Exhibit 99.1
State Street Reports Fourth-Quarter Earnings Per Share of $.86,
up 16%; for 2006, Revenue up 15%; EPS from Continuing Operations
up 14% and up 23% Excluding Q2 Tax Charges
BOSTON--(BUSINESS WIRE)--Jan. 17, 2007--State Street Corporation
today announced 2006 fourth-quarter earnings per share of $0.86 on net
income of $291 million. Earnings per share increased 16% versus the
2005 fourth quarter's results of $0.74 per share on net income of $249
million. Total revenue of $1.622 billion in the fourth quarter of 2006
is up 15% from $1.416 billion in the fourth quarter a year ago.
Expenses of $1.18 billion are up 13% from $1.04 billion in the
year-ago quarter. For the fourth quarter of 2006, return on
shareholders' equity of 15.9% is flat with the fourth quarter of 2005.
For the full year, earnings per share from continuing operations
of $3.21 per share, on net income of $1.1 billion, increased 14% from
$2.82 per share from continuing operations in 2005. Earnings per share
in 2006 includes $0.25 per share, or $83 million, of tax charges
recorded in the second quarter. Excluding these charges, earnings per
share from continuing operations would have been $3.46, up 23%, on net
income of $1.2 billion, compared to $2.82 per share from continuing
operations on income from continuing operations of $945 million in
2005. Return on shareholders' equity from continuing operations in
2006 of 16.0 %, or 17.1% excluding the tax charges, compares with
return on equity from continuing operations of 15.3% in 2005.
Total revenue, on a fully taxable-equivalent basis, is up 15%,
from $5.52 billion in 2005 to a record level of $6.35 billion in 2006.
Operating expenses in 2006 of $4.54 billion increased 12% from $4.04
billion in 2005.
Commenting on the performance, Ronald E. Logue, State Street's
chairman and chief executive officer, said, "I'm pleased that we
exceeded the financial goals we set for the year, helped by a
favorable operating environment. Nearly every revenue item on our
income statement increased in double digits on a year-over-year basis,
and we achieved positive operating leverage again this year. Our
servicing fees continued strong. Revenue at State Street Global
Advisors, our investment management arm, grew 26% in 2006 compared to
2005, and it is increasingly becoming a more meaningful contributor to
State Street's results. Our strategy of more actively managing the
balance sheet contributed to an annual increase of 21% in fully
taxable-equivalent net interest revenue. Net interest margin equaled
1.24% for 2006. Additionally, our non-U.S. revenue now represents
approximately 43% of total revenue, in line with our long-term goal of
50% over several years."
Logue concluded, "During 2007 we will build on the progress we
made in 2006, particularly internationally. We continue to target
positive operating leverage on an annual basis. We will continue to
execute against our long-term financial goals of revenue growth of 8%
to 12%, earnings per share growth of 10% to 15%, and return on equity
of 14% to 17%. Our 2007 target is to achieve in the top half of these
ranges."
FOURTH-QUARTER RESULTS VS. YEAR-AGO QUARTER
Total revenue of $1.622 billion in the fourth quarter of 2006 is
up from $1.416 billion, or 15%, from the fourth quarter of 2005.
Servicing fees are $698 million, up $61 million or 10%, from $637
million in the year-ago quarter. The increase is attributable to new
business from existing and new clients and higher equity valuations in
2006. Total assets under custody at quarter end are $11.85 trillion, a
record level, up 17%, compared with $10.12 trillion in the year-ago
quarter.
Management fees, generated by State Street Global Advisors, are
$253 million, up $40 million, or 19%, compared to $213 million in the
year-ago quarter. The increase in management fees reflects new
business from existing and new clients and higher equity valuations in
2006. Total assets under management at quarter end are at a record
level, $1.7 trillion, up 21%, compared to $1.4 trillion in the
previous year-ago quarter.
Average month-end values compared to the fourth quarter of 2005,
are up 13% for the S&P 500 Index and up 10% for the NASDAQ; average
month-end values for the MSCI(R) EAFE Index(SM) are up 24%. The total
return of the Lehman US Aggregate bond index for the fourth quarter is
1.24%.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage services, is up 12%, from $182 million to $203
million. The increase is driven by higher volumes in foreign exchange,
offset partially by lower volatility.
Securities finance revenue is $90 million in the quarter, compared
to $73 million in the year-ago quarter, an increase of 23%. The
increase primarily reflects improving demand for securities on loan.
Processing and other revenue is down 14%, or $10 million to $61
million partially due to the third-quarter transfer of tax-exempt
investments onto the balance sheet.
Fully taxable-equivalent net interest revenue is $325 million, up
28% from $253 million in last year's fourth quarter. The increase is
due to a higher level of customer deposits, a more favorable non-US
rate environment, and a higher level of lower-cost funding.
Total expenses of $1.18 billion in the fourth quarter of 2006 are
up 13% from expenses of $1.04 billion in the fourth quarter of 2005.
Salaries and employee benefits expenses increased $105 million from
$589 million to $694 million, driven principally by incentive
compensation due to improved performance and a higher headcount.
Transaction processing expense increased slightly to $121 million.
Information systems and communications expense was down slightly at
$119 million. Occupancy expenses of $94 million in 2006 compare to $89
million in 2005. Other expenses increased $29 million to $150 million,
which includes costs to support growth initiatives.
The effective tax rate was 34.6% in the fourth quarter of 2006
compared with 34% in the fourth quarter of 2005. We expect the rate
for 2007 to be 35.0%.
FOURTH-QUARTER RESULTS VS. THIRD QUARTER
Fourth-quarter earnings per share of $0.86 is up 4%, or $0.03,
compared to third quarter earnings per share of $0.83. The
third-quarter results include a cumulative gain of $15 million, or
$0.03 per share, in trading services revenue related to the
Corporation's tax-exempt investment programs. Excluding this gain,
earnings per share would have increased 8%. Total revenue in the
fourth quarter of $1.6 billion is up 7%, or $107 million, or $122
million excluding the cumulative gain in the third quarter, versus
$1.5 billion in the third quarter. Total expenses in the fourth
quarter of $1.2 billion are up $88 million compared to $1.1 billion in
the third quarter.
Servicing fee revenue is up 2% and management fee revenue is up
6%, both improvements due to higher equity valuations and business
from new and existing customers. Trading services revenue is up 19% to
$203 million due to increased volumes in FX and improved fees from
transition management, offset by lower volatilities in FX trading.
Excluding the impact of the third-quarter $15 million cumulative gain
noted above, the increase would have been 30%. Securities finance
revenue increased 3% to $90 million. Processing fees and other revenue
declined 6% to $61 million due to lower tax-advantaged investment
income. Fully taxable-equivalent net interest revenue increased 18% to
$325 million due to higher levels of customer deposits and lower-cost
funds.
Salaries and employee benefits expense is up 9% due to increased
incentive compensation expense. Occupancy expense was up 3% due to
higher operating costs. Other expense increased 27%, or $32 million,
to $150 million partially due to higher professional fees to support
growth initiatives.
FULL YEAR 2006 VS. 2005
Total revenue on a fully taxable-equivalent basis increased 15%
from $5.52 billion to $6.35 billion. Servicing fees increased 10%,
from $2.47 billion to $2.72 billion. Management fees increased 26%,
from $751 million to $943 million. Trading services revenue increased
24%, from $694 million to $862 million and securities finance revenue
increased 17%, from $330 million to $386 million. Processing fees and
other revenue decreased 10%, to $272 million from $302 million. Fully
taxable-equivalent net interest revenue increased 21%, from $949
million to $1.15 billion.
Expenses increased 12%, from $4.04 billion to $4.54 billion,
including increases of 19% to $2.65 billion in salaries and employee
benefits expense. Transaction processing expense increased 10% to $496
million and information systems and communications increased 3% to
$501 million. Occupancy expense decreased 5% to $373 million. Other
expenses increased 7% to $518 million.
ADDITIONAL INFORMATION
All per share amounts represent diluted earnings per share.
On January 12, 2007, the IRS released guidance concerning the Tax
Increase Prevention and Reconciliation Act, or "TIPRA". State Street
previously reported a second-quarter 2006 tax-related charge of
approximately $59 million, or $.18 per share, related to TIPRA. The
Corporation is evaluating this new guidance and believes that it may
result in a reduction in income tax expense as a result of a reversal
of a portion of the previously recorded tax-related charge. The amount
and timing of this potential tax reduction is still being evaluated.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Wednesday, January 17, 2007, at 9:30 a.m. EST, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 719/457-2680 (confirmation code
4193234). 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
services. With $11.9 trillion in assets under custody and $1.7
trillion in assets under management at December 31, 2006, State Street
operates in 26 countries and more than 100 geographic markets
worldwide and employs 21,700 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
678/999-4577 outside those countries.
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements about
our financial goals, 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 changes
in interest rates, the value of global and regional financial markets,
the extent of volatility in currency markets, the pace of cross-border
investment activity, the pace at which State Street adds new clients
or at which existing clients use additional services, State Street's
business mix, State Street's success at integrating and converting
acquisitions into its business, the pace of worldwide economic growth
and rates of inflation, the dynamics of markets State Street serves,
and consolidations among clients and competitors. 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 and subsequent SEC
filings. State Street encourages investors to read its 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 17, 2007, and we
will not undertake efforts to revise those forward-looking statements
to reflect events after this date.
STATE STREET CORPORATION
Press Release Addendum
Financial Highlights
December 31, 2006
Quarters Ended % Change
---------------------------------------
December September December Q4 Q4
(Dollars in millions, except 31, 30, 31, vs. vs.
per share amounts or where
otherwise noted) 2006 2006 2005 Q3 Q4
- ----------------------------------------------------------------------
Total Revenue $ 1,622 $ 1,515 $ 1,416 7 % 15 %
Total Expenses 1,178 1,090 1,039 8 13
Income Tax Expense 153 147 128 4 20
Net Income 291 278 249 5 17
Diluted Earnings Per Share $ .86 $ .83 $ .74 4 16
Closing Price Per Share of
Common Stock $ 67.44 $ 62.40 $ 55.44
Cash Dividends Declared Per
Share .21 .20 .19
Return on Equity 15.9 % 16.4 % 15.9 %
Assets Under Custody (AUC) (in
trillions) $ 11.85 $ 11.27 $ 10.12
Assets Under Management (AUM)
(in trillions) 1.75 1.63 1.44
Years Ended % Change
----------------------------
2006
December December
31, 31, vs.
(Dollars in millions, except per share
amounts) 2006 2005 2005
- ----------------------------------------------------------------------
Total Revenue $ 6,311 $ 5,473 15 %
Total Expenses 4,540 4,041 12
Income Tax Expense 693 487 42
Income from Continuing Operations 1,078 945 14
Income (Loss) from Discontinued Operations 10 (107)
Net Income 1,088 838
Diluted Earnings (Loss) Per Share:
From Continuing Operations $ 3.21 $ 2.82 14
From Discontinued Operations .03 (.32)
Net Income 3.24 2.50
Cash Dividends Declared Per Share $ .80 $ .72 11
Return on Equity from Continuing
Operations 16.0 % 15.3 %
Return on Equity 16.1 13.6
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters and years ended December 31, 2006 and December 31, 2005
Quarters Ended Years Ended
---------------------------- ----------------------------
December December December December
31, 31, 31, 31,
(Dollars in 2006 2005 %Change 2006 2005 %Change
millions,
except per
share
amounts)
- -------------------------------- ---------------------------- --------
Fee Revenue:
Servicing
fees $ 698 $ 637 10 % $ 2,723 $ 2,474 10%
Management
fees 253 213 19 943 751 26
Trading
services 203 182 12 862 694 24
Securities
finance 90 73 23 386 330 17
Processing
fees and
other 61 71 (14) 272 302 (10)
--------- --------- --------- ---------
Total fee
revenue 1,305 1,176 11 5,186 4,551 14
Net Interest
Revenue:
Interest
revenue 1,225 861 42 4,323 2,930 48
Interest
expense 909 619 47 3,213 2,023 59
--------- --------- --------- ---------
Net interest
revenue (1) 316 242 31 1,110 907 22
Provision for
loan losses - - - -
--------- --------- --------- ---------
Net interest
revenue
after
provision
for loan
losses 316 242 31 1,110 907 22
Gains
(Losses) on
sales of
available-
for-sale
investment
securities,
net 1 (2) 15 (1)
Gain on sale
of Private
Asset
Management
business - - - 16
- ---------------------- --------- --------- ---------
Total revenue 1,622 1,416 15 6,311 5,473 15
Operating
Expenses:
Salaries and
employee
benefits 694 589 18 2,652 2,231 19
Information
systems and
communi-
cations 119 122 (2) 501 486 3
Transaction
processing
services 121 118 3 496 449 10
Occupancy 94 89 6 373 391 (5)
Other 150 121 24 518 484 7
--------- --------- --------- ---------
Total
operating
expenses 1,178 1,039 13 4,540 4,041 12
--------- --------- --------- ---------
Income from
continuing
operations
before
income tax
expense 444 377 18 1,771 1,432 24
Income tax
expense from
continuing
operations 153 128 693 487
- ---------------------- --------- --------- ---------
Income from
continuing
operations 291 249 17 1,078 945 14
Income (Loss)
from
discontinued
operations
before
income tax
expense - - 16 (165)
Income tax
expense
(benefit)
from
discontinued
operations - - 6 (58)
- ---------------------- --------- --------- ---------
Income (Loss)
from
discontinued
operations - - 10 (107)
--------- --------- --------- ---------
Net income $ 291 $ 249 $ 1,088 $ 838
========= ========= ========= =========
Earnings Per
Share From
Continuing
Operations:
Basic $ .87 $ .75 16 $ 3.25 $ 2.86 14
Diluted .86 .74 16 3.21 2.82 14
Earnings
(Loss) Per
Share From
Discontinued
Operations:
Basic $ - $ - $ .03 $ (.33)
Diluted - - .03 (.32)
Earnings Per
Share:
Basic $ .87 $ .75 $ 3.28 $ 2.53
Diluted .86 .74 3.24 2.50
Average
Shares
Outstanding
(in
thousands):
Basic 331,421 330,689 331,350 330,361
Diluted 337,429 337,061 335,732 334,636
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 $325
million and $253 million for the three months ended December 31, 2006
and 2005, respectively, and $1.15 billion and $949 million for the
years ended December 31, 2006 and 2005, respectively.
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters ended December 31, 2006 and September 30, 2006
Quarters Ended
-------------------------------
December September
31, 30,
(Dollars in millions, except per share
amounts) 2006 2006 % Change
- ----------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 698 $ 685 2 %
Management fees 253 238 6
Trading services 203 171 19
Securities finance 90 87 3
Processing fees and other 61 65 (6)
--------- ----------
Total fee revenue 1,305 1,246 5
Net Interest Revenue:
Interest revenue 1,225 1,103 11
Interest expense 909 837 9
--------- ----------
Net interest revenue (1) 316 266 19
Provision for loan losses - -
--------- ----------
Net interest revenue after provision
for loan losses 316 266 19
Gains on sales of available-for-sale
investment securities, net 1 3
--------- ----------
Total revenue 1,622 1,515 7
Operating Expenses:
Salaries and employee benefits 694 639 9
Information systems and communications 119 121 (2)
Transaction processing services 121 121 -
Occupancy 94 91 3
Other 150 118 27
--------- ----------
Total operating expenses 1,178 1,090 8
--------- ----------
Income before income tax expense 444 425 4
Income tax expense 153 147
--------- ----------
Net income $ 291 $ 278 5
========= ==========
Earnings Per Share:
Basic $ .87 $ .84 4
Diluted .86 .83 4
Average Shares Outstanding (in
thousands):
Basic 331,421 330,440
Diluted 337,429 335,513
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 $325
million and $275 million for the three months ended December 31, 2006
and September 30, 2006.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
December 31, December 31,
(Dollars in millions, except per share
amounts) 2006 2005
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 2,368 $ 2,684
Interest-bearing deposits with banks 5,236 11,275
Securities purchased under resale agreements 14,678 8,679
Trading account assets 785 764
Investment securities available for sale 60,445 54,979
Investment securities held to maturity 4,547 4,891
Loans and leases (net of allowance of $18) 8,928 6,464
Premises and equipment 1,560 1,453
Accrued income receivable 1,617 1,364
Goodwill 1,384 1,337
Other intangible assets 434 459
Other assets 5,371 3,619
------------ ------------
Total assets $ 107,353 $ 97,968
============ ============
Liabilities
Deposits:
Noninterest-bearing $ 10,194 $ 9,402
Interest-bearing -- U.S. 1,272 2,379
Interest-bearing -- Non-U.S. 54,180 47,865
------------ ------------
Total deposits 65,646 59,646
Securities sold under repurchase agreements 19,147 20,895
Federal funds purchased 2,147 1,204
Other short-term borrowings 2,835 1,219
Accrued taxes and other expenses 3,162 2,632
Other liabilities 4,567 3,346
Long-term debt 2,616 2,659
------------ ------------
Total liabilities 100,120 91,601
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 and 337,126,000 shares 337 337
Surplus 399 266
Retained earnings 7,011 6,189
Accumulated other comprehensive loss (224) (231)
Treasury stock (at cost 4,688,000 and
3,501,000 shares) (290) (194)
------------ ------------
Total shareholders' equity 7,233 6,367
------------ ------------
Total liabilities and shareholders' equity $ 107,353 $ 97,968
============ ============
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