Updates Q3 2009 Reported Results to Reflect Increased Reserve;
Operating Outlook for 2009 Remains Unchanged
BOSTON--(BUSINESS WIRE)--
State Street Corporation (NYSE: STT) today announced that it has added
$250 million, as of September 30, 2009, to the reserve it established in
2007 to address legal exposure related to losses incurred by investors
in certain active fixed-income strategies managed by State Street Global
Advisors (SSgA). The Company believes the adjusted reserve should be
sufficient to account for a potential resolution of proceedings by the
Securities and Exchange Commission and other governmental authorities,
and to address ongoing litigation with respect to this matter.
Since 2007, SSgA has made significant changes to its organization,
including establishing new leadership, and has made substantial
investments in its operating platform, including its risk management and
compliance operations.
State Street also announced that it recently entered into a settlement
of the purported class action with respect to ERISA participants in the
active fixed -income strategies. The proposed settlement of $89.75
million is subject to court approval.
Prior to recording the $250 million provision for legal exposure, the
legal reserve totaled $193 million. After giving effect to the $250
million provision, the reserve as of September 30, 2009, as adjusted is
$443 million, and should be sufficient to settle the above matters,
including the purported class action.
For the third quarter of 2009, updated reported results are earnings per
share of $0.66 on net income of $327 million. Return on common
shareholders' equity is 10.2%, down from the previously announced 16.0%.
Operating-basis results for the third quarter of 2009 exclude the
provision for legal exposure and are unchanged from the operating-basis
results announced on October 20, 2009.
State Street's outlook for the full-year 2009 remains unchanged with
operating basis revenue expected to decline about 16 percent from the
record level of 2008; operating earnings per share, excluding the impact
of the extraordinary loss recorded upon consolidation of the commercial
paper conduits in the second quarter of 2009, and the provision for
legal exposure announced today, to be between $4.13 and $4.17 and
operating return on equity to be between 14 and 17 percent.
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's leading
providers of financial services to institutional investors including
investment servicing, investment management and investment research and
trading. With $17.9 trillion in assets under custody and administration
and $1.7 trillion in assets under management at September 30, 2009,
State Street operates in 27 countries and more than 100 geographic
markets worldwide. For more information, visit State Street's web site
at www.statestreet.com.
FORWARD-LOOKING STATEMENTS
This news announcement contains forward-looking statements as defined by
United States securities laws, including statements about the
sufficiency of the increased reserve discussed in this news
announcement, as well as 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,
but are not limited to:
-- financial market disruptions and the economic recession, whether in the
U.S. or internationally, and monetary and other governmental actions
designed to address such disruptions and recession, including actions
taken in the U.S. and internationally to address the financial and
economic disruptions that began in 2007;
-- increases in the potential volatility of, or declines in the levels of,
our net interest revenue, changes in the composition of the assets on
our consolidated balance sheet and the possibility that we may be
required to change the manner in which we fund those assets;
-- the financial strength and continuing viability of the counterparties
with which we or our customers do business and to which we have
investment, credit 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, credit agency ratings, and fair values 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 income statement recognition of an
impairment loss;
-- the maintenance of credit agency ratings for our debt and depository
obligations as well as the level of credibility of credit agency
ratings;
-- 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 U.S.
and internationally;
-- our ability to measure the fair value of the investment securities on
our consolidated balance sheet;
-- the results of litigation, government investigations and similar
disputes and, in particular, the effect of current or potential
proceedings concerning State Street Global Advisors', or SSgA's, active
fixed-income strategies and other investment products;
-- the enactment of legislation and changes in regulation and enforcement
that impact us and our customers;
-- 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 grow revenue, attract and/or retain 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;
-- changes in government regulation or new legislation, which may increase
our costs, expose us to risk related to compliance or impact our
customers;
-- changes in accounting standards and practices; 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.
While State Street has, as announced above, determined it is appropriate
to increase its reserve for the active fixed-income matter, State Street
has not entered into a settlement agreement with the SEC or any other
governmental authority at this time and there can be no assurance that
State Street will do so in the future. If such settlement discussions
are not successful and the SEC or other regulators were to pursue an
enforcement action, they would likely seek monetary or other penalties
or remedies, which may be greater than such reserve. There can be no
assurance that State Street will be able to agree upon terms of a
settlement with these governmental authorities and, if the Company were
unable to do so and the SEC or other governmental authorities were to
commence an enforcement proceeding, such enforcement proceeding, and the
outcome thereof, may have a material adverse effect on the Company's
business.
Other important factors that could cause actual results to differ
materially from those indicated by any forward-looking statements are
set forth in our 2008 Annual Report on Form 10-K, our Current Report on
Form 8-K dated May 18, 2009, and our subsequent SEC filings. We
encourage investors to read these filings, particularly the sections on
Risk Factors, 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, November 6, 2009, and we do not undertake
efforts to revise those forward-looking statements to reflect events
after this date.
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