EXHIBIT 99.1
State Street Corporation Achieves Record Revenue and Operating EPS in
Second Quarter
Positive Operating Leverage Continues
Strong Momentum at Investors Financial as Customer Conversions
Begin
BOSTON--(BUSINESS WIRE)--July 16, 2007--State Street Corporation
announced today second-quarter earnings per share of $1.07 compared to
$0.68 per share for the second quarter of 2006, which included
non-cash tax adjustments of $0.25 per share, or $0.93 per share
without those adjustments. Revenue of $1.921 billion in the second
quarter of 2007 represented a record and is up 16.4%, compared to
$1.651 billion in the year-ago quarter. Total expenses in the second
quarter of 2007 of $1.358 billion are up 15.5%, compared to $1.176
billion in the year-ago quarter. As a result, the Corporation
generated about 90 basis points of positive operating leverage. For
the second quarter of 2007, return on shareholders' equity is 19.2%,
compared to 14.0% in the second quarter of 2006 including the tax
adjustments or 19.2% excluding the tax adjustments. State Street's
acquisition of Investors Financial Services Corp. closed on July 2,
2007, and consequently, State Street's results for the quarter do not
reflect any contribution from the acquisition.
Ronald E. Logue, State Street's chairman and chief executive
officer, said, "Our strong performance during the first six months of
this year demonstrates the successful execution of our global
strategy, while we continue to build for the future with our
acquisition of Investors Financial. The improved results are
particularly significant in view of last year's strong second quarter.
The 12 percent increase in servicing fees this quarter highlights our
ability to win new business globally while deepening relationships
with existing customers."
Logue added, "State Street Global Advisors, which grew 22 percent
from last year's second quarter, continues to make a larger
contribution to our bottom line as it places greater emphasis on its
quantitative active strategies. We are pleased to achieve the eleventh
consecutive quarter of positive operating leverage compared to the
prior-year quarter. We also continued to benefit from our balance
sheet strategy. We achieved 1.64 percent in net interest margin on a
44 percent improvement in fully taxable-equivalent net interest
revenue."
Logue concluded, "The results of Investors Financial in the second
quarter were strong, like State Street's, and so we are revising our
financial goals for 2007: We now expect that revenue growth will be
between 20 percent and 22 percent; up from 16 percent to 18 percent we
forecast in February when we announced the deal. Excluding merger and
integration charges, growth in operating earnings per share will be
between 10 percent and 15 percent; and operating return on equity will
be between 14 percent and 17 percent, both of which were our original
financial goals we established more than two years ago. We expect to
achieve in the upper half of each of these ranges for 2007."
SECOND QUARTER RESULTS VS. YEAR-AGO QUARTER
Total revenue increased 16.4% to $1.9 billion in the second
quarter of 2007 compared to the second quarter of 2006, and total
expenses grew 15.5% to $1.4 billion over the same period.
Servicing fees are up 12%, to $766 million from $683 million in
last year's second quarter. The increase is attributable to new
business from existing and new customers in 2007 and higher equity
market valuations. Total assets under custody are $13.04 trillion at
June 30, 2007, up 20%, compared with $10.86 trillion a year ago. Daily
average values for the S&P 500 Index are up 17%, for the MSCI(R) EAFE
Index(SM) are up 22%, and for the NASDAQ are up 14%, during the second
quarter 2007 from the year-ago quarter.
Investment management fees, generated by State Street Global
Advisors, are $284 million, up 22% from $232 million a year ago.
Management fees reflect continued new business and an increase in
average month-end equity valuations. Total assets under management are
$1.93 trillion at June 30, 2007, up 26%, compared to $1.53 trillion
the previous year.
Trading services revenue, which includes foreign exchange trading
revenue and brokerage and other fees, is $260 million for the quarter,
up 1% from $258 million a year ago. The slight improvement was due
primarily to new revenue streams generated from our Currenex
acquisition, offset somewhat by weaker volatility in foreign exchange.
Securities finance revenue is $162 million in the quarter, up 27%
compared to $128 million in the year-ago quarter, primarily reflecting
an increase in demand. Both quarters' results represent seasonally
high activity.
Processing fees and other revenue are down 12% at $65 million,
compared to $74 million primarily due to the consolidation of
tax-exempt investments onto the balance sheet in the third quarter of
2006.
Net interest revenue on a fully taxable-equivalent basis is $397
million, an increase of $122 million, or 44%, from $275 million a year
ago. The increase in net interest revenue is due to a favorable mix of
deposits and improved spreads. Net interest margin increased to 1.64%
from 1.20% a year ago.
Expenses increased from $1.176 billion to $1.358 billion, up $182
million, or 15.5%. Salaries and benefits expenses are up 18% to $808
million, primarily attributable to incentive compensation due to
improved performance, increased staffing to support new business, and
merit increases. Expenses for information systems & communications
decreased $1 million, to $128 million. The increase in expenses
includes higher transaction processing services, up 5% to $141
million, due to higher volumes. Occupancy expense increased 3%, or $3
million, to $98 million. Other expenses increased 37% to $183 million
from $134 million due to costs associated with the acquisitions and
with new business initiatives, as well as sales promotion expenses.
SECOND-QUARTER 2007 RESULTS VS. FIRST QUARTER 2007
Second-quarter earnings per share of $1.07 is up 15%, compared to
earnings per share of $0.93 in the first quarter. Total revenue in the
second quarter of $1.921 billion is up 13.3% versus $1.696 billion in
the first quarter. Total expenses are $1.358 billion, up 12.0% versus
$1.213 billion in the first quarter. As a result, the Corporation
generated about 130 basis points of positive operating leverage. For
the second quarter of 2007, return on shareholders' equity is 19.2%
compared with 17.4% in the first quarter.
Servicing fees are up 7% to $766 million and management fees are
up 9% to $284 million, both due to new business and higher equity
valuations. Trading services increased 18% to $260 million due to
strength in foreign exchange volumes and brokerage. Securities finance
revenue increased 65%, from $98 million to $162 million, due to
improved spreads and seasonally high volumes. Processing fees and
other revenue are down from $73 million to $65 million primarily due
to lower fees from leasing and structured products. Net interest
revenue on a fully taxable-equivalent basis increased $60 million, or
18%, to $397 million, compared to $337 million in the first quarter.
Salaries and employee benefits total $808 million, an increase of
$69 million, or 9%, from $739 million, attributable to the impact of
incentive compensation due to improved performance, increased staffing
to support new business, and benefit increases. Transaction processing
services increased $12 million, or 9%, to $141 million due to an
increase in volumes. Information systems and communications expense is
up 2%, or $3 million, to $128 million. Occupancy increased $4 million
or 4% to $98 million. Other expenses are up $57 million, or 45%, from
$126 million to $183 million primarily as a result of costs associated
with new business initiatives and with the acquisitions, as well as
increased securities processing expenses.
The effective tax rate for the second quarter is 35.0%, flat with
the first quarter.
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 17, 2007, at 9:30 a.m. EDT, available at
www.statestreet.com/stockholder. The conference call will also be
available via telephone, at +1 719/457-2679 (confirmation code
2823043). 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. 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, under "Financial Reports."
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 $13.040 trillion in assets under custody and $1.934
trillion in assets under management at June 30, 2007, State Street
operates in 26 countries and more than 100 geographic markets
worldwide and employs 22,350 worldwide. On July 2, 2007, State Street
closed its acquisition of Investors Financial Services Corp. As of
June 30, 2007, Investors Financial held $2.4 trillion of assets under
administration of which $1.915 trillion were held in custody. On a pro
forma basis with this acquisition, State Street has $14.96 trillion in
assets under custody as of June 30, 2007. 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.
FORWARD-LOOKING STATEMENTS
This news announcement contains forward-looking statements as
defined by United States securities laws, including statements about
the recently completed acquisition of Investors Financial Services
Corporation, 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 integrate and convert acquisitions
into its business, including the recently closed acquisition
of Investors Financial Services Corporation;
-- 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, July 17, 2007, and State Street 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, 2007
Quarters Ended % Change
------------------------------
Q2 Q2
2007 2007
(Dollars in millions, except per share June March June vs. vs.
amounts 30, 31, 30,
or where otherwise noted) Q1 Q2
2007 2007 2006 2007 2006
- ----------------------------------------------------------------------
Total Revenue $1,921$1,696$1,651 13% 16%
Total Expenses 1,358 1,213 1,176 12 15
Net Income 366 314 227 17 61
Diluted Earnings Per Share $ 1.07$ .93$ .68 15 57
Cash Dividends Declared Per Share $ .22$ .21$ .20
Closing Price Per Share of Common Stock
(at quarter end) 68.40 64.75 58.09
Return on Equity 19.2% 17.4% 14.0%
At Quarter End:
Assets Under Custody (AUC) (in
trillions) $13.04$12.33$10.86
Assets Under Management (AUM) (in
trillions) 1.93 1.85 1.53
Six Months Ended % Change
---------------------------------------
2007
June 30, June 30, vs.
(Dollars in millions, except
per share information) 2007 2006 2006
- ---------------------------------------------------------------------
Total Revenue $ 3,617$ 3,174 14%
Total Expenses 2,571 2,272 13
Income Tax Expense 366 393 (7)
Income from Continuing
Operations 680 509 34
Income from Discontinued
Operations - 10
Net Income 680 519
Diluted Earnings Per Share:
From Continuing Operations $ 2.00$ 1.52 32
From Discontinued
Operations - .03
Net Income 2.00 1.55
Cash Dividends Declared Per
Share .43 .39 10
Return on Equity from
Continuing Operations 18.4% 15.8%
Return on Equity 18.4 16.1
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters ended June 30, 2007 and June 30, 2006
Quarters Ended
---------------------------
June 30, June 30,
(Dollars in millions, except per share
amounts) 2007 2006 % Change
- ------------------------------------------------------------- --------
Fee Revenue:
Servicing fees $ 766 $ 683 12 %
Management fees 284 232 22
Trading services 260 258 1
Securities finance 162 128 27
Processing fees and other 65 74 (12)
--------- --------
Total fee revenue 1,537 1,375 12
Net Interest Revenue:
Interest revenue 1,203 1,034 16
Interest expense 818 772 6
--------- --------
Net interest revenue (1) 385 262 47
Provision for loan losses - -
--------- --------
Net interest revenue after provision for
loan losses 385 262 47
Gains (Losses) on sales of available-for-
sale investment securities, net (1) 14
--------- --------
Total revenue 1,921 1,651 16.4
Operating Expenses:
Salaries and employee benefits 808 684 18
Information systems and communications 128 129 (1)
Transaction processing services 141 134 5
Occupancy 98 95 3
Other 183 134 37
--------- --------
Total operating expenses 1,358 1,176 15.5
--------- --------
Income from continuing operations before
income tax expense 563 475 19
Income tax expense from continuing
operations 197 248
--------- --------
Income from continuing operations 366 227 61
Income from discontinued operations before
income tax expense - -
Income tax expense from discontinued
operations - -
--------- --------
Income from discontinued operations - -
--------- --------
Net income $ 366 $ 227
========= ========
Earnings Per Share From Continuing
Operations:
Basic $ 1.09 $ .69 58
Diluted 1.07 .68 57
Earnings Per Share From Discontinued
Operations:
Basic $ - $ -
Diluted - -
Earnings Per Share:
Basic $ 1.09 $ .69
Diluted 1.07 .68
Average Shares Outstanding (in thousands):
Basic 335,769 330,804
Diluted 341,101 335,879
Six Months Ended
---------------------------
June 30, June 30,
(Dollars in millions, except per share
amounts) 2007 2006 % Change
- ------------------------------------------ ----------------- ---------
Fee Revenue:
Servicing fees $ 1,484 $ 1,340 11
Management fees 545 452 21
Trading services 480 488 (2)
Securities finance 260 209 24
Processing fees and other 138 146 (5)
-------- --------
Total fee revenue 2,907 2,635 10
Net Interest Revenue:
Interest revenue 2,375 1,995 19
Interest expense 1,665 1,467 13
-------- --------
Net interest revenue (1) 710 528 34
Provision for loan losses - -
-------- --------
Net interest revenue after provision
for loan losses 710 528 34
Gains (Losses) on sales of available-for-
sale investment securities, net - 11
-------- --------
Total revenue 3,617 3,174 14.0
Operating Expenses:
Salaries and employee benefits 1,547 1,319 17
Information systems and communications 253 261 (3)
Transaction processing services 270 254 6
Occupancy 192 188 2
Other 309 250 24
-------- --------
Total operating expenses 2,571 2,272 13.2
-------- --------
Income from continuing operations
before income tax expense 1,046 902 16
Income tax expense from continuing
operations 366 393
-------- --------
Income from continuing operations 680 509 34
Income from discontinued operations before
income tax expense - 16
Income tax expense from discontinued
operations - 6
-------- --------
Income from discontinued operations - 10
-------- --------
Net income $ 680 $ 519
======== ========
Earnings Per Share From Continuing
Operations:
Basic $ 2.03 $ 1.54 32
Diluted 2.00 1.52 32
Earnings Per Share From Discontinued
Operations:
Basic $ - $ .03
Diluted - .03
Earnings Per Share:
Basic $ 2.03 $ 1.57
Diluted 2.00 1.55
Average Shares Outstanding (in thousands):
Basic 334,908 331,777
Diluted 339,338 336,102
Consolidated Selected Financial Information presented above was
prepared in accordance with accounting principles generally accepted
in the United States.
(1) Net interest revenue on a fully taxable-equivalent basis was $397
million and $275 million for the quarters ended June 30, 2007 and
2006, respectively, and $734 million and $552 million for the six
months ended June 30, 2007 and 2006, respectively. These amounts
include taxable-equivalent adjustments of $12 million and $13 million
for the quarters ended June 30, 2007 and 2006, respectively, and $24
million for each of the six months ended June 30, 2007 and 2006.
STATE STREET CORPORATION
Press Release Addendum
SELECTED FINANCIAL INFORMATION
Quarters ended June 30, 2007 and March 31, 2007
Quarters Ended
---------------------------
June 30, March
31,
(Dollars in millions, except per share
amounts) 2007 2007 % Change
- ----------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 766 $ 718 7 %
Management fees 284 261 9
Trading services 260 220 18
Securities finance 162 98 65
Processing fees and other 65 73 (11)
--------- --------
Total fee revenue 1,537 1,370 12
Net Interest Revenue:
Interest revenue 1,203 1,172 3
Interest expense 818 847 (3)
--------- --------
Net interest revenue (1) 385 325 18
Provision for loan losses - -
--------- --------
Net interest revenue after provision for
loan losses 385 325 18
Gains (Losses) on sales of available-for-
sale investment securities, net (1) 1
--------- --------
Total revenue 1,921 1,696 13.3
Operating Expenses:
Salaries and employee benefits 808 739 9
Information systems and communications 128 125 2
Transaction processing services 141 129 9
Occupancy 98 94 4
Other 183 126 45
--------- --------
Total operating expenses 1,358 1,213 12.0
--------- --------
Income before income tax expense 563 483 17
Income tax expense 197 169
--------- --------
Net income $ 366 $ 314 17
========= ========
Earnings Per Share:
Basic $ 1.09 $ .94 16
Diluted 1.07 .93 15
Average Shares Outstanding (in thousands):
Basic 335,769 334,036
Diluted 341,101 338,727
Consolidated Selected Financial Information presented above was
prepared in accordance with accounting principles generally accepted
in the United States.
(1) Net interest revenue on a fully taxable-equivalent basis was $397
million and $337 million for the quarters ended June 30, 2007 and
March 31, 2007, respectively. Both amounts included taxable-
equivalent adjustments of $12 million.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
- ----------------------------------------------------------------------
June 30, December June 30,
31,
(Dollars in millions, except per share
amounts) 2007 2006 2006
- ----------------------------------------------------------------------
Assets
Cash and due from banks $ 4,851 $ 2,368 $ 4,580
Interest-bearing deposits with banks 4,616 5,236 7,634
Securities purchased under resale
agreements 10,772 14,678 10,786
Trading account assets 849 785 998
Investment securities available for sale 62,748 60,445 55,071
Investment securities held to maturity 4,308 4,547 4,528
Loans and leases (net of allowance of
$18) 12,050 8,928 8,690
Premises and equipment 1,725 1,560 1,541
Accrued income receivable 1,671 1,617 1,468
Goodwill 1,853 1,384 1,359
Other intangible assets 593 434 463
Other assets 6,232 5,371 5,418
--------- --------- ---------
Total assets $112,268 $107,353 $102,536
========= ========= =========
Liabilities
Deposits:
Noninterest-bearing $ 12,735 $ 10,194 $ 9,944
Interest-bearing -- U.S. 1,091 1,272 2,349
Interest-bearing -- Non-U.S. 59,210 54,180 51,262
--------- --------- ---------
Total deposits 73,036 65,646 63,555
Securities sold under repurchase
agreements 13,089 19,147 19,393
Federal funds purchased 2,741 2,147 1,811
Other short-term borrowings 3,500 2,835 1,351
Accrued taxes and other expenses 3,204 3,143 2,653
Other liabilities 4,860 4,567 4,705
Long-term debt 4,090 2,616 2,599
--------- --------- ---------
Total liabilities 104,520 100,101 96,067
Shareholders' Equity
Preferred stock, no par: authorized
3,500,000; issued none
Common stock, $1 par: authorized
750,000,000 shares;
issued 337,126,000, 337,126,000 and
337,126,000 shares 337 337 337
Surplus 365 399 308
Retained earnings 7,339 7,030 6,579
Accumulated other comprehensive loss (276) (224) (377)
Treasury stock (at cost 408,000,
4,688,000 and 6,495,000 shares) (17) (290) (378)
--------- --------- ---------
Total shareholders' equity 7,748 7,252 6,469
--------- --------- ---------
Total liabilities and shareholders'
equity $112,268 $107,353 $102,536
========= ========= =========
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