BOSTON--(BUSINESS WIRE)--Jan. 13, 2004--State Street Corporation
announced today fourth-quarter earnings per share of $1.33, equivalent
to net income of $447 million on revenue of $1.5 billion. For the
full-year 2003, earnings per share were $2.15 and net income was $722
million on revenue of $4.7 billion.
Results for the fourth quarter of 2003 include a gain on the sale
of State Street's Private Asset Management business of $285 million or
$0.56 in diluted earnings per share, the gain on the settlement of the
residual escrow from the 2002 sale of Corporate Trust business of $60
million or $0.12 diluted earnings per share and merger, integration
and divestiture costs of $29 million or $0.06 in diluted earnings per
share.
Results for the full year 2003 include the $345 million of gains
from the sale of the Private Asset Management business and the
Corporate Trust escrow settlement, or $0.68 in diluted earnings per
share, restructuring costs related to an expense-reduction program of
$296 million or $0.58 in diluted earnings per share, full year merger,
integration and divestiture costs of $110 million, or $0.22 in diluted
earnings per share, and the impact of a real estate loss and
settlement of a state tax issue that combined for a $0.06 reduction in
full year diluted earnings per share.
For the fourth quarter of 2002, earnings per share were $1.46
equivalent to net income of $477 million on revenue of $1.5 billion.
For the full-year 2002, earnings per share were $3.10 and net income
was $1.0 billion on revenue of $4.4 billion. Results for the fourth
quarter of 2002 and the full year 2002 include a gain of $495 million
or $0.90 in diluted earnings per share from the December 31, 2002 sale
of the Corporate Trust business.
For 2003, return on stockholders equity was 13.9% compared to
24.1% for 2002.
In reporting its financial results, State Street has prepared
information in four categories:
-- "Reported" results are in accordance with generally accepted
accounting principles (GAAP).
-- "Operating" results are "reported" results excluding
restructuring and merger-related charges and any gains from
divested businesses. They are presented on a
taxable-equivalent basis.
-- "GSS contribution" results are the revenue and expenses,
including financing costs and amortization of intangibles and
software, attributable to the GSS business acquired on January
31, 2003, as well as revenue and expenses from "out-of-scope"
GSS business that are closely related to Deutsche Asset
Management, but that were not part of the acquisition.
Per-share amounts reflect the effect on outstanding shares due
to the acquisition.
-- "Baseline" results are "operating" results excluding "GSS
contribution" and are presented on a taxable-equivalent basis.
State Street believes that providing non-GAAP financial
information assists investors and others by providing them with
financial information in a format that provides comparable financial
trends of ongoing business activities.
Baseline earnings per share were $0.69, up 28% compared to
baseline earnings per share of $0.54 for the fourth quarter of 2002,
and up 6% from $0.65 in the third quarter of 2003. Fourth quarter of
2002 baseline results exclude $10 million of pre-tax income, or $0.02
per share, attributable to the Corporate Trust business divested at
the end of 2002. Baseline revenue of $1.0 billion for Q4 2003 was up
6% from the fourth quarter of 2002, primarily due to increases in
servicing and management fees, processing and other fees, and foreign
exchange, partially offset by a loss on the sale of securities and
lower net interest revenue.
In the fourth quarter of 2003, the GSS business contributed $168
million in total revenue: $157 million of fee revenue, $9 million in
"out-of-scope" fee revenue, and $7 million of interest revenue, offset
by interest expense of $5 million attributable to the acquisition
financing. Included in GSS revenue was $19 million in FX revenue due
to a contract settlement negotiated with Deutsche Bank. The GSS
business earned $0.02 in the fourth quarter on a per-share basis,
including the "out-of-scope" results, the cost of financing and the
impact of increased shares outstanding, but excluding merger and
integration charges.
Operating earnings per share in the fourth quarter 2003, which
exclude the merger and integration charges and the gains related to
the sale of the divested businesses, was $0.71, up 31% from $0.54 a
year ago, and up 8% from $0.66 in the third quarter of 2003. Operating
revenue increased 23%, or $221 million, to $1.2 billion from the
fourth quarter of 2002 and was up $34 million, or 3% from the third
quarter of 2003. Return on stockholders' equity on an operating basis
was 17.2% for the quarter and 15.0% for the year. Operating earnings
for the year 2003 were $2.33, compared to $2.16 in 2002.
The following table summarizes State Street's baseline, GSS,
operating, and reported results for the fourth quarters of 2002 and
2003. Detailed information is available in the Addendum Selected
Financial Information tables included with this press release.
Dollars in millions except per share data; shares in millions
Three months ended
December 31, 2003December 31, 2002
Non-GAAP measures defined by
State Street
------------------------------------- --------------------
Baseline(a)GSS(b)Operating(c)Reported Operating(c)Reported
------------------------------------- --------------------
Fee revenue $791 $166 $957 $957 $686 $706
All other
revenue 214 2 216 549 266 750
------------------------------------- --------------------
Total
revenue 1,005 168 1,173 1,506 952 1,456
Total
expenses 655 143 798 828 691 704
Taxes 127 9 136 231 87 275
------------------------------------- --------------------
Net income $223 $16 $239 $447 $174 $477
===================================== ====================
Diluted eps $0.69 $0.02 $0.71 $1.33 $0.54 $1.46
Diluted
shares 325 339 339 326 326
(a) excludes GSS results; merger, integration and divesture costs;
restructuring costs; and gains from the sales of divested
businesses; presented on a taxable-equivalent basis
(b) revenue and expenses, including financing costs and amortization
of intangibles and software, attributable to the GSS business
acquired January 31, 2003, as well as revenue and expenses from
"out-of-scope" business which was not part of the transaction, but
excluding merger and integration costs. Per-share amounts reflect
the effect on outstanding shares due to the acquisition
(c) excludes merger, integration and divestiture charges,
restructuring charges and gains from the sales of divested
businesses in 2003, and in 2002, the results of the divested
Corporate Trust business; in 2002, baseline and operating results
are identical; presented on a taxable-equivalent basis
David A. Spina, State Street's chairman and chief executive
officer, said, "2003 was a challenging yet very productive year for
us. We won significant new business; we managed expenses aggressively;
and we met or exceeded all the commitments we made for integration of
the GSS business. We also continued to deliver superior service to our
clients -- which is always our number one goal.
"We expect 2004 to be another challenging year for our industry.
Although economic conditions seem to be improving, the business
environment is still extremely fragile and interest rates are at
50-year lows. Competition continues to be intense, especially in the
pension markets, and sales cycles are longer than we've seen in the
past. Costs related to compensation, technology, and occupancy will go
up in 2004. Our goal is to balance our near-term profit objectives
with strategic investments in State Street's future."
FOURTH-QUARTER RESULTS VS. THIRD QUARTER
On a reported basis, fourth quarter net income per share of $1.33
compares to a net income per share of $0.60 in the third quarter.
Total revenue in the fourth quarter of $1.5 billion, which included
$345 million in gains from the sales of divested businesses, is up 34%
versus $1.1 billion in the third quarter.
On a baseline basis, fourth-quarter net income of $0.69 per
diluted share is up 6% from $0.65 per share. Revenue rose 3%, from
$976 million to $1.0 billion, while expenses increased 1%, to $655
million, in line with the previously stated expense reduction target.
FOURTH-QUARTER RESULTS VS. YEAR-AGO QUARTER
On a reported basis, the fourth-quarter diluted earnings per share
was $1.33, reflecting net income of $447 million, and total revenue of
$1.5 billion, including the gains from the divested businesses. In the
fourth quarter of 2002, State Street earned $477 million, or $1.46 per
share, on $1.5 billion in revenue, including the gain from the
divested business.
On an operating basis, diluted earnings per share were $0.71. Net
income was $239 million, and revenue was $1.2 billion. In the fourth
quarter of 2002, net income was $174 million, or $0.54 per share, on
revenue of $952 million.
On a baseline basis, fourth-quarter diluted earnings per share
were $0.69, net income was $223 million, and revenue was $1.0 billion.
In the fourth quarter of 2002, net income was $174 million, or $0.54
per share, on revenue of $952 million.
The following review of specific revenue and expense lines uses
baseline results to provide consistent comparable data to the
year-earlier period.
Servicing fees are derived from accounting, administration,
custody, daily pricing, performance and analytics, compliance
monitoring, and operations outsourcing for investment managers.
Baseline servicing fees were up 16%, to $426 million from $369
million. The increase was attributable to higher equity market
valuations and new business from existing and new clients. Daily
average values for the S&P 500 Index were up 19% from the fourth
quarter of 2002; daily average values for the MSCI(R) EAFE Index(SM)
were up 27%. Total assets under custody were $9.4 trillion, including
$2.1 trillion attributable to the GSS business.
Baseline investment management fees, generated by State Street
Global Advisors, were $133 million, up 14% compared to $116 million a
year ago. Management fees reflected continued new business success and
an increase in average month-end equity valuations. Total assets under
management were $1.1 trillion, compared to $763 billion the previous
year.
Baseline foreign exchange trading revenue was $81 million for the
quarter, compared to $62 million a year ago. The increase was
attributable to improved volume and volatility, reflecting higher
cross-border investment activities.
Baseline processing fees and other increased $18 million to $70
million due to the mark-to-market gain on SPACES(SM) pursuant to FAS
150, improved performance of joint ventures and structured products'
business, offset by recognition of other-than-temporary impairment
charges on asset-backed investment securities.
Baseline net interest revenue was $220 million, a decline of $16
million, or 6%, from a year ago. Lower yields on reinvested assets
drove the decrease in net interest revenue. A loss of $6 million on
sales of securities compared with a gain of $31 million from the year
ago quarter.
Baseline operating expenses were $655 million, down $36 million,
or 5%, from $691 million a year ago. Lower salaries and benefits
expenses and direct controllable expenses were due to the previously
announced cost-reduction plans, partly offset by an increase in
information systems and communications and transaction processing
services.
GSS ACQUISITION AND INTEGRATION UPDATE
After eleven months of operation, the GSS business, including
"out-of-scope" results and excluding one-time costs, reported a profit
of $0.01 per share, exceeding our expectation of $0.01 to $0.03
dilution per share.
With most GSS clients having selected STT as their service
provider, we now expect to retain approximately 88% of the available
client revenue acquired, which excludes "out-of-scope" revenue. To
date, State Street has completed about 550 client conversions.
The pretax merger and restructuring costs associated with the
acquisition in 2003 totaled $103 million, within STT's estimated range
$90-$110 million. Client conversion will continue and will be
substantially complete by the end of 2004. The Company expects pretax
merger and integration costs related to these conversions to be about
an additional $50 to $60 million in 2004.
INVESTOR CONFERENCE CALL
State Street will webcast an investor conference call today,
Tuesday, January 13, 2004, 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
498324). 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 sophisticated global investors with investment
servicing and investment management. With $9.4 trillion in assets
under custody and $1.1 trillion in assets under management, State
Street is headquartered in Boston, Massachusetts and operates in 24
countries and over 100 markets worldwide and employees 19,800 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 2002 annual report 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, January 13, 2004, and the
company will not undertake efforts to revise those forward-looking
statements to reflect events after this date.
STATE STREET CORPORATION
Addendum Earnings Digest(a)
(Dollars in millions, except per share data)
Quarter ended December 31,
---------------------------------------------
2003 2002 % Change
------- ------- ---------
Revenue $1,506 $1,456 3
Earnings 447 477 (6)
Diluted earnings per share 1.33 1.46 (9)
Year ended December 31,
---------------------------------------------
2003 2002 % Change
------- ------- ---------
Revenue $4,734 $4,396 8
Earnings 722 1,015 (29)
Diluted earnings per share 2.15 3.10 (31)
----------------------------------------------------------------------
(a) Information presented in accordance with accounting principles
generally accepted in the United StatesSTATE STREET CORPORATION
Addendum Selected Financial Information
I. CONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH
ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
Reported Results Reported Results
Quarter Ended Year Ended December
December 31, 31,
----------------------------------------
(Dollars in millions,
except per share data) 2003 2002 2003 2002
------------------------------------------------------------------
Fee Revenue:
Servicing fees $ 525 $ 388 $ 1,950 $ 1,531
Management fees 137 116 533 485
Global securities lending 53 49 245 226
Foreign exchange trading 115 62 391 300
Brokerage fees 37 38 122 124
Processing fees and other 90 53 315 184
--------- --------- --------- ---------
Total Fee Revenue 957 706 3,556 2,850
Net Interest Revenue:
Interest revenue 377 465 1,539 1,974
Interest expense 167 240 729 995
--------- --------- --------- ---------
Net interest revenue 210 225 810 979
Provision for loan losses - 1 - 4
--------- --------- --------- ---------
Net interest revenue after
provision for loan losses 210 224 810 975
Gains/(losses) on sales of
available-for-sale
investment securities, net (6) 31 23 76
Gain on sale of Corporate
Trust business, net of
associated costs 60 495 60 495
Gain on sale of Private
Asset Management business,
net of exit and other
associated costs 285 - 285 -
------------------------------------ --------- --------- ---------
Total Revenue 1,506 1,456 4,734 4,396
Operating Expenses:
Salaries and employee
benefits 437 411 1,731 1,654
Information systems and
communications 141 94 551 373
Transaction processing
services 83 65 314 246
Occupancy 69 64 300 246
Merger, integration and
divestiture costs 29 - 110 -
Restructuring costs 1 - 296 20
Other 68 70 320 302
--------- --------- --------- ---------
Total operating expenses 828 704 3,622 2,841
--------- --------- --------- ---------
Income before income taxes 678 752 1,112 1,555
Income taxes 231 275 390 540
--------- --------- --------- ---------
Net Income $ 447 $ 477 $ 722 $ 1,015
========= ========= ========= =========
Earnings Per Share:
Basic $ 1.34 $ 1.47 $ 2.18 $ 3.14
Diluted 1.33 1.46 2.15 3.10
Average Shares Outstanding
(in thousands):
Basic 333,579 323,520 331,692 323,520
Diluted 338,895 326,469 335,326 327,477
Return on equity 12.2 % 42.4 % 13.9 % 24.1 %
Cash dividends declared per
share $ .15 $ .13 $ .56 $ .48
II.OTHER SELECTED FINANCIAL
INFORMATION
Quarter ended
December 31,
--------------------
(Dollars in millions, except
per share data or where
otherwise indicated) 2003 2002
----------------------------------------------
Assets under custody (in
billions) $ 9,370 $ 6,171
Assets under management
(in billions) 1,106 763
Total assets $ 87,534 $ 85,794
Long-term debt 2,222 1,270
Stockholders' equity 5,747 4,787
Closing price per share of
common stock $ 52.08 $ 39.00
STATE STREET CORPORATION
Addendum Selected Financial Information
III. SUPPLEMENTAL INCOME STATEMENT INFORMATION - RECONCILIATION OF
FOURTH QUARTER 2003 NON-GAAP MEASURES TO REPORTED RESULTS
Reconciliation of Financial Results
----------------------------------------------------
(Dollars in millions)
----------------------------------------------------
Quarter Ended December 31, 2003
----------------------------------------------------
Non-GAAP measures defined by
State Street (1)
--------------------------------------
Baseline GSS Operating Reported
Results Results(a) Results Other Results(2)
-----------------------------------------------------
Fee Revenue:
Servicing fees $ 426 $ 99 $ 525 $ 525
Management fees 133 4 137 137
Global securities
lending 44 9 53 53
Foreign exchange
trading 81 34 115 115
Brokerage fees 37 - 37 37
Processing fees
and other 70 20 90 90
--------- -------- --------- ----------
Total Fee Revenue 791 166 957 957
Net Interest
Revenue 220 2(b) 222 $ (12)(e) 210
Provision for
loan losses - - - - -
--------- -------- --------- ------ ----------
Net interest
revenue after
provision for
loan losses 220 2 222 (12) 210
Gains/(losses) on
sales of
available-for-
sale investment
securities, net (6) - (6) - (6)
Gain on sale of
Corporate Trust
business, net of
associated costs - - - 60 60
Gain on sale of
Private Asset
Management
business,
net of exit and
other associated
costs - - - 285 285
--------- -------- --------- ------ ----------
Total Revenue 1,005 168 1,173 333 1,506
Operating Expenses:
Salaries and
employee
benefits 373 64 437 - 437
Information
systems and
communications 100 41 141 - 141
Transaction
processing
services 65 18 83 - 83
Occupancy 59 10 69 - 69
Merger,
integration and
divestiture
costs - - - 29 29
Restructuring
costs - - - 1 1
Other 58 10 68 - 68
--------- -------- --------- ------ ----------
Total operating
expenses 655 143(c) 798 30 828
--------- -------- --------- ------ ----------
Income before
income taxes 350 25 375 303 678
Income taxes 115 9 124 107 231
Taxable-
equivalent
adjustment 12 - 12 (12)(e) -
--------- -------- --------- ------ ----------
Net Income $ 223 $ 16 $ 239 $ 208 $ 447
========= ======== ========= ====== ==========
Earnings Per
Share $ .69 $ .02(d) $ .71 $ .62 $ 1.33
Average Diluted
Shares (in
thousands) 324,828 14,067 338,895 - 338,895
Return on equity 16.0 % 17.2 % 12.2 %
Notes:
(1) In order to provide information on a comparable basis from period
to period and to assist stockholders, analysts, other external
parties and management in analyzing the financial results and
trends of ongoing businesses and operations, State Street also
presents supplemental financial information on an operating
results basis. State Street believes that such non-GAAP financial
information assists investors and others by providing them with
financial information in a format that provides comparable
financial trends of ongoing business activities.
(2) Reported results agree with the Corporation's Consolidated
Statement of Income prepared in accordance with accounting
principles generally accepted in the United States
(a) Includes $9 million of revenue and $12 million of expenses related
to out-of-scope client relationships
(b) Includes $5 million of interests costs attributable to the GSS
acquisition financing
(c) Includes amortization of intangibles and software of $9 million
(d) Includes ($.03) impact due to changes in shares outstanding
attributable to the acquisition
(e) Taxable-equivalent adjustment is not included in reported results
STATE STREET CORPORATION
Addendum Selected Financial Information
IV. SUPPLEMENTAL INCOME STATEMENT INFORMATION - RECONCILIATION OF 2003
NON-GAAP MEASURES TO REPORTED RESULTS
Reconciliation of Financial Results
----------------------------------------------------
(Dollars in millions)
----------------------------------------------------
Year Ended December 31, 2003
----------------------------------------------------
Non-GAAP measures defined by
State Street (1)
--------------------------------------
Baseline GSS Operating Reported
Results Results(a) Results Other Results(2)
---------------------------------------- ------------
Fee Revenue:
Servicing fees $ 1,596 $ 354 $ 1,950 $ 1,950
Management fees 517 16 533 533
Global securities
lending 194 51 245 245
Foreign exchange
trading 330 61 391 391
Brokerage fees 122 - 122 122
Processing fees
and other 230 98 328 $ (13)(e) 315
--------- -------- --------- ------ ----------
Total Fee Revenue 2,989 580 3,569 (13) 3,556
Net Interest
Revenue 868 (7)(b) 861 (51)(f) 810
Provision for
loan losses - - - - -
--------- -------- --------- ------ ----------
Net interest
revenue after
provision for
loan losses 868 (7) 861 (51) 810
Gains/(losses) on
sales of
available-for-
sale investment
securities, net 23 - 23 - 23
Gain on sale of
Corporate Trust
business, net of
associated costs - - - 60 60
Gain on sale of
Private Asset
Management
business,
net of exit and
other associated
costs - - - 285 285
--------- -------- --------- ------ ----------
Total Revenue 3,880 573 4,453 281 4,734
Operating Expenses:
Salaries and
employee
benefits 1,526 205 1,731 - 1,731
Information
systems and
communications 394 157 551 - 551
Transaction
processing
services 259 55 314 - 314
Occupancy 262 38 300 - 300
Merger,
integration and
divestiture
costs - - - 110 110
Restructuring
costs - - - 296 296
Other 258 62 320 - 320
--------- -------- --------- ------ ----------
Total operating
expenses 2,699 517(c) 3,216 406 3,622
--------- -------- --------- ------ ----------
Income before
income taxes 1,181 56 1,237 (125) 1,112
Income taxes 384 19 403 (13) (g) 390
Taxable-
equivalent
adjustment 51 - 51 (51)(f) -
--------- -------- --------- ------ ----------
Net Income $ 746 $ 37 $ 783 $ (61) $ 722
========= ======== ========= ====== ==========
Earnings Per
Share $ 2.32 $ .01(d) $ 2.33 $(.18) $ 2.15
Average Diluted
Shares (in
thousands) 321,259 14,067 335,326 - 335,326
Return on equity 14.3 % 15.0 % 13.9 %
Notes:
(1) In order to provide information on a comparable basis from period
to period and to assist stockholders, analysts, other external
parties and management in analyzing the financial results and
trends of ongoing businesses and operations, State Street also
presents supplemental financial information on an operating
results basis. State Street believes that such non-GAAP financial
information assists investors and others by providing them with
financial information in a format that provides comparable
financial trends of ongoing business activities.
(2) Reported results agree with the Corporation's Consolidated
Statement of Income prepared in accordance with accounting
principles generally accepted in the United States
(a) Includes $24 million of revenue and $31 million of expenses
related to out-of-scope client relationships
(b) Includes $21 million of interests costs attributable to the
GSS acquisition financing
(c) Includes amortization of intangibles and software of $28 million
(d) Includes ($.11) impact due to changes in shares outstanding
attributable to the acquisition
(e) Represents a valuation reserve on certain assets classified as
available-for-sale
(f) Taxable-equivalent adjustment is not included in reported results
(g) Reflects the impact of a certain Massachusetts tax
issue ($12 million tax expense) as well as the tax benefit
applicable to the net of all other non-recurring gains and
charges
STATE STREET CORPORATION
Addendum Selected Financial Information
V. SUPPLEMENTAL INCOME STATEMENT INFORMATION - BASELINE RESULTS
YEAR OVER YEAR COMPARISON
Baseline results are a non-GAAP measure defined by State Street as
reported results excluding GSS contribution, restructuring,
merger, integration and divestiture costs, valuation reserves,
state tax issue impact and results of a divested business and are
presented on a taxable-equivalent basis.
Baseline Baseline
Results Results
Quarter Ended December 31, Year Ended December 31,
-------------------------- -------------------------
(Dollars in
millions,
except per
share data) 2003 2002 (a)% Change 2003 2002 (b)% Change
------ ---------------- ------- -----------------
Baseline Fee
Revenue:
Servicing fees $426 $369 16% $1,596 $1,454 10 %
Management fees 133 116 14 517 485 6
Global
securities
lending 44 49 (10) 194 226 (14)
Foreign
exchange
trading 81 62 29 330 300 10
Brokerage fees 37 38 (2) 122 124 (1)
Processing fees
and other 70 52 34 230 180 28
------ ------- ------- -------
Total Baseline
Fee Revenue 791 686 15 2,989 2,769 8
Baseline Net
Interest
Revenue 220 236 868 1,027
Provision for
loan losses - 1 - 4
------ ------- ------- -------
Baseline net
interest
revenue after
provision for
loan losses 220 235 (6) 868 1,023 (15)
(taxable-
equivalent
basis)
Gains/(losses)
on the sales
of available-
for-sale
investment
securities,
net (6) 31 23 76 (69)
------ ------- ------- -------
Total Baseline
Revenue 1,005 952 6 3,880 3,868
Baseline
Operating
Expenses:
Salaries and
employee
benefits 373 404 (8) 1,526 1,622 (6)
Information
systems and
communications 100 93 7 394 367 7
Transaction
processing
services 65 64 4 259 242 7
Occupancy 59 62 (4) 262 240 10
Other 58 68 (15) 258 293 (12)
------ ------- ------- -------
Total Baseline
Operating
Expenses 655 691 (5) 2,699 2,764 (2)
------ ------- ------- -------
Baseline Income
Before Income
Taxes 350 261 34 1,181 1,104 7
Income taxes 115 72 384 335
Taxable-
equivalent
adjustment 12 15 51 61
------ ------- ------- -------
Baseline Net
Income $223 $174 28 $746 $708 5
====== ======= ======= =======
Diluted
Baseline
Earnings Per
Share $.69 $.54 28 $2.32 $2.16 7
(a) Reflects restatement of originally issued financial results to
exclude the results of operations of the divested Corporate
Trust activities
(b) Reflects restatement of originally issued financial results to
exclude the results of operations of the divested Corporate
Trust activities and the reclassification of certain
restructuring costs now shown as a component of reported
results rather than baseline results
STATE STREET CORPORATION
Addendum Selected Financial Information
VI. SUPPLEMENTAL INCOME STATEMENT INFORMATION - OPERATING RESULTS
YEAR OVER YEAR COMPARISON
Operating results are a non-GAAP measure defined by State Street as
reported results excluding restructuring, merger, divestiture and
integration costs, valuation reserves, state tax issue impact and
results of a divested business and are presented on a taxable-
equivalent basis.
Operating Operating
Results Results
Quarter Ended December 31, Year Ended December 31,
----------------------------------------------------
(Dollars in
millions,
except per
share data) 2003 2002 (a)% Change 2003 2002 (b)% Change
------ ---------------- ------- -----------------
Operating Fee
Revenue:
Servicing fees $525 $369 42% $1,950 $1,454 34 %
Management fees 137 116 18 533 485 10
Global
securities
lending 53 49 8 245 226 8
Foreign
exchange
trading 115 62 84 391 300 30
Brokerage fees 37 38 (2) 122 124 (1)
Processing fees
and other 90 52 71 328 180 82
------ ------- ------- -------
Total Operating
Fee Revenue 957 686 39 3,569 2,769 29
Operating Net
Interest
Revenue 222 236 861 1,027
Provision for
loan losses - 1 - 4
------ ------- ------- -------
Operating net
interest
revenue after
provision for
loan losses 222 235 (5) 861 1,023 (16)
(taxable-
equivalent
basis)
Gains/(losses)
on the sales
of available-
for-sale
investment
securities,
net (6) 31 23 76 (69)
------ ------- ------- -------
Total Operating
Revenue 1,173 952 23 4,453 3,868 15
Expenses -
Operating
Results:
Salaries and
employee
benefits 437 404 8 1,731 1,622 7
Information
systems and
communications 141 93 51 551 367 50
Transaction
processing
services 83 64 32 314 242 30
Occupancy 69 62 10 300 240 25
Other 68 68 320 293 9
------ ------- ------- -------
Total Expenses
- Operating
Results 798 691 16 3,216 2,764 16
------ ------- ------- -------
Operating
Income before
income taxes 375 261 43 1,237 1,104 12
Income taxes 124 72 403 335
Taxable-
equivalent
adjustment 12 15 51 61
------ ------- ------- -------
Net Operating
Income $239 $174 37 $783 $708 10
====== ======= ======= =======
Diluted
Operating
Earnings Per
Share $.71 $.54 31 $2.33 $2.16 8
(a) Reflects restatement of originally issued financial results to
exclude the results of operations of the divested Corporate
Trust activities
(b) Reflects restatement of originally issued financial results to
exclude the results of operations of the divested Corporate
Trust activities and the reclassification of certain
restructuring costs now shown as a component of reported
results rather than operating results
STATE STREET CORPORATION
Addendum Consolidated Statement of Condition
----------------------------------------------------------------------
December 31, December 31,
(Dollars in millions) 2003 2002
----------------------------------------------------------------------
Assets
Cash and due from banks $ 3,376 $ 1,361
Interest-bearing deposits with banks 21,738 28,143
Securities purchased under resale agreements
and securities borrowed 9,447 17,215
Federal funds sold 104 -
Trading account assets 405 984
Investment securities 38,215 28,071
Loans (less allowance of $61 and $61) 4,960 4,113
Premises and equipment 1,212 887
Accrued income receivable 1,015 823
Goodwill 1,326 462
Other intangible assets 525 127
Other assets 5,211 3,608
------------ ------------
Total Assets $87,534 $85,794
============ ============
Liabilities
Deposits:
Noninterest-bearing $ 7,893 $ 7,279
Interest-bearing -- U.S. 5,062 9,005
Interest-bearing -- Non-U.S. 34,561 29,184
------- -------
Total Deposits 47,516 45,468
Securities sold under repurchase agreements 22,806 21,963
Federal funds purchased 1,019 3,895
Other short-term borrowings 1,437 3,440
Accrued taxes and other expenses 2,424 1,967
Other liabilities 4,363 3,004
Long-term debt 2,222 1,270
------------ -------
Total Liabilities 81,787 81,007
Stockholders' Equity
Preferred stock, no par: authorized
3,500,000; issued none
Common stock, $1 par: authorized 500,000,000;
issued 337,132,000 and 329,992,000 337 330
Surplus 329 104
Retained earnings 5,007 4,472
Accumulated other comprehensive income 192 106
Treasury stock at cost (2,658,000 and
5,065,000 shares) (118) (225)
------------ ------------
Total Stockholders' Equity 5,747 4,787
------------ ------------
Total Liabilities and Stockholders' Equity $87,534 $85,794
============ ============
CONTACT: State Street Corporation
Edward J. Resch, 617-664-1110
Investors:
Kelley MacDonald, 617-664-3477
Media:
Hannah Grove, 617-664-3377
SOURCE: State Street Corporation