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| State Street Corporation Achieves Record Revenue and Operating EPS in Second Quarter 17/07/2007 |
| Boston, MA ... July 17, 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 ® EAFE Indexsm 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 INVESTOR CONFERENCE CALL 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 Important factors that may affect future results and outcomes include:
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
SOURCE: State Street Corporation
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