1,361 1,287 6 2,669 2,506 7
Operating Expenses:
Salaries and
employee
benefits 552 510 8 1,076 972 11
Information
systems and
communications 121 130 (7) 247 269 (8)
Transaction
processing
services 112 103 9 220 199 11
Occupancy 114 84 36 206 174 18
Merger and
integration
costs (2) - 16 (100) - 34 (100)
Other 129 110 17 245 213 15
------- ------- -------- --------
Total operating
expenses 1,028 953 8 1,994 1,861 7
------- ------- -------- --------
Income before
income tax
expense 333 334 675 645
Income tax expense 113 114 229 208
------- ------- -------- --------
Net income $ 220 $ 220 - $ 446 $ 437 2
======= ======= ======== ========
Earnings Per Share:
Basic $ .67 $ .66 2 $ 1.35 $ 1.31 3
Diluted .66 .65 2 1.33 1.28 4
OTHER SELECTED FINANCIAL INFORMATION
Average Shares Outstanding
(in thousands):
Basic 330,118 334,930 330,837 334,782
Diluted 334,090 340,647 334,216 341,232
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 $228
million and $238 million for the three months ended June 30, 2005
and June 30, 2004, respectively, and $451 million and $452 million
for the six months ended June 30, 2005 and June 30, 2004,
respectively.
(2) Reported earnings for the quarter and six months ended June 30,
2004 included $16 million and $34 million, respectively, of
pre-tax merger and integration costs ($.03 and $.07 per share,
respectively) 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 June 30, 2005 and March 31, 2005
Quarter Ended
----------------------------
(Dollars in millions, except June 30, March 31,
per share information) 2005 2005 % Change
- --------------------------------------------------------- ---------
Fee Revenue:
Servicing fees $ 618 $ 599 3 %
Management fees 173 177 (2)
Securities lending 113 70 61
Trading services 169 167 1
Processing fees and other 70 84 (17)
--------- ---------
Total fee revenue 1,143 1,097 4
Net Interest Revenue:
Interest revenue 693 603 15
Interest expense 476 391 22
--------- ---------
Net interest revenue (1) 217 212 2
Provision for loan losses - - -
--------- ---------
Net interest revenue after provision
for loan losses 217 212 2
Gain(loss) on the sales of available-
for-sale investment securities, net 1 (1) (200)
--------- ---------
Total revenue 1,361 1,308 4
Operating Expenses:
Salaries and employee benefits 552 524 5
Information systems and communications 121 126 (4)
Transaction processing services 112 108 4
Occupancy 114 92 24
Other 129 116 11
--------- ---------
Total operating expenses 1,028 966 6
--------- ---------
Income before income tax expense 333 342
Income tax expense 113 116
--------- ---------
Net income $ 220 $ 226 (3)
========= =========
Earnings Per Share:
Basic $ .67 $ .68 (1)
Diluted .66 .67 (1)
OTHER SELECTED FINANCIAL INFORMATION
Average Shares Outstanding (in thousands):
Basic 330,118 331,563
Diluted 334,090 334,653
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 $228
million and $223 million for the three months ended June 30, 2005
and March 31, 2005, respectively.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
(Dollars in millions, except June 30, December 31, June 30,
share information) 2005 2004 2004
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 6,466 $ 2,035 $ 3,588
Interest-bearing deposits with
banks 14,728 20,634 28,920
Securities purchased under
resale agreements 11,699 12,878 10,228
Federal funds sold - 5,450 2,050
Trading account assets 805 745 448
Investment securities 53,854 37,571 36,011
Loans (less allowance of $18,
$18 and $36) 6,352 4,611 5,433
Premises and equipment 1,449 1,444 1,370
Accrued income receivable 1,249 1,204 1,140
Goodwill 1,498 1,497 1,396
Other intangible assets 466 494 542
Other assets 5,688 5,477 3,014
------------- ------------ ------------
Total assets $104,254 $94,040 $94,140
============= ============ ============
Liabilities
Deposits:
Noninterest-bearing $ 11,363 $13,671 $10,223
Interest-bearing -- U.S. 2,328 2,843 4,594
Interest-bearing -- Non-U.S. 48,366 38,615 40,530
------------- ------------ ------------
Total deposits 62,057 55,129 55,347
Securities sold under
repurchase agreements 23,748 21,881 22,458
Federal funds purchased 303 435 1,203
Other short-term borrowings 1,654 1,343 1,428
Accrued taxes and other
expenses 2,541 2,603 2,375
Other liabilities 5,240 4,032 3,072
Long-term debt 2,463 2,458 2,347
------------- ------------ ------------
Total liabilities 98,006 87,881 88,230
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 337,126,000 shares 337 337 337
Surplus 287 289 304
Retained earnings 5,920 5,590 5,340
Accumulated other comprehensive
(loss) income (6) 92 (5)
Treasury stock (at cost 6,427,000,
3,481,000 and 1,548,000 shares) (290) (149) (66)
- -------------------------------------------- ------------ ------------
Total shareholders' equity 6,248 6,159 5,910
------------- ------------ ------------
Total liabilities and
shareholders' equity $104,254 $94,040 $94,140
============= ============ ============
CONTACT: State Street Corporation
Edward J. Resch, +1 617/664-1110
or
Investors:
Kelley MacDonald, +1 617/664-3477
or
Media:
Hannah Grove, +1 617/664-3377