State Street Corporation Achieves Record Revenue and Operating EPS in Second Quarter.

Positive Operating Leverage Continues

Strong Momentum at Investors Financial as Customer Conversions Begin

BOSTON -- 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([R]) EAFE Index(SM) 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

All per share amounts represent diluted earnings per share.

INVESTOR CONFERENCE CALL

State Street will webcast an investor conference call today, Tuesday, July 17, 2007, at 9:30 a.m. EDT, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/457-2679 (confirmation code 2823043). Recorded replays of the conference call will be available on the web site, and by telephone at +1 402/220-4230, beginning at 2:00 PM today. The telephone replay will be available for two weeks following the conference call. This press release and additional financial information is available on State Street's website, at www.statestreet.com/stockholder, under "Financial Reports."

State Street Corporation (NYSE: STT) is the world's leading 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 

This news announcement contains forward-looking statements as defined by United States securities laws, including statements about the recently completed acquisition of Investors Financial Services Corporation, as well as about our financial goals, the financial outlook and 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 State Street's expectations or beliefs as of any date subsequent to the date of this release.

Important factors that may affect future results and outcomes include:

* State Street's ability to integrate and convert acquisitions into its business, including the recently closed acquisition of Investors Financial Services Corporation;

* the level and volatility of interest rates, particularly in the U.S. and Europe; the performance and volatility of securities, currency and other markets in the U.S. and internationally; economic conditions and monetary and other governmental actions designed to address those conditions;

* State Street's ability to attract non-interest bearing deposits and other low-cost funds;

* the competitive environment in which State Street operates;

* the enactment of legislation and changes in regulation and enforcement that impact State Street and its customers;

* State Street's ability to continue to grow revenue, control expenses and attract the capital necessary to achieve its business goals and comply with regulatory requirements;

* State Street's ability to control systemic and operating risk;

* trends in the globalization of investment activity and the growth on a worldwide basis in financial assets;

* trends in governmental and corporate pension plans and savings rates;

* changes in accounting standards and practices, including changes in the interpretation of existing standards, that impact State Street's 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 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.

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