Exhibit 99.1
State Street Corporation Reports Strong
EPS Growth from Continuing Operations on Year-over-Year 18% Revenue
Increase; Reports Decline in Expenses Compared to Second Quarter
BOSTON--(BUSINESS WIRE)--Oct. 18, 2005--State Street Corporation
announced today third-quarter earnings per share from continuing
operations of $0.75. This result is up 44% from $0.52 in last year's
third 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 $1.4 billion in the third quarter of 2005 is up 18%, or
$214 million, compared to $1.2 billion in the year-ago quarter. Total
expenses in the third quarter of 2005 of $1.0 billion are up 11%, or
$102 million, compared to $906 million in the year-ago quarter. Net
income from continuing operations is $250 million, up 41% or $73
million from $177 million in the year-ago quarter. For the third
quarter of 2005, return on stockholders' equity from continuing
operations is 15.9% compared to 11.7% in the third quarter of 2004.
Including results from discontinued operations due to the charge
for the divestiture of Bel Air Investment Advisors, net income in the
third quarter of 2005 is $143 million, or $0.43 per share.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "We are very pleased with the results of the quarter
for a number of reasons. First, our year-over-year servicing and
management fee revenue growth continues to be strong, driven in part
by new business and deepening relationships with existing customers.
Second, we are managing our expenses more carefully showing no growth
from the last quarter and thirdly, as a result of these two
accomplishments, we were able to better manage the effect of the
seasonality of market driven revenue."
Logue concluded, "Directionally I am very pleased with where we
are heading. Our results this quarter, as well as our healthy new
business pipeline, position us to achieve our financial goals for the
year. We continue to target positive operating leverage for the full
year. While we continue to expect to achieve at the lower end of our
revenue goal, we now expect our growth in earnings per share from
continuing operations to be approximately in the middle of the 10
percent to 15 percent range and our return on equity from continuing
operations to be approximately in the middle of the 14 percent to 17
percent range. As we move into the fourth quarter, our momentum is
positive, and we are beginning to show the results of the actions we
undertook at this time last year."
THIRD QUARTER RESULTS VS. YEAR-AGO QUARTER
Servicing fees are up 9%, to $620 million from $568 million in
last year's third 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 $9.8 trillion, up
9%, compared with $9.0 trillion in the year-ago quarter. Daily average
values for the S&P 500 Index are up 11% from the third quarter of
2004; daily average values for the MSCI(R) EAFE Index(SM) are up 19%.
The average values for the NASDAQ are up about 15%.
Investment management fees, generated by State Street Global
Advisors, are $188 million, up 21% from $156 million a year ago.
Management fees reflect continued new business and an increase in
average month-end equity valuations. Total assets under management are
a record $1.4 trillion, up 14%, compared to $1.2 trillion the previous
year.
Securities lending revenue is $74 million in the quarter, up 54%
compared to $48 million in the year-ago quarter, reflecting improved
spreads and increased volume.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage and other fees, is $176 million for the quarter,
up 59% from $111 million a year ago. The increase was driven by
improved volumes and increased volatility in foreign exchange as well
as strong transition management business.
Processing fees and other revenue was relatively flat, down $1
million to $77 million.
Net interest revenue on a fully taxable-equivalent basis is $245
million, an increase of $22 million from $223 million a year ago. The
increase in net interest revenue is attributable to improved yields
and a larger investment portfolio, offset partially by a flatter yield
curve.
The Company also recorded a $16 million gain from the final
settlement of the 2003 sale of its Private Asset Management business.
Expenses increased from $906 million to $1,008 million, up $102
million, or 11%. Salaries and benefits expenses are up 19% to $566
million, primarily due to the impact of 593 employees added from the
three investment management operations outsourcing contracts last year
and increased incentive compensation due to improved results. Expenses
for information systems & communications declined $10 million, or 8%,
to $117 million due to reductions related to the conversion of GSS
business. The increase in expenses also includes higher transaction
processing services, up 17% to $111 million, partially due to higher
volumes in the brokerage business. Occupancy expense increased 9%, or
$8 million, to $96 million. Other expenses rose 11%, or $12 million,
to $118 million.
The effective tax rate from continuing operations was 34.0% in
both quarters.
In September 2005, State Street committed to a plan to divest its
ownership interest in Bel Air Investment Advisors. Accordingly, State
Street accounted for Bel Air separately as a discontinued operation
and recorded a pre-tax charge of $165 million and an income tax
benefit of $58 million in the third-quarter results.
State Street purchased approximately 3.1 million shares of its
common stock during the third quarter at an average price of $48.50
per share. The remaining authorization to purchase shares is 9.7
million shares.
THIRD-QUARTER RESULTS VS. SECOND QUARTER
Third-quarter net income from continuing operations of $0.75 per
share compares to $0.66 in the second quarter, an increase of 14%.
Total revenue in the third quarter of $1.39 billion is up 2% from
$1.36 billion in the second quarter. Total expenses were down 2%, or
$20 million, to $1,008 million from $1,028 million in the second
quarter, which included a $26 million charge for a sublease agreement.
Return on stockholders' equity from continuing operations of 15.9% in
the third quarter compares with 14.4% in the second quarter.
Servicing fees are up $2 million to $620 million, and management
fees are up 9% to $188 million due to new business and an increase in
equity valuations. Securities lending revenue decreased 35%, from $113
million to $74 million, reflecting seasonal strength in the second
quarter. Revenue from trading services increased 4%, or $7 million to
$176 million. Processing fees and other revenues are up $7 million, or
10%, from $70 million to $77 million. Net interest revenue on a fully
taxable-equivalent basis increased $17 million, or 7%, to $245 million
from $228 million, due to improved yields from the securities
portfolio, offset somewhat by a flatter yield curve.
Salaries and employee benefits total $566 million, an increase of
$14 million, or 3%, from $552 million, due to increased incentive
compensation from the improved results. Occupancy decreased 16%, or
$18 million, to $96 million primarily due to the impact of the $26
million charge taken in the second quarter for a subleasing agreement.
Other expenses are down $11 million, or 9%, from $129 million to $118
million primarily due to a reduction in fees for professional
services.
ADDITIONAL INFORMATION
All per share amounts represent diluted earnings per share.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Tuesday, October 18, 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
831086). 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 $9.8 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 and employs 20,375 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, October 18, 2005, and
the Corporation will not undertake efforts to revise those
forward-looking statements to reflect events after this date.
Press Release Addendum
Financial Highlights
September 30, 2005
Quarter Ended % Change
------------------------------------------
(Dollars in millions,
except per share September June September Q3 Q3
information or 30, 30, 30, vs. vs.
where otherwise indicated) 2005 2005 2004 Q2 Q3
- ----------------------------------------------------------------------
Total Revenue $ 1,388 $ 1,361 $ 1,174 2 % 18 %
Total Expenses 1,008 1,028 906 (2) 11
Net Income from Continuing
Operations 250 220 177 14 41
Net Loss from Discontinued
Operations (107) - -
Net income 143 220 177
Earning Per Share from
Continuing Operations:
Basic $ .76 $ .67 $ .52 13 46
Diluted .75 .66 .52 14 44
Loss Per Share from
Discontinued Operations:
Basic (.33) - -
Diluted (.32) - -
Earnings Per Share:
Basic .43 .67 .52
Diluted .43 .66 .52
Closing Price Per Share of
Common Stock 48.92 48.25 42.71
Cash Dividends Declared Per
Share .18 .18 .16
Return on Equity from
Continuing Operations 15.9 % 14.4 % 11.7 %
Return on Equity 9.1 14.4 11.7
Assets Under Custody (AUC)
(in trillions) $ 9.80 $ 9.62 $ 9.00
Assets Under Management
(AUM) (in trillions) 1.41 1.37 1.24
Nine Months Ended % Change
----------------------------
September September 2005
(Dollars in millions, except 30, 30, vs.
per share information) 2005 2004 2004
- -------------------------------------------------------
Total Revenue $ 4,057 $ 3,680 10
Total Expenses 3,002 2,767 8
Net Income from Continuing
Operations 696 614 13
Net Loss from Discontinued
Operations (107) -
Net Income 589 614
Earning Per Share from
Continuing Operations:
Basic $ 2.11 $ 1.83 15
Diluted 2.08 1.80 16
Loss Per Share from
Discontinued Operations:
Basic (.33) -
Diluted (.32) -
Earnings Per Share:
Basic 1.78 1.83
Diluted 1.76 1.80
Cash Dividends Declared Per
Share .53 .47 13
Return on Equity from
Continuing Operations 15.1 % 13.8 %
Return on Equity 12.8 13.8
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarter Ended Nine Months Ended
(Dollars in -------------------------- --------------------------
millions,
except September September September September
per share 30, 30, % 30, 30, %
information) 2005 2004(3) Change 2005 2004(3) Change
-------------------------- --------- ------ -------- --------- ------
Fee Revenue:
Servicing fees $ 620 $ 568 9 % $1,837 $1,693 9 %
Management fees 188 156 21 538 456 18
Securities
lending 74 48 54 257 201 28
Trading services 176 111 59 512 434 18
Processing fees
and other 77 78 (1) 231 235 (2)
----------- ------ ---------- -------
Total fee
revenue 1,135 961 18 3,375 3,019 12
Net Interest
Revenue:
Interest revenue 773 463 67 2,069 1,255 65
Interest expense 537 250 115 1,404 613 129
----------- ------ ---------- -------
Net interest
revenue (1) 236 213 11 665 642 4
Provision for
loan losses - - - -
----------- ------ ---------- -------
Net interest
revenue
after
provision
for
loan losses 236 213 11 665 642 4
Gain on the sales
of available-
for-sale
investment
securities, net 1 - 1 19 (95)
Gain on the sale
of the Private
Asset Management
business 16 - 16 -
---------- ------- ---------- -------
Total
revenue 1,388 1,174 18 4,057 3,680 10
Operating
Expenses:
Salaries and
employee
benefits 566 474 19 1,642 1,446 14
Information
systems and
communications 117 127 (8) 364 396 (8)
Transaction
processing
services 111 95 17 331 294 13
Occupancy 96 88 9 302 262 15
Merger and
integration
costs (2) - 16 (100) - 50 (100)
Other 118 106 11 363 319 14
---------- ------- ---------- -------
Total
operating
expenses 1,008 906 11 3,002 2,767 8
---------- ------- ---------- -------
Income from
continuing
operations
before
income tax
expense 380 268 42 1,055 913 16
Income tax
expense from
continuing
operations 130 91 359 299
---------- ------- ---------- -------
Net income
from
continuing
operations 250 177 41 696 614 13
Loss from
discontinued
operations (165) - (165) -
Income tax
benefit from
discontinued
operations (58) - (58) -
---------- ------- ---------- -------
Net loss
from
discontinued
operations (107) - (107) -
---------- ------- ---------- -------
Net income $ 143 $ 177 $ 589 $ 614
========== ======= ========== =======
Earnings Per
Share From
Continuing
Operations:
Basic $ .76 $ .52 46 $ 2.11 $ 1.83 15
Diluted .75 .52 44 2.08 1.80 16
Loss Per Share
From
Discontinued
Operations:
Basic (.33) - (.33) -
Diluted (.32) - (.32) -
Earnings Per
Share:
Basic .43 .52 1.78 1.83
Diluted .43 .52 1.76 1.80
OTHER SELECTED FINANCIAL INFORMATION
Average Shares
Outstanding (in
thousands):
Basic 329,097 335,626 330,251 335,065
Diluted 334,103 339,348 333,999 340,529
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 $245
million and $223 million for the three months ended September 30, 2005
and 2004, respectively, and $696 million and $675 million for the nine
months ended September 30, 2005 and 2004, respectively.
(2) Reported earnings for the quarter and nine months ended September
30, 2004 included $16 million and $50 million, respectively, of pre-
tax merger and integration costs ($.03 and $.10 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 September 30, 2005 and June 30, 2005
Quarter Ended
------------------------------------
(Dollars in millions, except per September 30, June 30,
share information) 2005 2005 % Change
- ------------------------------------------------ ----------- ---------
Fee Revenue:
Servicing fees $ 620 $ 618 - %
Management fees 188 173 9
Securities lending 74 113 (35)
Trading services 176 169 4
Processing fees and other 77 70 10
-------------- -----------
Total fee revenue 1,135 1,143 (1)
Net Interest Revenue:
Interest revenue 773 693 12
Interest expense 537 476 13
-------------- -----------
Net interest revenue (1) 236 217 9
Provision for loan losses - - -
-------------- -----------
Net interest revenue after
provision for loan losses 236 217 9
Gain on the sales of
available-for-sale investment
securities, net 1 1
Gain on the sale of the Private
Asset Management business 16 -
-------------- -----------
Total revenue 1,388 1,361 2
Operating Expenses:
Salaries and employee benefits 566 552 3
Information systems and
communications 117 121 (3)
Transaction processing services 111 112 (1)
Occupancy 96 114 (16)
Other 118 129 (9)
-------------- -----------
Total operating expenses 1,008 1,028 (2)
-------------- -----------
Income from continuing
operations before income tax
expense 380 333 14
Income tax expense from continuing
operations 130 113
-------------- -----------
Net income from continuing
operations 250 220 14
Loss from discontinued operations (165) -
Income tax benefit from
discontinued operations (58) -
-------------- -----------
Net loss from discontinued
operations (107) -
-------------- -----------
Net income $ 143 $ 220
============== ===========
Earnings Per Share From Continuing
Operations:
Basic $ .76 $ .67 13
Diluted .75 .66 14
Loss Per Share From
Discontinued Operations:
Basic (.33) -
Diluted (.32) -
Earnings Per Share:
Basic .43 .67
Diluted .43 .66
OTHER SELECTED FINANCIAL INFORMATION
Average Shares Outstanding (in
thousands):
Basic 329,097 330,118
Diluted 334,103 334,090
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 $245
million and $228 million for the three months ended September 30, 2005
and June 30, 2005, respectively.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
(Dollars in millions, except September 30, December 31, September 30,
share information) 2005 2004 2004
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 2,634 $ 2,035 $ 6,058
Interest-bearing deposits with
banks 14,438 20,634 30,392
Securities purchased under
resale agreements 12,474 12,878 10,378
Federal funds sold - 5,450 2,700
Trading account assets 56 745 673
Investment securities 57,677 37,571 36,818
Loans (less allowance of $18,
$18 and $36) 8,170 4,611 5,512
Premises and equipment 1,455 1,444 1,431
Accrued income receivable 1,215 1,204 1,085
Goodwill 1,346 1,497 1,462
Other intangible assets 451 494 466
Other assets 5,529 5,477 3,552
------------- ------------ -------------
Total assets $ 105,445 $ 94,040 $ 100,527
============= ============ =============
Liabilities
Deposits:
Noninterest-bearing $ 9,787 $ 13,671 $ 9,793
Interest-bearing -- U.S. 2,230 2,843 6,093
Interest-bearing -- Non-
U.S. 51,437 38,615 42,043
------------- ------------ -------------
Total deposits 63,454 55,129 57,929
Securities sold under
repurchase agreements 21,851 21,881 20,702
Federal funds purchased 1,668 435 5,500
Other short-term borrowings 1,618 1,343 1,881
Accrued taxes and other
expenses 2,575 2,603 2,513
Other liabilities 5,736 4,032 3,415
Long-term debt 2,439 2,458 2,436
------------- ------------ -------------
Total liabilities 99,341 87,881 94,376
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 328 289 287
Retained earnings 6,003 5,590 5,463
Accumulated other
comprehensive (loss) income (144) 92 86
Treasury stock (at cost
9,080,000, 3,481,000 and 576,000
shares) (420) (149) (22)
--------- ------------ -------------
Total shareholders'
equity 6,104 6,159 6,151
------------- ------------ -------------
Total liabilities and
shareholders' equity $ 105,445 $ 94,040 $ 100,527
============= ============ =============
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