Exhibit 99.1
State Street Corporation Announces EPS from Continuing Operations up
25% on a 16% Revenue Increase to a Record $1.5 Billion in First
Quarter of 2006; Strong Performance across All Business Units
BOSTON--(BUSINESS WIRE)--April 18, 2006--State Street Corporation
announced today first-quarter earnings per share from continuing
operations of $0.84, up 25% from $0.67 in last year's first quarter
driven by strong revenue growth as well as positive operating
leverage. In addition, State Street recognized a $0.03 gain from
discontinued operations related to finalizing costs associated with
the divestiture of Bel Air Investment Advisors. Record revenue of $1.5
billion in the first quarter of 2006 is up 16%, or $215 million,
compared to $1.3 billion in the year-ago quarter. Total expenses in
the first quarter of 2006 of $1.1 billion are up 13%, or $130 million,
compared to $966 million in the year-ago quarter. Net income from
continuing operations of $282 million was up $56 million, or 25% from
$226 million a year ago. For the first quarter of 2006, return on
shareholders' equity was 17.6% compared to 15.0% in the first quarter
of 2005.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "I am very pleased with our overall results. Our fee
revenue continues to be strong across all business units and
geographies, especially management fees from State Street Global
Advisors. In addition, we benefited from favorable foreign exchange
and equity markets. Our net interest revenue and net interest margin
also increased due to the continuing execution of our balance sheet
strategy.
"Based on the outlook for interest rates, we may face pressure
from rising rates later this year, and we also need to continue to
work hard at moderating our rate of expense growth. Looking to the
rest of the year, we are well positioned to achieve our previously
stated goals for revenue and earnings per share growth, as well as
return on equity. If the current strength continues, our results for
the full year may be above the middle of the respective ranges."
FIRST QUARTER RESULTS VS. YEAR-AGO QUARTER
Servicing fees are up 10%, to $657 million from $599 million in
last year's first quarter. The increase is attributable to new
business from existing and new clients in 2006 and higher equity
market valuations. Total assets under custody are $10.7 trillion, up
13%, compared with $9.5 trillion in the year-ago quarter. Daily
average values for the S&P 500 Index are up 8% from the first quarter
of 2005; daily average values for the MSCI(R) EAFE Index(SM) are up
17%.
Investment management fees, generated by State Street Global
Advisors, are $220 million, up 24% from $177 million a year ago.
Management fees reflect continued new business, an increase in average
month-end equity valuations, and higher performance fees. Total assets
under management are $1.5 trillion, up 12%, compared to $1.4 trillion
the previous year.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage and other fees, is $230 million for the quarter,
up 38% from $167 million a year ago. The increase in foreign exchange
was due to stronger volumes and a favorable mix, offset by weaker
volatilities. Strong transition business drove the increase in
brokerage fees and other revenue.
Securities finance revenue is $81 million in the quarter, up 16%
compared to $70 million in the year-ago quarter, primarily reflecting
an increase in the volume of securities lent. Processing and other fee
revenue was down 14%, or $12 million, due to declines in sub-servicing
fees and various other investments, none of which was material.
Net interest revenue on a fully taxable-equivalent basis is $277
million, an increase of $54 million, or 24%, from $223 million a year
ago. The increase is due to the continued repositioning of the
investment portfolio, more favorable deposit pricing, and customer
volumes.
Expenses increased from $966 million to $1.1 billion, up $130
million, or 13%. Salaries and benefits expenses are up 21% to $635
million, primarily due to the increase in headcount and higher benefit
costs, as well as the impact of incentive compensation due to improved
performance. The headcount increase includes the addition of 170 staff
from the previously announced acquisition of UniverseSoft Technology
Company in Hangzhou, China.
Expenses for information systems & communications increased $6
million, or 5%, to $132 million due to costs associated with increased
global infrastructure costs. The increase in total expenses also
includes higher transaction processing services, up 11% to $120
million, due to higher volumes in the investment servicing business.
Other expenses were flat at $116 million.
The effective tax rate in the first quarter of 2006 is 34.0%, the
same as the rate in 2005.
State Street purchased approximately 2.9 million shares of its
common stock during the first quarter at an average price of $61.99
per share. The Corporation's remaining authorization to purchase
shares is approximately 15 million shares, an amount recently approved
by the Board of Directors.
FIRST-QUARTER RESULTS VS. FOURTH QUARTER
First-quarter net income per share from continuing operations of
$0.84 compares to net income per share of $0.74 in the fourth quarter,
an increase of 14%, driven by strong revenue growth as well as
positive operating leverage. Total revenue in the first quarter of
$1.523 billion is up 8% versus $1.416 billion in the fourth quarter of
2005. Total expenses are $1.096 billion, up 5% versus $1.039 billion
in the fourth quarter. Return on shareholders equity of 17.6% in the
first quarter compares with 15.9% in the fourth quarter.
Servicing fees are up 3% to $657 million and management fees are
up 3% to $220 million primarily due to new business. Trading services
revenue is up 26%, from $182 million to $230 million due to strong
foreign exchange performance. Securities finance revenue increased
11%, from $73 million to $81 million, due to increased volumes. Net
interest revenue on a fully taxable-equivalent basis is $277 million,
up from $253 million, or 9%, due to the continued repositioning of the
investment portfolio, favorable deposit pricing, and customer volumes.
Salaries and employee benefits total $635 million, an increase of
$46 million, or 8%, from $589 million due to increased headcount and
higher benefit costs, as well as the impact of incentive compensation.
More than one third of the increase in our headcount from the fourth
quarter was due to the previously announced acquisition of
UniverseSoft Technology Company in Hangzhou, China. Transaction
processing is up 2% to $120 million due to increased volumes in the
investment servicing business, and occupancy is up 4% to $93 million
from $89 million due to annual increases in operating costs.
Information systems and communications increased 8% from $122 million
to $132 million, due to costs associated with increased global
infrastructure costs. Other expenses are down $5 million from $121
million to $116 million due to lower professional fees.
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, April 18, 2006, 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
4414294). 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 $10.7 trillion in assets under custody and $1.5 trillion in
assets under management, State Street operates in 26 countries and
more than 100 geographic markets and employs 21,375 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 2005 annual report on Form 10-K, particularly in Item 1A,
"Risk Factors," and the Corporation's subsequent SEC filings which
should be read before making any investment decision. The
forward-looking statements contained in this press release speak only
as of the date hereof, April 18, 2006, and the Corporation will not
undertake efforts to revise those forward-looking statements to
reflect events after this date.
These financial schedules should be used in conjunction with State
Street's quarterly earnings press release.
Press Release Addendum
Financial Highlights
March 31, 2006
Quarters Ended % Change
-----------------------------------------
(Dollars in millions, except March December March Q1 Q1
per share information or 31, 31, 31, vs. vs.
where otherwise indicated) 2006 2005 2005 Q4 Q1
- ----------------------------------------------------------------------
Total Revenue $ 1,523 $ 1,416 $ 1,308 8% 16%
Total Expenses 1,096 1,039 966 5 13
Income from Continuing
Operations 282 249 226 13 25
Income from Discontinued
Operations 10 - -
Net income 292 249 226 17 29
Diluted Earnings Per Share:
From Continuing Operations $ .84 $ .74 $ .67 14 25
From Discontinued Operations .03 - -
Net Income .87 .74 .67 18 30
Closing Price Per Share of
Common Stock $ 60.43 $ 55.44 $ 43.72
Cash Dividends Declared Per
Share .19 .19 .17
Return on Equity from
Continuing Operations 17.6% 15.9% 15.0%
Return on Equity 18.3 15.9 15.0
Assets Under Custody (AUC)
(in trillions) $ 10.74 $ 10.12 $ 9.52
Assets Under Management (AUM)
(in trillions) 1.54 1.44 1.37
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters Ended
----------------------------
(Dollars in millions, except per share March 31, March 31,
information) 2006 2005 % Change
- ------------------------------------------------------------ ---------
Fee Revenue:
Servicing fees $ 657 $ 599 10 %
Management fees 220 177 24
Trading services 230 167 38
Securities finance 81 70 16
Processing fees and other 72 84 (14)
--------- ---------
Total fee revenue 1,260 1,097 15
Net Interest Revenue:
Interest revenue 961 603 59
Interest expense 695 391 78
--------- ---------
Net interest revenue (1) 266 212 25
Provision for loan losses - -
--------- ---------
Net interest revenue after provision for
loan losses 266 212 25
Loss on sales of available-for-sale
investment securities, net (3) (1)
--------- ---------
Total revenue 1,523 1,308 16
Operating Expenses:
Salaries and employee benefits 635 524 21
Information systems and communications 132 126 5
Transaction processing services 120 108 11
Occupancy 93 92 1
Other 116 116 -
--------- ---------
Total operating expenses 1,096 966 13
--------- ---------
Income from continuing operations before
income tax expense 427 342 25
Income tax expense from continuing
operations 145 116
--------- ---------
Income from continuing operations 282 226 25
Income from discontinued operations before
income tax expense 16 -
Income tax expense from discontinued
operations 6 -
--------- ---------
Income from discontinued operations 10 -
--------- ---------
Net income $ 292 $ 226
========= =========
Earnings Per Share From Continuing
Operations:
Basic $ .85 $ .68 25
Diluted .84 .67 25
Earnings Per Share From Discontinued
Operations:
Basic $ .03 $ -
Diluted .03 -
Earnings Per Share:
Basic $ .88 $ .68
Diluted .87 .67
OTHER SELECTED FINANCIAL INFORMATION
Average Shares Outstanding (in thousands):
Basic 332,761 331,563
Diluted 337,117 334,653
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 $277
million and $223 million for the three months ended March 31, 2006 and
2005, respectively
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters ended March 31, 2006 and
December 31, 2005
Quarters Ended
-----------------------------
(Dollars in millions, except per share March 31, December 31,
information) 2006 2005 % Change
- ----------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 657 $ 637 3 %
Management fees 220 213 3
Trading services 230 182 26
Securities finance 81 73 11
Processing fees and other 72 71 1
--------- ---------
Total fee revenue 1,260 1,176 7
Net Interest Revenue:
Interest revenue 961 861 12
Interest expense 695 619 12
--------- ---------
Net interest revenue (1) 266 242 10
Provision for loan losses - -
--------- ---------
Net interest revenue after provision for
loan losses 266 242 10
Loss on sales of available-for-sale
investment securities, net (3) (2)
--------- ---------
Total revenue 1,523 1,416 8
Operating Expenses:
Salaries and employee benefits 635 589 8
Information systems and communications 132 122 8
Transaction processing services 120 118 2
Occupancy 93 89 4
Other 116 121 (4)
--------- ---------
Total operating expenses 1,096 1,039 5
--------- ---------
Income from continuing operations before
income tax expense 427 377 13
Income tax expense from continuing
operations 145 128
--------- ---------
Income from continuing operations 282 249 13
Income from discontinued operations
before income tax expense 16 -
Income tax expense from discontinued
operations 6 -
--------- ---------
Income from discontinued operations 10 -
--------- ---------
Net income $ 292 $ 249
========= =========
Earnings Per Share From Continuing
Operations:
Basic $ .85 $ .75 13
Diluted .84 .74 14
Earnings Per Share From Discontinued
Operations:
Basic $ .03 $ -
Diluted .03 -
Earnings Per Share:
Basic $ .88 $ .75
Diluted .87 .74
OTHER SELECTED FINANCIAL INFORMATION
Average Shares Outstanding (in thousands):
Basic 332,761 330,689
Diluted 337,117 337,061
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 $277
million and $253 million for the three months ended March 31, 2006 and
December 31, 2005, respectively.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
(Dollars in millions, except March 31, December 31, March 31,
share information) 2006 2005 2005
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 3,405 $ 2,684 $ 2,926
Interest-bearing deposits with
banks 10,473 11,275 20,160
Securities purchased under
resale agreements 11,058 8,679 12,699
Federal funds sold - - 1,000
Trading account assets 1,120 764 521
Investment securities
available for sale 55,395 54,979 46,892
Investment securities held to
maturity 4,575 4,891 1,321
Loans (less allowance of $18,
$18 and $18) 8,941 6,464 4,830
Premises and equipment 1,553 1,453 1,450
Accrued income receivable 1,323 1,364 1,174
Goodwill 1,340 1,337 1,472
Other intangible assets 447 459 485
Other assets 4,526 3,619 5,164
----------- ---------- -------------
Total assets $ 104,156 $ 97,968 $ 100,094
=========== ========== =============
Liabilities
Deposits:
Noninterest-bearing $ 10,837 $ 9,402 $ 10,301
Interest-bearing -- U.S. 2,339 2,379 2,711
Interest-bearing -- Non-U.S. 48,623 47,865 45,306
----------- ---------- -------------
Total deposits 61,799 59,646 58,318
Securities sold under
repurchase agreements 21,195 20,895 20,698
Federal funds purchased 3,631 1,204 1,739
Other short-term borrowings 1,560 1,219 2,840
Accrued taxes and other
expenses 2,501 2,632 2,410
Other liabilities 4,440 3,346 5,628
Long-term debt 2,617 2,659 2,436
----------- ---------- -------------
Total liabilities 97,743 91,601 94,069
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 238 266 282
Retained earnings 6,418 6,189 5,759
Accumulated other
comprehensive (loss) income (350) (231) (95)
Treasury stock (at cost
4,645,000, 3,501,000 and
5,849,000 shares) (230) (194) (258)
----------- ---------- -------------
Total shareholders' equity 6,413 6,367 6,025
----------- ---------- -------------
Total liabilities and
shareholders' equity $ 104,156 $ 97,968 $ 100,094
=========== ========== =============
CONTACT: State Street Corporation
Edward J. Resch, 617-664-1110
or
Investors:
Kelley MacDonald, 617-664-3477
or
Media:
Hannah Grove, 617-664-3377