In Third Quarter State Street Corporation Saw Less Favorable Market Conditions Than in First Half.BOSTON Boston, town, EnglandBoston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. -- Market-Driven Revenues & Expenses Down from Q2; Servicing and Management Fees Steady State Street Corporation today announced third-quarter earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share of $0.52, or net income of $177 million, on revenue of $1.2 billion. These results compare to earnings per diluted share of $0.60, or net income of $202 million, on revenue of $1.1 billion in the third quarter of last year. Total expenses in the third quarter of 2004 were $906 million compared to $821 million in the year-ago quarter. For the third quarter of 2004, return on stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was 11.7%. Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per diluted share for the third quarter were $0.55, down 15% compared to operating earnings per diluted share of $0.65 for the third quarter of 2003 and were down 19%, compared to the second quarter of 2004. Operating results for 2003 have been reduced by $0.01 per diluted share reflecting the impact of the divested Private Asset Management business. Operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of $1.2 billion in the third quarter of 2004 was up 6% from the third quarter of 2003, and down 9% from $1.3 billion in the second quarter of 2004 due to the impact of market-driven revenue, primarily related to foreign exchange and securities lending Securities Lending When a brokerage lends securities owned by its clients to short sellers. Notes: This allows brokers to create additional revenue (commissions) on the short sale transaction. revenue. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of $890 million in the third quarter of 2004 were up $109 million, or 14%, from the third quarter of 2003, but down 5% from $937 million in the second quarter. Return on stockholders' equity on an operating basis was 12.3% for the third quarter of 2004. Operating revenue for the nine months ended September September: see month. 30, 2004 was up 15%, from $3.2 billion to $3.7 billion, compared to the same period a year ago and operating earnings per share were up 20%, from $1.58 to $1.90. Operating expenses for same period were $2.7 billion, an increase of 14% from $2.4 billion in the year-ago period. Results for the third quarter of 2004 include pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern merger and integration costs of $16 million, or $0.03 per diluted share due to the continuing integration of the Deutsche Bank Deutsche Bank AG (IPA: /'dɔɪ.tʃə/[1]) (ISIN: DE0005140008, NYSE: DB) (English: German Bank Global Securities Services business (GSS (storage) GSS - Group-Sweeping Scheduling. ), acquired in January January: see month. 2003. Results for the third quarter of 2003 included pretax merger and integration costs of $26 million related to the GSS acquisition, as well as restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs, resulting in a net charge of $0.06 per diluted share. Third quarter 2003 results also included the operating results of the divested Private Asset Management business which was sold in 2003. For the nine months ended September 30, 2004, earnings per share of $1.80 compared with $0.82 for the year-ago period on revenues of $3.7 billion in 2004 and $3.2 billion in 2003, an increase of 14%. The 2004 results include $50 million for merger and integration charges or $0.10 per share; in 2003, merger and integration charges, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , and other charges total to a charge of $0.80 per share. Commenting on the quarter, Ron Noun 1. Ron - a Chadic language spoken in northern Nigeria Bokkos, Daffo West Chadic - a group of Chadic languages spoken in northern Nigeria; Hausa in the most important member Logue, State Street's chairman and chief executive officer, said, "While our investment servicing and management fees were up about 15% from the year-ago quarter and were flat with the second quarter of 2004, I am very disappointed with our results this quarter. We saw a sharp decline in foreign exchange, brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. , and securities lending revenue in the quarter compared to the second quarter due to market activity. We lowered expenses, compared to the second quarter, but not at a significant enough level to offset the decline in these market-driven revenues. We are taking steps to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. expenses with revenues, not as a reaction to this quarter's results, but as a conscious effort we began early in July July: see month. . These changes will not only help us better absorb absorb To offset sell orders or a new security offering with buy orders. shifts in market-driven revenue, but more importantly, strategically allocate To reserve a resource such as memory or disk. See memory allocation. our resources." He concluded, "We continued to win new business, adding a total of sixteen new asset servicing assignments in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and eight in
Asia/Pacific. State Street Global Advisors had some impressive wins this
year, both in Europe and in the US, adding $104 billion in net new
business. As we continue to grow, we will continue to look at our
business, and find areas where we can either eliminate or combine units
to achieve greater efficiency and capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. scale. As an initial result, we are in the process of restructuring our business in several areas: we are limiting our near-term near-term adj. Of, for, or involving a short period of time in the near future. investment in wealth manager services, integrating the management of our balance sheet into the Treasury group, combining corporate cash management with securities operations, and exiting the 529 education plan servicing business. As a result of these decisions and some others, we will eliminate about 425 positions, which will save us about $50 million annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. with little impact on revenue. We expect to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. a charge of about $25 million in the fourth quarter. We believe these actions will put us in a better position to achieve improved long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. results." State Street is also announcing that it is reactivating its stock purchase program. The company currently has an 8.3 million stock purchase authorization The right or permission to use a system resource; the process of granting access. See access control. . In addition, the company is announcing that it is divesting its remaining high-net-worth investment management business, Bel Air Bel Air may refer to: Places in the United States:
1. A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission. 2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control and is in discussions to sell it back to the partners. The company expects to record pretax charges between $150 and $170 million upon closing which is expected to be completed during the first half of 2005. In reporting its financial results, State Street has prepared information in two categories: --"Reported" results are in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). --"Operating" results are reported results for the three- and nine-month periods in 2004 excluding merger and integration costs, and for the three- and nine-month periods in 2003 excluding merger and integration costs, restructuring costs, and the results of a divested business, and for the nine-month period, the loss on the sale of certain real estate and the settlement of a state tax legislation issue. Operating results are presented on a taxable-equivalent basis. State Street believes that non-GAAP financial information assists investors and others by providing them with financial information in a format that presents comparable financial trends of ongoing business activities. THIRD-QUARTER OPERATING RESULTS VS. YEAR-AGO QUARTER Operating revenue of $1.2 billion in the third quarter of 2004 was up from $1.1 billion or 6% from the third quarter of 2003. Servicing fees were $568 million, up $63 million or 12%, from $505 million in the year-ago quarter. The increase was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to new business from existing and new clients and by higher equity valuations in 2004. Total assets under custody The care, possession, and control of a thing or person. The retention, inspection, guarding, maintenance, or security of a thing within the immediate care and control of the person to whom it is committed. The detention of a person by lawful authority or process. were $9.0 trillion One thousand times one billion, which is 1, followed by 12 zeros, or 10 to the 12th power. See space/time. (mathematics) trillion - In Britain, France, and Germany, 10^18 or a million cubed. In the USA and Canada, 10^12. , up 3%, compared with $8.8 trillion in the year-ago quarter. Management fees, generated by State Street Global Advisors, were $156 million, up $34 million, or 28%, compared to $122 million in the year-ago quarter. The increase in management fees reflected new business from existing and new clients and higher equity valuations in 2004. Total assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. were $1.2 trillion, up 28%, compared to $965 billion the previous year. Average month-end values for the S&P 500 Index were up 11% from the third quarter of 2003; average month-end values for the MSCI(R) EAFE Index EAFE index See: European Australian and Far East index (SM) were up 21%. Securities lending revenue was $48 million in the quarter, compared to $61 million in the year-ago quarter, a decrease of 21%. The decrease reflects a short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. pressure on spreads from the recent increases in the target Fed funds fed funds See federal funds. rate, partially offset by a 22% increase in volume of securities on loan. Foreign exchange trading Foreign Exchange Trading or FX Trading, clients are able to hedge against, or speculate upon, changes in the exchange rate of two currencies. For example, a speculator can long EUR/USD in foreign exchange market in order to profit from capturing the appreciation of Euro against the revenue was $75 million for the quarter, compared to $101 million in the year-ago quarter, a decline of 26%. The decline was attributable to lower volatilities, lower cross-border investment activities by our clients and changes in mix. Brokerage fees were $31 million in the quarter, compared to $28 million in the year-ago quarter, up 11%. Net interest revenue was $223 million, up $7 million or 3% from $216 million in the year-ago quarter. This increase was attributed to an increase in balance sheet size, offset largely by recent increases in the target Fed funds rate. Operating expenses of $890 million in the third quarter of 2004 were up $109 million or 14% from the third quarter of 2003. Salaries and benefits expenses increased $72 million to $474 million, driven in part by an increase in incentive compensation due to the 20% increase in year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. performance. Merit increases and benefits costs also contributed to the increase. Higher expenses also included an increase of $16 million in transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time. Transaction processing systems are the backbone of an organization because they update constantly. services, due to higher volume-driven expenses, and an increase of $29 million in other expense driven primarily by increased professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. expenses needed to support growth initiatives and compliance requirements Compliance requirements are a series of directives established by United States Federal government agencies that summarize hundreds of Federal laws and regulations applicable to Federal assistance (also known as Federal aid or Federal funds). . The effective tax rate in the third quarter of 2004 was 34%, compared to 34% in the third quarter of 2003. THIRD-QUARTER RESULTS VS. SECOND QUARTER On a reported basis, third-quarter net income per diluted share of $0.52, which included $16 million, or $0.03 per diluted share of merger and integration charges, was down 20% compared to second quarter net income per diluted share of $0.65, which included $16 million, or $0.03 per diluted share of merger and integration charges. Total revenue in the third quarter of $1.2 billion was down 9% versus $1.3 billion in the second quarter. Total expenses in the third quarter of $906 million were down 5% or $47 million compared to $953 million in the second quarter. On an operating basis, third-quarter net income per diluted share was $0.55 compared to second quarter net income per diluted share of $0.68. Revenue decreased 9% to $1.2 billion from $1.3 billion and expenses decreased 5% to $890 million from $937 million. GSS ACQUISITION UPDATE On an operating basis, State Street's 2004 third-quarter results included $0.04 earnings per share, after finance charges, on revenues of $146 million and expenses of $114 million, which includes "out-of-scope" GSS business. For the nine months ended September 30, 2004, operating earnings per diluted share totaled $0.08. Based on current estimates, State Street now believes that the total GSS business will contribute between $0.08 to $0.10 in operating earnings per diluted share for 2004. INVESTOR CONFERENCE CALL State Street will webcast an investor conference call today, Tuesday Tuesday: see week. , October October: see month. 12, 2004, at 9:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/457-2617 (confirmation code 286996). Recorded replays of the conference call will be available on the web site, and by telephone at +1 402/220-4230 (confirmation code 286996), 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 NYSE See: New York Stock Exchange : STT STT State Street Corporation (stock symbol) STT Suomen Tietotoimisto (Finnish National News Agency) STT Secure Transaction Technology STT Surface Tension Transfer (welding) ) is the world's leading specialist in providing institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. with investment servicing, investment management and investment research and trading. With $9.0 trillion in assets under custody and $1.2 trillion in assets under management, State Street operates in 24 countries and more than 100 markets worldwide and employs 20,000 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , or +1 202/266-3340 outside those countries. This news announcement contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in currency markets, consolidations among clients and competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. , 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 2003 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" , October 12, 2004, and the Corporation will not undertake efforts to revise those forward-looking statements to reflect events after this date.
STATE STREET CORPORATION
Addendum Earnings Digest(1)
(Dollars in millions, except per share data)
Quarter ended September 30,
-------------------------------------
2004 2003 % Change
---------- --------- -----------
Revenue $1,174 $1,126 4
Earnings 177 202 (12)
Diluted earnings per share .52 .60 (13)
Nine months ended September 30,
-------------------------------------
2004 2003 % Change
---------- --------- -----------
Revenue $3,680 $3,228 14
Earnings 614 275 123
Diluted earnings per share 1.80 .82 120
----------------------------------------------------------------------
(1) Information presented in accordance with accounting principles
generally accepted in the United States
STATE 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 Nine months ended
Sept. 30, Sept. 30,
------------------------- -------------------------
(Dollars in
millions,
except per
share data) 2004 2003 2004 2003
--------------- ---------- ------------ ---------- ------------
Fee Revenue:
Servicing fees $ 568 $ 505 $ 1,693 $ 1,425
Management fees 156 141 456 396
Global
securities
lending 48 61 201 192
Foreign
exchange
trading 75 101 309 276
Brokerage fees 31 28 112 85
Processing fees
and other 83 92 248 225
---------- ------------ ---------- ------------
Total Fee
Revenue 961 928 3,019 2,599
Net Interest Revenue:
Interest revenue 463 364 1,255 1,162
Interest expense 250 161 613 562
---------- ------------ ---------- ------------
Net interest revenue 213 203 642 600
Provision for
loan losses - - - -
---------- ------------ ---------- ------------
Net interest
revenue after
provision for
loan losses 213 203 642 600
Gains on the
sales of
available-for-
sale investment
securities, net - (5) 19 29
---------- ------------ ---------- ------------
Total Revenue 1,174 1,126 3,680 3,228
Operating Expenses:
Salaries and
employee
benefits 474 407 1,446 1,294
Information
systems and
communications 127 140 396 410
Transaction
processing
services 95 80 294 231
Occupancy 88 84 262 231
Merger and
integration
costs 16 26 50 81
Restructuring
costs - 3 - 295
Other 106 81 319 252
---------- ------------ ---------- ------------
Total operating
expenses 906 821 2,767 2,794
---------- ------------ ---------- ------------
Income before
income taxes 268 305 913 434
Income taxes 91 103 299 159
---------- ------------ ---------- ------------
Net Income $ 177 $ 202 $ 614 $ 275
========== ============ ========== ============
Earnings Per
Share:
Basic $ .52 $ .61 $ 1.83 $ .83
Diluted .52 .60 1.80 .82
Average Shares Outstanding
(in thousands):
Basic 335,626 332,246 335,065 331,056
Diluted 339,348 336,568 340,529 334,160
Return on equity 11.7 % 12.0 % 13.8 % 8.7 %
Cash dividends
declared per
share $ .16 $ .14 $ .47 $ .41
II. OTHER SELECTED FINANCIAL INFORMATION
As of September 30,
-----------------------
(Dollars in
millions, except
per share data
or where
otherwise
indicated) 2004 2003
----------------- -------- -----------
Assets under
custody
(in billions) $ 9,000 $ 8,752
Assets under
management
(in billions) 1,236 965
Total assets $ 100,527 $ 81,776
Long-term debt 2,436 2,151
Stockholders'
equity 6,151 5,244
Closing price
per share of
common stock $ 42.71 $ 45.00
STATE STREET CORPORATION
Addendum Selected Financial Information
II. SUPPLEMENTAL INCOME STATEMENT INFORMATION - RECONCILIATION OF
OPERATING RESULTS
Reconciliation of Financial Results
(Dollars in millions)
Quarter ended September 30,
------------------------------
Operating Reported
Results Other Results
--------- --------- --------
Fee Revenue:
Servicing fees $ 568 $ 568
Management fees 156 156
Global securities lending 48 48
Foreign exchange trading 75 75
Brokerage fees 31 31
Processing fees and other 83 83
--------- --------
Total fee revenue 961 961
Net Interest Revenue:
Net Interest Revenue 223 $ (10)(1) 213
Provision for loan losses - - -
--------- --------- --------
Net interest revenue after
provision for loan losses 223 (10) 213
Gains on the sales of available-
for-sale investment securities,
net - - -
--------- --------- --------
Total Revenue 1,184 (10) 1,174
Operating Expenses:
Salaries and employee benefits 474 - 474
Information systems and
communications 127 - 127
Transaction processing services 95 - 95
Occupancy 88 - 88
Merger and integration costs - 16 (2) 16
Other 106 - 106
--------- --------- --------
Total operating expenses 890 16 906
--------- --------- --------
Income before income taxes 294 (26) 268
Income taxes 96 (5)(3) 91
Taxable-equivalent adjustment 10 (10)(1) -
--------- --------- --------
Net Income $ 188 $ (11) $ 177
========= ========= ========
Diluted Earnings Per Share $ .55 $ (.03) $ .52
Average Diluted Shares (in
thousands) 339,348 339,348
Return on equity 12.3% 11.7%
Notes:
Reported results agree with the Corporation's Consolidated
Statement of Income.
(1) Taxable-equivalent adjustment is not included in reported results.
(2) Merger and integration costs associated with the acquisition of
the GSS business.
(3) Reflects the tax benefit associated with the merger and
integration costs.
STATE STREET CORPORATION
Addendum Selected Financial Information
II. SUPPLEMENTAL INCOME STATEMENT INFORMATION - RECONCILIATION OF
OPERATING RESULTS
Reconciliation of Financial Results
(Dollars in millions)
Nine months ended September 30,
-------------------------------
Operating Reported
Results Other Results
--------- --------- --------
Fee Revenue:
Servicing fees $ 1,693 $ 1,693
Management fees 456 456
Global securities lending 201 201
Foreign exchange trading 309 309
Brokerage fees 112 112
Processing fees and other 248 248
--------- --------
Total fee revenue 3,019 3,019
Net Interest Revenue:
Net Interest Revenue 675 $ (33)(1) 642
Provision for loan losses - - -
--------- --------- --------
Net interest revenue after
provision for loan losses 675 (33) 642
Gains on the sales of available-for-
sale investment securities, net 19 - 19
--------- --------- --------
Total Revenue 3,713 (33) 3,680
Operating Expenses:
Salaries and employee benefits 1,446 - 1,446
Information systems and
communications 396 - 396
Transaction processing services 294 - 294
Occupancy 262 - 262
Merger and integration costs - 50 (2) 50
Other 319 - 319
--------- --------- --------
Total operating expenses 2,717 50 2,767
--------- --------- --------
Income before income taxes 996 (83) 913
Income taxes 316 (17)(3) 299
Taxable-equivalent adjustment 33 (33)(1) -
--------- --------- --------
Net Income $ 647 $ (33) $ 614
========= ========= ========
Diluted Earnings Per Share $ 1.90 $ (.10) $ 1.80
Average Diluted Shares (in
thousands) 340,529 340,529
Return on equity 14.5% 13.8%
Notes:
Reported results agree with the Corporation's
Consolidated Statement of Income.
(1) Taxable-equivalent adjustment is not included in reported results.
(2) Merger and integration costs associated with the acquisition of
the GSS business.
(3) Reflects the tax benefit associated with the merger and
integration costs.
STATE STREET CORPORATION
Addendum Selected Financial Information
III. SUPPLEMENTAL INCOME STATEMENT INFORMATION -
RECONCILIATION OF REPORTED RESULTS TO NON-GAAP MEASURES
Income Income
Total Before Tax Earnings
Total Operating Income Expense Net Per
Revenue Expenses Taxes (Benefit) Income Share
------- --------- ------ --------- ------ --------
Three months ended
September 30, 2004
Reported results -
GAAP $1,174 $906 $268 $91 $177 $.52
Non-operating
business activities:
Merger and
integration costs - (16) 16 5 11 .03
------- --------- ------ --------- ------ --------
Total non-operating
business activities - (16) 16 5 11 .03
Taxable-equivalent
adjustment 10 - 10 10 - -
------- --------- ------ --------- ------ --------
Operating results $1,184 $890 $294 $106 $188 $.55
======= ========= ====== ========= ====== ========
Three months ended
September 30, 2003
Reported results -
GAAP $1,126 $821 $305 $103 $202 $.60
Results of the
divested Private
Asset Management
business (19) (11) (8) (2) (6) (.01)
Non-operating
business activities:
Restructuring costs - (3) 3 - 3 .01
Merger and
integration costs - (26) 26 - 26 .05
------- --------- ------ --------- ------ --------
Total non-operating
business activities - (29) 29 - 29 .06
Taxable-equivalent
adjustment 13 - 13 13 - -
------- --------- ------ --------- ------ --------
Operating results $1,120 $781 $339 $114 $225 $.65
======= ========= ====== ========= ====== ========
STATE STREET CORPORATION
Addendum Selected Financial Information
IV. SUPPLEMENTAL INCOME STATEMENT INFORMATION -
OPERATING RESULTS YEAR OVER YEAR COMPARISON
Operating results are a non-GAAP measure defined by State Street
as reported results presented on a taxable-equivalent basis,
adjusted for significant non-operating items and the related tax
effects; For 2004, operating results exclude merger and
integration costs, and for 2003, exclude the results of a divested
business, merger and integration costs, restructuring costs, and
for the nine months ended September 30, 2003, settlement of a
state tax matter and the loss on sale of certain real estate.
Operating Results Operating Results
Quarter ended Nine months ended
September 30, September 30,
------------------------- --------------------------
(Dollars in millions,
except per
share data) 2004 2003(1) % Change 2004 2003(2) % Change
------ -------- --------- ------- -------- ---------
Operating Fee Revenue:
Servicing fees $568 $505 12% $1,693 $1,425 19%
Management fees 156 122 28 456 341 34
Global securities
lending 48 61 (21) 201 192 5
Foreign exchange
trading 75 101 (26) 309 276 12
Brokerage fees 31 28 11 112 85 32
Processing fees
and other 83 92 (10) 248 237 5
------ -------- ------- --------
Total Operating
Fee Revenue 961 909 6 3,019 2,556 18
Operating Net Interest Revenue:
Net interest
revenue 223 216 675 639
Provision for
loan losses - - - -
------ -------- ------- --------
Operating net
interest revenue after
provision for
loan losses 223 216 3 675 639 6
(taxable- equivalent basis)
Gains on the sales of
available-for-sale
investment
securities, net - (5) (100) 19 29 (34)
------ -------- ------- --------
Total Operating
Revenue 1,184 1,120 6 3,713 3,224 15
Expenses -
Operating Results:
Salaries and
employee
benefits 474 402 18 1,446 1,276 13
Information
systems and
communications 127 140 (9) 396 409 (3)
Transaction
processing
services 95 79 20 294 230 28
Occupancy 88 83 6 262 227 15
Other 106 77 38 319 242 32
------ -------- ------- --------
Total Expenses -
Operating Results 890 781 14 2,717 2,384 14
------ -------- ------- --------
Operating Income
before income
taxes 294 339 (13) 996 840 19
Income taxes 96 107 316 272
Taxable-
equivalent
adjustment 10 13 33 39
------ -------- ------- --------
Net Operating
Income $188 $219 (14) $647 $529 22
====== ======== ======= ========
Diluted Operating
Earnings Per
Share $.55 $.65 (15) $1.90 $1.58 20
Notes:
(1) Reflects restatement of previously issued operating-basis
supplemental financial information to exclude the results of the
divested Private Asset Management business, including $19 million
of revenue, $11 million of expenses and $.01 in diluted operating
earnings per share.
(2) Reflects restatement of previously issued operating-basis
supplemental financial information to exclude the results of the
divested Private Asset Management business, including $56 million
of revenue, $34 million of expenses and $.04 in diluted operating
earnings per share.
STATE STREET CORPORATION
Addendum Selected Financial Information
IV. SUPPLEMENTAL INCOME STATEMENT INFORMATION -
OPERATING RESULTS QUARTER OVER QUARTER COMPARISON
Operating results are a non-GAAP measure defined by State Street
as reported results presented on a taxable-equivalent basis, and
in 2004, excluding merger and integration costs and the related
tax effects of such costs.
Operating Results
Quarter ended
-----------------------------
(Dollars in millions, except per share Sept. 30, June 30,
data) 2004 2004 % Change
---------- -------- ---------
Operating Fee Revenue:
Servicing fees $568 $570 - %
Management fees 156 153 2
Global securities lending 48 89 (46)
Foreign exchange trading 75 116 (35)
Brokerage fees 31 36 (14)
Processing fees and other 83 81 2
---------- --------
Total Operating Fee Revenue 961 1,045 (8)
Operating Net Interest Revenue:
Net interest revenue 223 238
Provision for loan losses - -
---------- --------
Operating net interest revenue after
provision for loan losses 223 238 (6)
(taxable-equivalent basis)
Gains on the sales of available-for-
sale investment securities, net - 16 (100)
---------- --------
Total Operating Revenue 1,184 1,299 (9)
Expenses - Operating Results:
Salaries and employee benefits 474 510 (7)
Information systems and communications 127 130 (2)
Transaction processing services 95 103 (8)
Occupancy 88 84 5
Other 106 110 (4)
---------- --------
Total Expenses - Operating Results 890 937 (5)
---------- --------
Operating Income before income taxes 294 362 (19)
Income taxes 96 119
Taxable-equivalent adjustment 10 12
---------- --------
Net Operating Income $188 $231 (19)
========== ========
Diluted Operating Earnings Per Share $.55 $.68 (19)
STATE STREET CORPORATION
Addendum Selected Financial Information
V. CONSOLIDATED STATEMENT OF CONDITION
Sept. 30, Dec. 31, Sept. 30,
(Dollars in millions) 2004 2003 2003
------------- ------------ ------------
Assets
Cash and due from banks $ 6,058 $ 3,376 $ 1,691
Interest-bearing deposits with
banks 30,392 21,738 22,333
Securities purchased under
resale agreements 10,378 9,447 8,737
Federal funds sold 2,700 104 -
Trading account assets 673 405 1,059
Investment securities 36,818 38,215 32,364
Loans (less allowance of $36,
$61 and $61) 5,512 4,960 6,168
Premises and equipment 1,431 1,212 1,154
Accrued income receivable 1,085 1,015 1,010
Goodwill 1,462 1,326 1,301
Other intangible assets 466 525 508
Other assets 3,552 5,211 5,451
------------- ------------ ------------
Total Assets $100,527 $87,534 $81,776
============= ============ ============
Liabilities
Deposits:
Noninterest-bearing $ 9,793 $ 7,893 $10,690
Interest-bearing -- U.S. 6,093 5,062 3,746
Interest-bearing -- Non-U.S. 42,043 34,561 28,722
------------- ------------ ------------
Total Deposits 57,929 47,516 43,158
Securities sold under
repurchase agreements 20,702 22,806 21,895
Federal funds purchased 5,500 1,019 1,778
Other short-term borrowings 1,881 1,437 1,842
Accrued taxes and other
expenses 2,513 2,424 2,199
Other liabilities 3,415 4,363 3,509
Long-term debt 2,436 2,222 2,151
------------- ------------ ------------
Total Liabilities 94,376 81,787 76,532
Stockholders' Equity
Preferred stock, no par:
authorized 3,500,000; issued
none
Common stock, $1 par:
authorized 500,000,000;
issued 337,126,000,
337,132,000 and 337,135,000 337 337 337
Surplus 287 329 336
Retained earnings 5,463 5,007 4,610
Accumulated other comprehensive
income 86 192 126
Treasury stock at cost (576,000,
2,658,000 and 3,738,000 shares) (22) (118) (165)
-------------------------------------------- ------------ ------------
Total Stockholders' Equity 6,151 5,747 5,244
------------- ------------ ------------
Total Liabilities and
Stockholders' Equity $100,527 $87,534 $81,776
============= ============ ============
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