Exhibit 99.1
State Street Corporation Achieves Record Revenue of $1.7 Billion and EPS of $.93
in the First Quarter, Both up 11% versus Year-Ago Quarter
Tenth Consecutive Quarter of Positive Operating Leverage
BOSTON--(BUSINESS WIRE)--April 17, 2007--State Street Corporation
announced today first-quarter net income per share of $0.93, up 11%
from earnings per share from continuing operations of $0.84 in last
year's first quarter. Operating-basis revenue of $1.708 billion in the
first quarter of 2007, representing a State Street record for a
quarter, is up 11.3% from $1.534 billion compared to the year-ago
quarter. Total expenses in the first quarter of 2007 of $1.213 billion
are up 10.7% from $1.096 billion compared to the year-ago quarter. As
a result, State Street achieved positive operating leverage of
approximately 60 basis points. Net income of $314 million for the
quarter is up 11% from income from continuing operations of $282
million for the year-ago quarter. For the first quarter of 2007,
return on shareholders' equity was 17.4% compared to 17.6% from
continuing operations in the first quarter of 2006.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "We continue to grow our revenue and earnings per share
and generate return on equity consistent with our long-term goals. Our
ability to control expenses and achieve positive operating leverage
contributed to this result, while revenue from investment servicing
and securities finance increased significantly. I'm particularly
pleased with the performance of State Street Global Advisors this
quarter, which continues to generate increased revenue and profit
driven largely by demand from clients for its range of innovative
enhanced and quantitative active investment strategies. Our net
interest revenue and net interest margin continue to benefit from a
favorable mix of customer deposits, especially from non-US customers.
Trading services revenue declined moderately as foreign exchange
markets were not as robust as they were in last year's first quarter,
which, as we stated at the time, were unusually strong.
"During the first quarter, we closed the Currenex transaction and
are excited about the capabilities resulting from this acquisition. We
look forward to completing the proposed acquisition of Investors
Financial Services Corporation, which is expected to close in the
middle of the year. We expect that these transactions will enhance our
leadership in several high-growth segments of the investment servicing
markets and deliver important benefits for our customers."
FIRST QUARTER 2007 RESULTS VS. YEAR-AGO QUARTER
Servicing fees are up 9% to $718 million from $657 million in last
year's first quarter. The increase is attributable to new business
from existing and new customers in 2007 and to higher daily-average
equity market valuations. Total assets under custody are $12.3
trillion at March 31, 2007, up 15%, compared with $10.7 trillion at
March 31, 2006. Daily average values for the S&P 500 Index are up 11%
from the first quarter of 2006; daily average values for the MSCI(R)
EAFE Index(SM) are up 19%.
Investment management fees, generated by State Street Global
Advisors, are $261 million, up 19% from $220 million in the year-ago
quarter. Growth in management fees reflect continued new business, as
well as an increase in average month-end equity market valuations.
Total assets under management are $1.8 trillion, up 20%, compared to
$1.5 trillion at March 31, 2006.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage and other fees, is $220 million for the quarter,
down 4% from $230 million in the year-ago quarter. The decrease in
foreign exchange is due to weaker volatility, offset partially by
increased volumes. Brokerage and other fees increased 5% due primarily
to fees from one month of Currenex revenue, partially offset by weaker
transition management and brokerage volumes.
Securities finance revenue is $98 million in the quarter, up 21%
from $81 million compared to the year-ago quarter, primarily
reflecting an increase in the volume of securities lent.
Net interest revenue on a fully taxable-equivalent basis is $337
million, an increase of 22% from $277 million a year ago. The increase
is due primarily to a higher level of customer deposits, the continued
benefit from the non-US rate environment, and stable U.S. rates.
Expenses increased to $1.213 billion, up 10.7% from $1.096 billion
a year ago. Salaries and benefits expenses are up 16% to $739 million
from $635 million, primarily as a result of the impact of incentive
compensation, merit increases, increased headcount due to new business
wins, and higher benefit costs.
The increase in total expenses also includes higher transaction
processing services, up 8% to $129 million from $120 million a year
ago, due to higher volumes in the investment servicing business.
Expenses for information systems & communications decreased 5%, to
$125 million from $132 million and occupancy increased 1%, to $94
million from $93 million. Other expenses were up 9%, or $10 million at
$126 million from $116 million due primarily to costs to support
growth initiatives.
The effective tax rate in the first quarter of 2007 is 35.0%, up
from 34.0% in the year-ago quarter.
FIRST-QUARTER 2007 RESULTS VS. FOURTH QUARTER 2006
First-quarter net income per share of $0.93 is up from $.91 per
share in the fourth quarter of 2006. Excluding the fourth-quarter
tax-related adjustment of $0.05 per share, net income per share
increased 8% compared to net income per share of $0.86. Total revenue
in the first quarter is $1.708 billion, up 4.5% versus $1.634 billion
in the fourth quarter of 2006. Total expenses are $1.213 billion up
3.0% versus $1.178 billion in the fourth quarter. On a sequential
basis, we achieved positive operating leverage of about 150 basis
points. Return on shareholders' equity of 17.4% in the first quarter
compares with 16.9% or with 15.9%, excluding 100 basis points that
resulted from the fourth-quarter tax-related adjustments.
Servicing fees are $718 million, up 3% from $698 million due to
new business as well as an increase in daily equity market valuations.
Management fees are $261 million, up 3% from $253 million primarily
due to new business, as well as an increase in month-end equity market
valuations, partially offset by a decline in performance fees. Trading
services revenue is $220 million, up 8% from $203 million due to
strength in foreign exchange revenue and brokerage and other fee
revenue, primarily related to one month of Currenex revenue.
Securities finance revenue increased 9%, from $90 million to $98
million due primarily to increased volumes and slightly improved
spreads. Processing fees and other revenue increased 20% to $73
million from $61 million primarily due to an increase in equity income
from the joint ventures. Net interest revenue on a fully
taxable-equivalent basis is $337 million, up 3% from $328 million, due
primarily to a higher level of transaction deposits and continued
benefit from the non-US rate environment.
Salaries and employee benefits expense increased 6% to $739
million from $694 million due to the impact of incentive compensation,
higher benefit costs and the impact of increased headcount due to new
business wins. Transaction processing expense is up 7% from $121
million to $129 million due to increased volumes in the investment
servicing business, and Information systems and communications expense
increased 5% from $119 million to $125 million, due primarily to costs
associated with increased global infrastructure investments,
particularly in Europe. Other expenses are down 16% from $150 million
to $126 million due primarily to a decline in expenses for securities
processing and 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 17, 2007, at 9:00 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 719/457-2679 (confirmation code
9045459). Recorded replays of the conference call will be available on
the web site, and by telephone at +1 402/220-4230, beginning at 12:00
p.m. EDT today. The telephone replay will be available for two weeks
following the conference call. This press release and additional
financial information is available on State Street's website, at
www.statestreet.com/stockholder.
State Street Corporation (NYSE: STT) is the world's leading
provider of financial services to institutional investors including
investment servicing, investment management and investment research
and trading. With $12.3 trillion in assets under custody and $1.8
trillion in assets under management at March 31, 2007, State Street
operates in 26 countries and more than 100 geographic markets and
employs 21,950 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.
FORWARD-LOOKING STATEMENTS
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements about
our pending and recently completed acquisitions of Investors Financial
Services Corporation and Currenex, respectively, as well as about our
financial goals, the financial outlook and business environment. These
statements are not guarantees of future performance, are inherently
uncertain, are based on current assumptions that are difficult to
predict and involve a number of risks and uncertainties. Therefore,
actual outcomes and results may differ materially from what is
expressed in those statements, and those statements should not be
relied upon as representing State Street's expectations or beliefs as
of any date subsequent to the date of this release.
Important factors that may affect future results and outcomes
include:
-- State Street's ability to complete, integrate and convert
acquisitions into its business, including the receipt of
required regulatory and Investors Financial shareholder
approvals;
-- the level and volatility of interest rates, particularly in
the U.S. and Europe; the performance and volatility of
securities, currency and other markets in the U.S. and
internationally; economic conditions and monetary and other
governmental actions designed to address those conditions;
-- State Street's ability to attract non-interest bearing
deposits and other low-cost funds;
-- the competitive environment in which State Street operates;
-- the enactment of legislation and changes in regulation and
enforcement that impact State Street and its customers;
-- State Street's ability to continue to grow revenue, control
expenses and attract the capital necessary to achieve its
business goals and comply with regulatory requirements;
-- State Street's ability to control systemic and operating risk;
-- trends in the globalization of investment activity and the
growth on a worldwide basis in financial assets;
-- trends in governmental and corporate pension plans and savings
rates;
-- changes in accounting standards and practices, including
changes in the interpretation of existing standards, that
impact State Street's consolidated financial statements;
-- and changes in tax legislation and in the interpretation of
existing tax laws by U.S. and non-U.S. tax authorities that
impact the amount of taxes due.
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 2006 Annual Report on Form 10-K and its
subsequent SEC filings. State Street encourages investors to read its
10-K, particularly the section on Risk Factors, 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 17, 2007, and State Street will not
undertake efforts to revise those forward-looking statements to
reflect events after this date.
OTHER INFORMATION
State Street has filed with the SEC a registration statement that
includes the proxy statement/prospectus and other relevant documents
to be mailed to security holders of Investors Financial Services
Corporation in connection with State Street's proposed acquisition of
Investors Financial. We urge investors to read the proxy
statement/prospectus and any other relevant documents, because they
contain important information about State Street, Investors Financial
and the proposed transaction. A definitive proxy statement/prospectus
will be sent to security holders of Investors Financial seeking
approval of the proposed transaction. Investors will be able to obtain
these materials (when they become available) and other documents filed
with the SEC free of charge at the SEC's website, www.sec.gov. In
addition, a copy of the definitive proxy statement/prospectus (when it
becomes available) may be obtained free of charge by directing a
request to State Street Corporation, One Lincoln Street, Boston MA
02110, Attention: Office of the General Counsel; or by directing a
request to Investors Financial Services Corporation, 200 Clarendon
Street, Boston MA 02116, Attention: Office of the General Counsel.
This communication is not a solicitation of a proxy from any
security holder of Investors Financial or an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. No
offering of securities shall be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of 1933,
as amended.
Investors Financial, its directors and executive officers and
certain other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding Investors Financial's directors and executive
officers is available in the proxy statement filed with the SEC by
Investors Financial on March 10, 2006. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise, is
contained in the proxy statement/prospectus and other relevant
materials filed with the SEC.
STATE STREET CORPORATION
Press Release Addendum
Financial Highlights
March 31, 2007
Quarters Ended % Change
-------------------------------- ---------------
Q1 2007 Q1 2007
March 31, December 31, March 31, vs. vs.
(Dollars in
millions, except
per share amounts
or where otherwise
noted) 2007 2006 2006 Q4 2006 Q1 2006
- ----------------------------------------------------------------------
Total Revenue $ 1,696 $ 1,622 $ 1,523 5 % 11 %
Total Expenses 1,213 1,178 1,096 3 11
Income from
Continuing
Operations 314 309 282 2 11
Income from
Discontinued
Operations - - 10
Net Income 314 309 292 2 8
Diluted Earnings Per
Share:
From Continuing
Operations $ .93 $ .91 $ .84 2 11
From Discontinued
Operations - - .03
Net Income .93 .91 .87 2 7
Cash Dividends
Declared Per Share $ .21 $ .21 $ .19
Closing Price Per
Share of Common
Stock 64.75 67.44 60.43
Return on Equity
from Continuing
Operations 17.4 % 16.9 % 17.6 %
Return on Equity 17.4 % 16.9 % 18.3 %
At Quarter End:
Assets Under Custody
(AUC) (in
trillions) $ 12.33 $ 11.85 $ 10.74
Assets Under
Management (AUM)
(in trillions) 1.85 1.75 1.54
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters ended March 31, 2007 and March 31, 2006
Quarters Ended
------------------------------
March 31, March 31,
(Dollars in millions, except per share
amounts) 2007 2006 % Change
- ----------------------------------------------------------- ---------
Fee Revenue:
Servicing fees $ 718 $ 657 9 %
Management fees 261 220 19
Trading services 220 230 (4)
Securities finance 98 81 21
Processing fees and other 73 72 1
--------- ---------
Total fee revenue 1,370 1,260 9
Net Interest Revenue:
Interest revenue 1,172 961 22
Interest expense 847 695 22
--------- ---------
Net interest revenue (1) 325 266 22
Provision for loan losses - -
--------- ---------
Net interest revenue after provision for
loan losses 325 266 22
Gains (Losses) on sales of available-
for-sale investment securities, net 1 (3)
-------- --------
Total revenue 1,696 1,523 11.4
Operating Expenses:
Salaries and employee benefits 739 635 16
Information systems and communications 125 132 (5)
Transaction processing services 129 120 8
Occupancy 94 93 1
Other 126 116 9
--------- ---------
Total operating expenses 1,213 1,096 10.7
--------- ---------
Income from continuing operations before
income tax expense 483 427 13
Income tax expense from continuing
operations 169 145
--------- ---------
Income from continuing operations 314 282 11
Income from discontinued operations
before income tax expense - 16
Income tax expense from discontinued
operations - 6
--------- ---------
Income from discontinued operations - 10
--------- ---------
Net income $ 314 $ 292
========= =========
Earnings Per Share From Continuing
Operations:
Basic $ .94 $ .85 11
Diluted .93 .84 11
Earnings Per Share From Discontinued
Operations:
Basic $ - $ .03
Diluted - .03
Earnings Per Share:
Basic $ .94 $ .88
Diluted .93 .87
Average Shares Outstanding (in
thousands):
Basic 334,036 332,761
Diluted 338,727 337,117
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 $337
million and $277 million for the quarters ended March 31, 2007 and
2006, respectively. These amounts include taxable-equivalent
adjustments of $12 million and $11 million, respectively.
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters ended March 31, 2007 and December 31, 2006
Quarters Ended
-----------------------------------
March 31, December 31,
(Dollars in millions, except per
share amounts) 2007 2006 % Change
- ----------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 718 $ 698 3 %
Management fees 261 253 3
Trading services 220 203 8
Securities finance 98 90 9
Processing fees and other 73 61 20
---------- -------------
Total fee revenue 1,370 1,305 5
Net Interest Revenue:
Interest revenue 1,172 1,226 (4)
Interest expense 847 910 (7)
---------- -------------
Net interest revenue (1) 325 316 3
Provision for loan losses - -
---------- -------------
Net interest revenue after
provision for loan losses 325 316 3
Gains on sales of available-for-
sale investment securities, net 1 1
---------- -------------
Total revenue 1,696 1,622 4.6
Operating Expenses:
Salaries and employee benefits 739 694 6
Information systems and
communications 125 119 5
Transaction processing services 129 121 7
Occupancy 94 94 -
Other 126 150 (16)
---------- -------------
Total operating expenses 1,213 1,178 3.0
---------- -------------
Income before income tax expense 483 444 9
Income tax expense 169 135
---------- -------------
Net income $ 314 $ 309 2
========== =============
Earnings Per Share:
Basic $ .94 $ .93 1
Diluted .93 .91 2
Average Shares Outstanding (in
thousands):
Basic 334,036 331,421
Diluted 338,727 337,429
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 $337
million and $328 million for the quarters ended March 31, 2007 and
December 31, 2006. These amounts include taxable-equivalent
adjustments of $12 million and $12 million, respectively.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in millions, except per
share amounts) 2007 2006 2006
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 3,298 $ 2,368 $ 3,405
Interest-bearing deposits with
banks 4,751 5,236 10,473
Securities purchased under resale
agreements 12,158 14,678 11,058
Trading account assets 1,025 785 1,120
Investment securities available for
sale 63,519 60,445 55,395
Investment securities held to
maturity 4,385 4,547 4,575
Loans and leases (net of allowance
of $18) 10,140 8,928 8,941
Premises and equipment 1,680 1,560 1,553
Accrued income receivable 1,627 1,617 1,323
Goodwill 1,815 1,384 1,340
Other intangible assets 596 434 447
Other assets 5,009 5,371 4,526
---------- ------------ ----------
Total assets $ 110,003 $ 107,353 $ 104,156
========== ============ ==========
Liabilities
Deposits:
Noninterest-bearing $ 9,939 $ 10,194 $ 10,837
Interest-bearing -- U.S. 965 1,272 2,339
Interest-bearing -- Non-U.S. 55,696 54,180 48,623
---------- ------------ ----------
Total deposits 66,600 65,646 61,799
Securities sold under repurchase
agreements 17,368 19,147 21,195
Federal funds purchased 5,007 2,147 3,631
Other short-term borrowings 3,629 2,835 1,560
Accrued taxes and other expenses 2,900 3,143 2,501
Other liabilities 4,419 4,567 4,440
Long-term debt 2,613 2,616 2,617
---------- ------------ ----------
Total liabilities 102,536 100,101 97,743
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 311 399 238
Retained earnings 7,046 7,030 6,418
Accumulated other comprehensive
loss (147) (224) (350)
Treasury stock (at cost 1,386,000,
4,688,000 and 4,645,000 shares) (80) (290) (230)
---------- ------------ ----------
Total shareholders' equity 7,467 7,252 6,413
---------- ------------ ----------
Total liabilities and
shareholders' equity $ 110,003 $ 107,353 $ 104,156
========== ============ ==========
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