BOSTON--(BUSINESS WIRE)--
State Street Corporation (NYSE: STT):
Unrealized Investment Portfolio Losses Improve by $730 Million
After-Tax as of January 30, 2009, Compared to December 31, 2008
More Conservative First-Half Reinvestment Strategy Reduces 2009
Expectations
State Street Corporation today updated its full-year 2008 earnings to
reflect the impact of a plan to further strengthen its tangible common
equity ratio (TCE) in light of continued unprecedented market
disruption. The 2008 results have been updated to reflect a $278 million
pre-tax reduction in 2008 incentive compensation as part of a plan to
improve TCE. In 2009, the plan to improve TCE includes reducing the
Company's quarterly dividend on its common stock to $0.01 per share, a
more conservative reinvestment plan affecting assets paying down and
maturing in its investment portfolio, actions intended to increase
organic capital growth, and a reduction in the size of the company's
balance sheet.
For 2008, GAAP earnings per share of $4.30 are up from the previously
announced $3.89 per share. Return on common shareholders' equity in 2008
is 14.8%, up from the previously announced 13.4%. For the fourth quarter
of 2008, earnings are $0.54 per share, up from the previously announced
$0.15 per share. Return on common shareholders' equity is 8.4% in the
fourth quarter of 2008, up from the previously announced 2.3%. Operating
expenses for full year and fourth quarter 2008, were $6.780 billion and
$1.528 billion, respectively, down from the previously announced
operating expenses for those periods of $7.058 billion and $1.806
billion, respectively. These expenses reflect the reduced compensation
in each period. Revenue for the full year and fourth quarter 2008 of
$10.693 billion and $2.673 billion, respectively, are unchanged from the
amounts previously announced.
Commenting on the announcement, Ronald E. Logue, State Street's chairman
and chief executive officer, said, "State Street has among the highest
regulatory capital ratios in the industry; however, we are implementing
a plan to alleviate investor concerns about our pro forma TCE
ratio, if we were to consolidate the asset-backed commercial paper
conduits that we administer. These are extraordinary times that require
swift action. Given that we are asking our shareholders to make
sacrifices through dividend reductions, we believe that we must also be
willing to make our own sacrifices and therefore, we have eliminated the
2008 incentive compensation for the five named executive officers and
reduced it by approximately 50% for the remainder of the company."
Logue added, "While our tangible common equity ratio will vary with the
impact of the fixed-income markets on our investment portfolio and the
conduit assets and our actual results, we currently anticipate that the
steps we are announcing will result in a meaningful increase in our
tangible common equity ratio during the first quarter and the full year.
As of January 30, 2009, our unrealized after-tax loss on our investment
portfolio has improved $730 million, from $6.3 billion at December 31,
2008 to $5.6 billion. Also, the unrealized loss in our conduit assets
has improved modestly."
Logue concluded, "We are adjusting our outlook for 2009 based on several
new factors: a more conservative reinvestment plan affecting assets
paying down and maturing in our investment portfolio; we now expect the
S & P 500 to average about 900 for the year down from our previous
estimate of 1000; and we intend to further restrain expenses in 2009. As
a result, we now expect our operating revenue to decline 8% to 12% from
record levels in 2008; our operating earnings per share to decline 12%
to 16% from the updated record level of $5.61 per share in 2008; and our
return on common equity to approach the low end of our 14% to 17%
long-term range. At our meeting with investors and analysts later today,
we will provide further detail about our TCE improvement plan and our
2009 outlook."
Management presents results on an operating basis in order to provide
financial information that is comparable from period to period and to
present comparable financial trends with respect to our ongoing business
operations. A full reconciliation of operating-basis results to U.S.
generally accepted accounting principals (GAAP) is included in the
addendum at the end of this press release. The following financial
results are presented on an operating basis, and are updated from our
previously announced operating results to reflect the effects of the
reduced compensation in the full year and fourth quarter 2008 and to
otherwise reflect the same adjustments between GAAP and operating, as
were previously announced.
For 2008, updated operating-basis earnings per share of $5.61 are up
from the previously announced $5.21 per share. Operating-basis return on
common shareholders' equity is 19.3%, up from the previously announced
17.9%. In the fourth quarter of 2008, operating-basis earnings are $1.58
per share, up from the previously announced $1.18 per share.
Operating-basis return on common shareholders' equity in the fourth
quarter of 2008 is 24.3%, up from the previously announced 18.3%. As
noted above, these results reflect the reduced salaries and employee
benefits expense in each period. Operating-basis revenue for the full
year and fourth quarter 2008 of $10.477 billion and $2.641 billion,
respectively, are unchanged from the amounts previously announced.
The reduction in expenses results in an increase to State Street
Corporation's Tier-1 capital ratio to 20.74% at December 31, 2008 from
the previously announced 20.49% and an increase to the leverage ratio to
7.83% from the previously announced 7.74%. The TCE ratio at December 31,
2008, is 4.61%. The pro forma TCE ratio, including consolidation
of all assets and liabilities of the State Street-administered
asset-backed commercial paper conduits, was 1.19% as of December 31,
2008. Assuming market prices remain constant from January through the
rest of 2009 and we execute on our plan, we expect TCE to be
approximately 4.91% by the end of 2009.
ADDITIONAL INFORMATION
All per share amounts represent diluted earnings per common share based
on average common shares outstanding for the respective period reported.
INVESTOR PRESENTATION
State Street will webcast a pre-recorded investor call today, Thursday,
February 5, 2009, at 8:00 a.m. EST, available at www.statestreet.com/stockholder.
The conference call will also be available via telephone, at +1
706/645-9291 (Conference ID# 84375390). The pre-recorded call will be
available for two weeks. This press release and additional financial
information are available on State Street's website, at www.statestreet.com/stockholder,
under "Investor Information--Latest News," -Annual Reports and Financial
Trends--Financial Trends" and "--Investor Events and Presentations."
In addition, State Street Corporation will webcast a presentation to
investors and analysts by Ronald E. Logue, Chairman of the Board and
Chief Executive Officer, Edward J. Resch, Executive Vice President and
Chief Financial Officer, Joseph ("Jay") L. Hooley, President and Chief
Operating Officer and Scott Powers, President and CEO, State Street
Global Advisors on Thursday, February 5, 2009, at 12:30 p.m. EST. The
presentation will be accessible, in listen-only mode, on State Street's
investor relations home page, at www.statestreet.com/stockholder,
and via telephone, at +1 ( 706 ) 679 - 5594 (Conference ID # 82862937).
Recorded replays of the presentation will be available on the web site
and by telephone +1 (706) 645-9291 (Conference ID # 82862937) beginning
at 5:30 p.m. EST that day. The telephone replay will be available for
approximately two weeks following the conference call. This press
release, presentation materials to be referred to on today's webcast and
additional financial information will be available prior to that webcast
on State Street's website, at www.statestreet.com/stockholder,
under "Investor Information--Latest News," -Annual Reports and Financial
Trends--Financial Trends" and "--Investor Events and Presentations."
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
$12.04 trillion in assets under custody and $1.44 trillion in assets
under management at December 31, 2008, State Street operates in 27 countries
and more than 100 geographic markets worldwide and employs 28,475
worldwide.
FORWARD-LOOKING STATEMENTS
This news announcement contains forward-looking statements as defined by
United States securities laws, including statements about our goals and
expectations regarding our business, financial condition, results of
operations and strategies, the financial and market outlook,
governmental and regulatory initiatives and developments and the
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 our expectations or
beliefs as of any date subsequent to the date of this release.
Important factors that may affect future results and outcomes include:
-- global financial market disruptions and the current, worldwide economic
recession, and monetary and other governmental actions designed to
address such disruptions and recession in the United States and
internationally;
-- the financial strength of the counterparties with which we or our
clients do business and with which we have investment or financial
exposure;
-- the liquidity of the U.S. and international securities markets,
particularly the markets for fixed-income securities, and the liquidity
requirements of our customers;
-- the credit quality and credit agency ratings of the securities in our
investment securities portfolio, a deterioration or downgrade of which
could lead to other-than-temporary impairment of the respective
securities and the recognition of an impairment loss;
-- the maintenance of credit agency ratings for our debt obligations as
well as the level of credibility of credit agency ratings;
-- the possibility that changes to accounting rules or in market conditions
or asset performance may require any off-balance sheet activities,
including the unconsolidated asset-backed commercial paper conduits we
administer, to be consolidated into our financial statements, requiring
the recognition of associated losses;
-- the possibility of our customers incurring substantial losses in
investment pools where we act as agent, and the possibility of further
general reductions in the valuation of assets;
-- our ability to attract deposits and other low-cost short-term funding;
-- potential changes to the competitive environment, including changes due
to the effects of consolidation, extensive and changing government
regulation and perceptions of State Street as a suitable service
provider or counterparty;
-- the level and volatility of interest rates and the performance and
volatility of securities, credit, currency and other markets in the
United States and internationally;
-- our ability to measure the fair value of securities in our investment
securities portfolio and in the asset-backed commercial paper conduits
we sponsor;
-- the results of litigation and similar disputes and, in particular, the
effect of current or potential litigation concerning SSgA's active
fixed-income strategies, and the enactment of legislation and changes in
regulation and enforcement that impact us and our customers, as well as
the effects of legal and regulatory proceedings;
-- adverse publicity or other reputational harm;
-- our ability to pursue acquisitions, strategic alliances and divestures,
finance future business acquisitions and obtain regulatory approvals and
consents for acquisitions;
-- the performance and demand for the products and services we offer,
including the level and timing of withdrawals from our collective
investment products;
-- our ability to continue to grow revenue, attract highly skilled people,
control expenses and attract the capital necessary to achieve our
business goals and comply with regulatory requirements;
-- our ability to control operating risks, information technology systems
risks and outsourcing risks, the possibility of errors in the
quantitative models we use to manage our business and the possibility
that our controls will fail or be circumvented;
-- the potential for new products and services to impose additional costs
on us and expose us to increased operational risk, and our ability to
protect our intellectual property rights;
-- our ability to obtain quality and timely services from third parties
with which we contract;
-- changes in accounting standards and practices, including changes in the
interpretation of existing standards, that impact our 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 our 2007 Annual Report on Form 10-K and our subsequent SEC
filings, including, in particular, our Current Report on Form 8-K dated
January 20, 2009. We encourage investors to read these filings,
particularly the sections on Risk Factors, and our 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, February 5, 2009, and we do not undertake efforts to
revise those forward-looking statements to reflect events after this
date.
STATE STREET CORPORATION
Earnings Press Release Addendum
Consolidated Financial Highlights
December 31, 2008
Quarters Ended % Change
Q4 2008 Q4 2008
(Dollars in
millions, except December 31, September 30, December 31, vs. vs.
per share amounts
or where otherwise 2008 2008 2007 Q3 2008 Q4 2007
noted)
Total Revenue (1) $ 2,673 $ 2,771 $ 2,479 (4) % 8 %
Total Expenses:
Non-operating 450 - 467
provisions, net
Restructuring 306 - -
charges
Provision for
indemnification - 200 -
exposure
Merger and 27 30 57
integration costs
Expenses from 1,528 1,695 1,649 (10) (7)
operations
Income Tax Expense 106 369 83
Net Income 256 477 223 (46) 15
Net Income
Available to Common 234 477 223
Shareholders
Diluted Earnings $ .54 $ 1.09 $ .57 (50) (5)
Per Common Share
Average Diluted
Common Shares 431,902 435,030 392,200
Outstanding (in
thousands):
Cash Dividends
Declared Per Common $ .24 $ .24 $ .23
Share
Closing Price Per
Share of Common 39.33 56.88 81.20
Stock (at quarter
end)
Return on Common 8.4 % 13.6 % 7.7 %
Equity
At Quarter End:
Assets Under
Custody (AUC) (in $ 12.04 $ 14.05 $ 15.30
trillions)
Assets Under
Management (AUM) 1.44 1.69 1.98
(in trillions)
Years Ended % Change
2008
December 31, December 31, vs.
(Dollars in millions, except per share 2008 2007 2007
amounts)
Total Revenue(2) $ 10,693 $ 8,336 28 %
Total Expenses:
Non-operating provisions, net 450 467
Restructuring charges 306 -
Provision for indemnification exposure 200 -
Merger and integration costs 115 198
Expenses from operations 6,780 5,768 18
Income Tax Expense 1,031 642 61
Net Income 1,811 1,261 44
Net Income Available to Common 1,789 1,261 42
Shareholders
Diluted Earnings Per Common Share $ 4.30 $ 3.45 25
Average Diluted Common Shares Outstanding 416,100 365,488
(in thousands):
Cash Dividends Declared Per Common Share $ .95 $ .88 8
Return on Common Equity 14.8 % 13.4 %
(1) Quarter ended September 30, 2008 includes $350 million gain from sale of
CitiStreet interest, net of exit and other associated costs.
(2) Year ended December 31, 2008 includes $350 million gain from sale of
CitiStreet interest, net of exit and other associated costs.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Quarters and Years Ended December 31, 2008 and December 31, 2007
Quarters Ended Years Ended
December December December December
31, 31, 31, 31,
(Dollars in
millions, 2008 2007 % 2008 2007(1) %
except per Change Change
share amounts)
Fee Revenue:
Servicing fees $ 842 $ 967 (13 ) % $ 3,745 $ 3,388 11 %
Management 209 297 (30 ) 1,028 1,141 (10 )
fees
Trading 418 352 19 1,467 1,152 27
services
Securities 329 256 29 1,230 681 81
finance
Processing 83 55 51 277 271 2
fees and other
Total fee 1,881 1,927 (2 ) 7,747 6,633 17
revenue
Net Interest
Revenue:
Interest 1,427 1,454 (2 ) 4,879 5,212 (6 )
revenue
Interest 584 898 (35 ) 2,229 3,482 (36 )
expense
Net interest 843 556 52 2,650 1,730 53
revenue (2)
Provision for - - - -
loan losses
Net interest
revenue after 843 556 52 2,650 1,730 53
provision for
loan losses
Gains (Losses)
related to
investment (51 ) (4 ) (54 ) (27 )
securities,
net
Gain on sale
of CitiStreet
interest, net
of exit and - - 350 -
other
associated
costs
Total revenue 2,673 2,479 7.8 10,693 8,336 28.3
Expenses:
Salaries and
employee 698 793 (12 ) 3,842 3,256 18
benefits
Information
systems and 163 148 10 633 546 16
communications
Transaction
processing 145 184 (21 ) 644 619 4
services
Occupancy 124 107 16 465 408 14
Provision for - 600 - 600
legal exposure
Provision for
investment 450 - 450 -
account
infusion
Restructuring 306 - 306 -
charges
Merger and
integration 27 57 (53 ) 115 198 (42 )
costs
Other 398 284 40 1,396 806 73
Total expenses 2,311 2,173 6.4 7,851 6,433 22.0
Income before
income tax 362 306 18 2,842 1,903 49
expense
Income tax 106 83 1,031 642
expense
Net income $ 256 $ 223 15 $ 1,811 $ 1,261 44
Net income
available to $ 234 $ 223 5 $ 1,789 $ 1,261 42
common
shareholders
Earnings Per
Common Share:
Basic $ .55 $ .58 (5 ) $ 4.33 $ 3.50 24
Diluted .54 .57 (5 ) 4.30 3.45 25
Average Common
Shares
Outstanding
(in
thousands):
Basic 431,042 385,200 413,182 360,675
Diluted 431,902 392,200 416,100 365,488
Consolidated Selected Financial Information presented above was prepared in
accordance with accounting principles generally accepted in the United States.
(1)Year ended December 31, 2007 includes financial results of Investors
Financial business for the quarters ended September 30 and December 31,
2007.
(2) Net interest revenue on a fully taxable-equivalent basis was $811 million and
$573 million for the quarters ended December 31, 2008 and 2007, respectively, and
$2.78 billion and $1.79 billion for the years ended December 31, 2008 and 2007,
respectively. These amounts include taxable-equivalent adjustments of $28 million
and $17 million for the quarters ended December 31, 2008 and 2007, respectively,
and $104 million and $58 million for the years ended December 31, 2008 and 2007,
respectively.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Quarters Ended December 31, 2008 and September 30, 2008
Quarters Ended
December 31, September 30,
(Dollars in millions, except per share 2008 2008 % Change
amounts)
Fee Revenue:
Servicing fees $ 842 $ 966 (13) %
Management fees 209 261 (20)
Trading services 418 363 15
Securities finance 329 246 34
Processing fees and other 83 63 32
Total fee revenue 1,881 1,899 (1)
Net Interest Revenue:
Interest revenue 1,427 1,027 39
Interest expense 584 502 16
Net interest revenue (1) 843 525 61
Provision for loan losses - -
Net interest revenue after provision for 843 525 61
loan losses
Gains (Losses) related to investment (51) (3)
securities, net
Gain on sale of CitiStreet interest, net - 350
of exit and other associated costs
Total revenue 2,673 2,771 (3.5)
Expenses:
Salaries and employee benefits 698 1,022 (32)
Information systems and communications 163 151 8
Transaction processing services 145 165 (12)
Occupancy 124 116 7
Provision for investment account infusion 450 -
Restructuring charges 306 -
Merger and integration costs 27 30 (10)
Other 398 441 (10)
Total expenses 2,311 1,925 20.1
Income before income tax expense 362 846 (57)
Income tax expense 106 369
Net income $ 256 $ 477 (46)
Net income available to common $ 234 $ 477 (51)
shareholders
Earnings Per Common Share:
Basic $ .55 $ 1.11 (50)
Diluted .54 1.09 (50)
Average Common Shares Outstanding (in
thousands):
Basic 431,042 430,872
Diluted 431,902 435,030
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 $811 million
and $640 million for the quarters ended December 31, 2008 and September 30,
2008, respectively. These amounts include taxable-equivalent adjustments of $28
million and $25 million.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION
Quarters and Years Ended December 31, 2008 and December 31, 2007
Quarters Ended(1) Years Ended (1)
December December December December
31, 31, 31, 31,
(Dollars in % %
millions, except 2008 2007 Change 2008 2007 Change
per share amounts)
Fee Revenue:
Servicing fees $ 842 $ 967 (13) % $ 3,745 $ 3,388 11 %
Management fees 209 297 (30) 1,028 1,141 (10)
Trading services 418 352 19 1,467 1,152 27
Securities finance 329 256 29 1,230 681 81
Processing fees 83 55 51 277 271 2
and other
Total fee revenue 1,881 1,927 (2) 7,747 6,633 17
Net Interest
Revenue:
Interest revenue, 1,133 1,471 (23) 4,714 5,270 (11)
operating basis
Interest expense 322 898 (64) 1,930 3,482 (45)
Net interest
revenue, operating 811 573 42 2,784 1,788 56
basis
Provision for loan - - - -
losses
Net interest
revenue after
provision for loan 811 573 42 2,784 1,788 56
losses, operating
basis
Gains (Losses)
related to (51) (4) (54) (27)
investment
securities, net
Total revenue,
operating basis(2) 2,641 2,496 5.8 10,477 8,394 24.8
(3)
Expenses:
Salaries and 698 934 (25) 3,842 3,397 13
employee benefits
Information
systems and 163 148 10 633 546 16
communications
Transaction
processing 145 184 (21) 644 619 4
services
Occupancy 124 107 16 465 408 14
Other 398 276 44 1,196 798 50
Total expenses,
operating basis 1,528 1,649 (7.3) 6,780 5,768 17.5
(2)(3)
Income before
income tax 1,113 847 31 3,697 2,626 41
expense, operating
basis
Income tax
expense, operating 383 290 1,236 899
basis
Taxable-equivalent 28 17 104 58
adjustment
Net income, $ 702 $ 540 30 $ 2,357 $ 1,669 41
operating basis
Net income
available to
common $ 680 $ 540 26 $ 2,335 $ 1,669 40
shareholders,
operating basis
Diluted earnings
per common share, $ 1.58 $ 1.38 14 $ 5.61 $ 4.57 23
operating basis
Average diluted
common shares 431,902 392,200 416,100 365,488
outstanding (in
thousands)
Return on common
equity, operating 24.3 % 18.7 % 19.3 % 17.7 %
basis
(1) Refer to the accompanying reconciliation of reported results
to operating-basis results.
(2)For the quarter ended December 31, 2008, positive operating leverage in the
year-over-year comparison was 1,310 basis points, based on growth in total
operating-basis revenue of 5.8% and a decline in total operating-basis expenses
of 7.3%.
(3)For the year ended December 31, 2008, positive operating leverage in the
year-over-year comparison was 730 basis points, based on growth in total
operating-basis revenue of 24.8% and growth in total operating-basis expenses of
17.5%.
STATE STREET CORPORATION
Earnings Press Release Addendum
SELECTED CONSOLIDATED OPERATING-BASIS FINANCIAL INFORMATION
Quarters Ended December 31, 2008 and September 30, 2008
Quarters Ended (1)
December 31, September 30,
(Dollars in millions, except per share 2008 2008 % Change
amounts)
Fee Revenue:
Servicing fees $ 842 $ 966 (13) %
Management fees 209 261 (20)
Trading services 418 363 15
Securities finance 329 246 34
Processing fees and other 83 63 32
Total fee revenue 1,881 1,899 (1)
Net Interest Revenue:
Interest revenue, operating basis 1,133 1,105 3
Interest expense 322 465 (31)
Net interest revenue, operating basis 811 640 27
Provision for loan losses - -
Net interest revenue after provision for 811 640 27
loan losses, operating basis
Gains (Losses) related to investment (51) (3)
securities, net
Total revenue, operating basis(2) 2,641 2,536 4.1
Expenses:
Salaries and employee benefits 698 1,022 (32)
Information systems and communications 163 151 8
Transaction processing services 145 165 (12)
Occupancy 124 116 7
Other 398 241 65
Total expenses, operating basis (2) 1,528 1,695 (9.9)
Income before income tax expense, 1,113 841 32
operating basis
Income tax expense 383 278
Taxable-equivalent adjustment 28 25
Net income, operating basis $ 702 $ 538 30
Net income available to common $ 680 $ 538 26
shareholders, operating basis
Diluted earnings per common share, $ 1.58 $ 1.24 27.4
operating basis
Average diluted common shares 431,902 435,030
outstanding (in thousands)
Return on common equity, operating basis 24.3 % 15.4 %
(1) Refer to the accompanying reconciliation of reported results to
operating-basis results.
(2)For the quarter ended December 31, 2008, positive operating leverage in the
quarter-over-quarter comparison was 1,400 basis points, based on growth in total
operating-basis revenue of 4.1% and a decline in total operating-basis expenses
of 9.9%.
STATE STREET CORPORATION
Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter and Year Ended December 31, 2008
(Dollars in
millions, except Quarter Ended December 31, 2008 Year Ended December 31, 2008
per share amounts)
Reported Operating Reported Operating
Results Adjustments Results Results Adjustments Results
Fee Revenue:
Servicing fees $ 842 $ 842 $ 3,745 $ 3,745
Management fees 209 209 1,028 1,028
Trading services 418 418 1,467 1,467
Securities finance 329 329 1,230 1,230
Processing fees 83 83 277 277
and other
Total fee revenue 1,881 1,881 7,747 7,747
Net Interest
Revenue:
Interest revenue 1,427 $ (294) (1) 1,133 4,879 $ (165) (8) 4,714
Interest expense 584 (262) (2) 322 2,229 (299) (2) 1,930
Net interest 843 (32) 811 2,650 134 2,784
revenue
Provision for loan - - - - - -
losses
Net interest
revenue after 843 (32) 811 2,650 134 2,784
provision for loan
losses
Gains (Losses)
related to (51) - (51) (54) - (54)
investment
securities, net
Gain on sale of
CitiStreet
interest, net of - - - 350 (350) (9) -
exit and other
associated costs
Total revenue 2,673 (32) 2,641 10,693 (216) 10,477
Expenses:
Salaries and 698 - 698 3,842 - 3,842
employee benefits
Information
systems and 163 - 163 633 - 633
communications
Transaction
processing 145 - 145 644 - 644
services
Occupancy 124 - 124 465 - 465
Provision for
investment account 450 (450) (3) - 450 (450) (3) -
infusion
Restructuring 306 (306) (4) - 306 (306) (4) -
charges
Merger and 27 (27) (5) - 115 (115) (5) -
integration costs
Other 398 - 398 1,396 (200) (10) 1,196
Total expenses 2,311 (783) 1,528 7,851 (1,071) 6,780
Income before 362 751 1,113 2,842 855 3,697
income taxes
Income tax expense 106 277 (6) 383 1,031 205 (11) 1,236
Taxable-equivalent - 28 (7) 28 - 104 (7) 104
adjustment
Net income $ 256 $ 446 $ 702 $ 1,811 $ 546 $ 2,357
Net income
available to $ 234 $ 446 $ 680 $ 1,789 $ 546 $ 2,335
common
shareholders
Diluted earnings $ .54 $ 1.04 $ 1.58 $ 4.30 $ 1.31 $ 5.61
per common share
Average diluted
common shares 431,902 431,902 431,902 416,100 416,100 416,100
outstanding (in
thousands)
Return on common 8.4 % 15.9 % 24.3 % 14.8 % 4.5 % 19.3 %
equity
Reported results reflect State Street's Consolidated Statement of Income prepared in
accordance with accounting principles generally accepted in the United States.
(1)Represents taxable-equivalent adjustment of $28 million, which is not included in reported results
and $322 million of revenue related to the Boston Federal Reserve Bank's Asset-Backed Commercial
Paper Money Market Liquidity Facility (AMLF).
(2)Represents interest expense related to the Boston Federal Reserve Bank's AMLF.
(3) Represents a charge associated with SSgA Stable Value Funds.
(4)Represents restructuring costs associated with reduction in workforce and other cost
initiatives.
(5) Represents merger and integration costs recorded in connection with the acquisition of Investors
Financial, which are direct and incremental costs associated with the acquisition and do not include
ongoing expenses of the combined organization.
(6)Represents $24 million of income tax expense related to the Boston Federal Reserve Bank's AMLF,
$180 million of income tax benefit related to SSgA Stable Value Funds, $112 million of income tax
benefit related to restructuring costs, and $9 million of income tax benefit related to merger and
integration costs for the acquisition of Investors Financial.
(7)Represents taxable-equivalent adjustment, which is not included in reported results.
(8)Represents taxable-equivalent adjustment of $104 million for the year ended December 31, 2008,
which is not included in reported results, plus a $98 million charge associated with SILO leveraged
lease transactions, net of $367 million of revenue related to the Boston Federal Reserve Bank's AMLF.
(9)Represents gain on the sale of CitiStreet interest, net of exit and other associated costs, which
State Street divested on July 1, 2008.
(10)Represents a charge to provide for estimated net exposure on an indemnification obligation
associated with collateralized repurchase agreements.
(11)Represents $27 million of income tax expense related to the Boston Federal Reserve Bank's AMLF,
$39 million of income tax expense related to the reserve for SILO's, $140 million of income tax
expense related to the gain from sale of CitiStreet interest, $180 million of income tax benefit
related to SSgA Stable Value Funds, $112 million of income tax benefit related to restructuring
costs, $39 million of income tax benefit related to merger and integration costs for the acquisition
of Investor's Financial and $80 million of income tax benefit related to the provision for estimated
net exposure on an indemnification obligation associated with collateralized repurchase agreements.
STATE STREET CORPORATION
Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter and Year Ended December 31, 2007
(Dollars in
millions, except Quarter Ended December 31, 2007 Year Ended December 31, 2007
per share amounts)
Reported Operating Reported Operating
Results Adjustments Results Results Adjustments Results
Fee Revenue:
Servicing fees $ 967 $ 967 $ 3,388 $ 3,388
Management fees 297 297 1,141 1,141
Trading services 352 352 1,152 1,152
Securities finance 256 256 681 681
Processing fees 55 55 271 271
and other
Total fee revenue 1,927 1,927 6,633 6,633
Net Interest
Revenue:
Interest revenue 1,454 $ 17 (1) 1,471 5,212 $ 58 (1) 5,270
Interest expense 898 - 898 3,482 - 3,482
Net interest 556 17 573 1,730 58 1,788
revenue
Provision for loan - - - - - -
losses
Net interest
revenue after 556 17 573 1,730 58 1,788
provision for loan
losses
Gains (Losses)
related to (4) - (4) (27) - (27)
investment
securities, net
Total revenue 2,479 17 2,496 8,336 58 8,394
Expenses:
Salaries and 793 141 (2) 934 3,256 141 (2) 3,397
employee benefits
Information
systems and 148 - 148 546 - 546
communications
Transaction
processing 184 - 184 619 - 619
services
Occupancy 107 - 107 408 - 408
Provision for 600 (600) (2) - 600 (600) (2) -
legal exposure
Merger and 57 (57) (3) - 198 (198) (3) -
Integration costs
Other 284 (8) (2) 276 806 (8) (2) 798
Total expenses 2,173 (524) 1,649 6,433 (665) 5,768
Income before 306 541 847 1,903 723 2,626
income taxes
Income tax expense 83 207 290 642 257 899
Taxable-equivalent - 17 (1) 17 - 58 (1) 58
adjustment
Net income $ 223 $ 317 $ 540 $ 1,261 $ 408 $ 1,669
Net income
available to $ 223 $ 317 $ 540 $ 1,261 $ 408 $ 1,669
common
shareholders
Diluted earnings $ .57 $ .81 $ 1.38 $ 3.45 $ 1.12 $ 4.57
per common share
Average diluted
common shares 392,200 392,200 392,200 365,488 365,488 365,488
outstanding (in
thousands)
Return on common 7.7 % 11.0 % 18.7 % 13.4 % 4.3 % 17.7 %
equity
Reported results reflect State Street's Consolidated Statement of Income prepared in accordance with
accounting principles generally accepted in the United States.
(1)Represents taxable-equivalent adjustment, which is not included in reported results.
(2) Represents a net charge associated with certain active fixed-income strategies at State Street
Global Advisors.
(3) Represents merger and integration costs recorded in connection with the acquisition of Investors
Financial, which are direct and incremental costs associated with the acquisition and do not include
ongoing expenses of the combined organization.
STATE STREET CORPORATION
Earnings Press Release Addendum
RECONCILIATION OF REPORTED RESULTS TO OPERATING-BASIS RESULTS
Quarter Ended September 30, 2008
(Dollars in millions, except per share Quarter Ended September 30, 2008
amounts)
Reported Operating
Results Adjustments Results
Fee Revenue:
Servicing fees $ 966 $ 966
Management fees 261 261
Trading services 363 363
Securities finance 246 246
Processing fees and other 63 63
Total fee revenue 1,899 1,899
Net Interest Revenue:
Interest revenue 1,027 $ 78 (1) 1,105
Interest expense 502 (37) (2) 465
Net interest revenue 525 115 640
Provision for loan losses - - -
Net interest revenue after provision 525 115 640
for loan losses
Gains (Losses) related to investment (3) - (3)
securities, net
Gain on sale of CitiStreet interest, 350 (350) (3) -
net of exit and other associated costs
Total revenue 2,771 (235) 2,536
Expenses:
Salaries and employee benefits 1,022 - 1,022
Information systems and communications 151 - 151
Transaction processing services 165 - 165
Occupancy 116 - 116
Merger and integration costs 30 (30) (4) -
Other 441 (200) (5) 241
Total expenses 1,925 (230) 1,695
Income before income taxes 846 (5) 841
Income tax expense 369 (91) (6) 278
Taxable-equivalent adjustment - 25 (7) 25
Net income $ 477 $ 61 $ 538
Net income available to common $ 477 $ 61 $ 538
shareholders
Diluted earnings per common share $ 1.09 $ .15 $ 1.24
Average diluted common shares 435,030 435,030 435,030
outstanding (in thousands)
Return on common equity 13.6 % 1.8 % 15.4 %
Reported results reflect State Street's Consolidated Statement of Income
prepared in accordance with accounting principles generally accepted in the
United States.
(1)Represents taxable-equivalent adjustment of $25 million for the quarter
ended September 30, 2008, which is not included in reported results, plus a $98
million charge associated with SILO leasing transactions, net of $45 million of
revenue related to the Boston Federal Reserve Bank's Asset-Backed Commercial
Paper Money Market Liquidity Facility (AMLF).
(2)Represents $37 million of interest expense related to the Boston Federal
Reserve Bank's AMLF.
(3)Represents gain on the sale of CitiStreet interest, net of exit and other
associated costs, which State Street divested on July 1, 2008.
(4) Represents merger and integration costs recorded in connection with the
acquisition of Investors Financial, which are direct and incremental costs
associated with the acquisition and do not include ongoing expenses of the
combined organization.
(5)Represents a charge to provide for estimated net exposure to customers on an
indemnification obligation associated with collateralized repurchase
agreements.
(6)Represents $3 million of income tax expense related to the Boston Federal
Reserve Bank's AMLF, $39 million of income tax expense related to the reserve
for SILO's, $140 million of income tax expense related to the gain from sale of
CitiStreet interest, $11 million of income tax benefit related to merger and
integration costs for the acquisition of Investors Financial, and $80 million
of income tax benefit related to the provision for potential secured exposure
associated with a collateralized repurchase agreement.
(7)Represents taxable-equivalent adjustment, which is not included in reported
results.
STATE STREET CORPORATION
Press Release Addendum
CONSOLIDATED STATEMENT OF CONDITION
December 31, September 30, December 31,
(Dollars in millions, except per share 2008 2008 2007
amounts)
Assets
Cash and due from banks $ 3,181 $ 56,145 $ 4,041
Interest-bearing deposits with banks 55,733 20,548 6,271
Securities purchased under resale 1,635 9,598 19,133
agreements
Federal funds sold - 1,500 4,540
Trading account assets 815 6,332 589
Investment securities available for 54,163 68,881 70,326
sale
Investment securities held to maturity
purchased under money
market liquidity facility 6,087 76,660 -
Investment securities held to maturity 15,767 3,945 4,233
Loans and leases (net of allowance of 9,113 17,430 15,784
$18)
Premises and equipment 2,011 1,987 1,894
Accrued income receivable 1,738 1,915 2,096
Goodwill 4,527 4,516 4,567
Other intangible assets 1,851 1,890 1,990
Other assets 17,010 14,217 7,079
Total assets $ 173,631 $ 285,564 $ 142,543
Liabilities
Deposits:
Noninterest-bearing $ 32,785 $ 70,033 $ 15,039
Interest-bearing -- U.S. 4,558 9,988 14,790
Interest-bearing -- Non-U.S. 74,882 70,848 65,960
Total deposits 112,225 150,869 95,789
Securities sold under repurchase 11,154 17,274 14,646
agreements
Federal funds purchased 1,082 1,984 425
Short-term borrowings under money 6,042 76,627 -
market liquidity facility
Other short-term borrowings 11,555 4,289 5,557
Accrued taxes and other expenses 408 2,443 4,392
Other liabilities 13,972 14,908 6,799
Long-term debt 4,419 4,106 3,636
Total liabilities 160,857 272,500 131,244
Shareholders' Equity
Preferred stock, no par: authorized 1,883 - -
3,500,000; issued 20,000 shares
Common stock, $1 par: authorized
750,000,000 shares;
issued 431,976,032, 431,950,903 and 432 432 398
398,366,326 shares
Surplus 6,992 6,793 4,630
Retained earnings 9,135 9,002 7,745
Accumulated other comprehensive loss (5,650) (3,146) (575)
Treasury stock (at cost 418,354, (18) (17) (899)
404,943 and 12,081,863 shares)
Total shareholders' equity 12,774 13,064 11,299
Total liabilities and shareholders' $ 173,631 $ 285,564 $ 142,543
equity
Source: State Street Corporation
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