LIMITED ACCESS State Street Corporation Third-Quarter 2013 Financial Highlights October 22, 2013 Exhibit 99.3
2 Forward-Looking Statements This presentation contains forward-looking statements as defined by United States securities laws, including statements relating to our goals and expectations regarding our business, financial and capital condition, results of operations, investment portfolio performance and strategies, the financial and market outlook, governmental and regulatory initiatives and developments, and the business environment. Forward-looking statements are often, but not always, identified by such forward-looking terminology as "plan," "expect," “outlook," "believe," "anticipate," "estimate," "seek," "may," "will," "trend," "target," "strategy" and "goal," or similar statements or variations of such terms. 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 October 22, 2013. Important factors that may affect future results and outcomes include, but are not limited to: the financial strength and continuing viability of the counterparties with which we or our clients do business and to which we have investment, credit or financial exposure, including, for example, the direct and indirect effects on counterparties of the current sovereign-debt risks in Europe and other regions; financial market disruptions or economic recession, whether in the U.S., Europe, Asia or other regions; increases in the volatility of, or declines in the level of, our net interest revenue, changes in the composition of the assets recorded in our consolidated statement of condition (and our ability to measure the fair value of investment securities) and the possibility that we may change the manner in which we fund those assets; the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities and inter-bank credits, and the liquidity requirements of our clients; 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; 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 recognition of an impairment loss in our consolidated statement of income; our ability to attract deposits and other low-cost, short-term funding, and our ability to deploy deposits in a profitable manner consistent with our liquidity requirements and risk profile; the manner and timing with which the Federal Reserve and other U.S. and foreign regulators implement the Dodd-Frank Act, the Basel II and Basel III capital and liquidity standards, and European legislation with respect to the levels of regulatory capital we must maintain, our credit exposure to third parties, margin requirements applicable to derivatives, banking and financial activities and other regulatory initiatives in the U.S. and internationally, including regulatory developments that result in changes to our structure or operating model, increased costs or other changes to how we provide services; adverse changes in the regulatory capital ratios that we are required to meet, whether arising under the Dodd-Frank Act, the Basel II or Basel III capital and liquidity standards or due to changes in regulatory positions, practices or regulations in jurisdictions in which we engage in banking activities, including changes in internal or external data, formulae, models, assumptions or other advanced systems used in calculating our capital ratios that cause changes in those ratios as they are measured from period to period; increasing requirements to obtain the prior approval of the Federal Reserve or our other regulators for the use, allocation or distribution of our capital or other specific capital actions or programs, including acquisitions, dividends and equity purchases, without which our growth plans, distributions to shareholders, equity purchase programs or other capital initiatives may be restricted; changes in law or regulation that may adversely affect our business activities or those of our clients or our counterparties, and the products or services that we sell, including additional or increased taxes or assessments thereon, capital adequacy requirements, margin requirements and changes that expose us to risks related to the adequacy of our controls or compliance programs; our ability to promote a strong culture of risk management, operating controls, compliance oversight and governance that meet our expectations or those of our clients and our regulators; the credit agency ratings of our debt and depository obligations and investor and client perceptions of our financial strength; delays or difficulties in the execution of our previously announced Business Operations and Information Technology Transformation program, which could lead to changes in our estimates of the charges, expenses or savings associated with the planned program and may cause volatility of our earnings; the results of, and costs associated with, government investigations, litigation, and similar claims, disputes, or proceedings; the possibility that our clients will incur substantial losses in investment pools for which we act as agent, and the possibility of significant reductions in the valuation of assets underlying those pools; adverse publicity or other reputational harm; dependencies on information technology, complexities and costs of protecting the security of our systems and difficulties with protecting our intellectual property rights; our ability to grow revenue, control expenses, attract and retain highly skilled people and raise the capital necessary to achieve our business goals and comply with regulatory requirements; potential changes to the competitive environment, including changes due to regulatory and technological changes, the effects of industry consolidation, and perceptions of State Street as a suitable service provider or counterparty; potential changes in how and in what amounts clients compensate us for our services, and the mix of services provided by us that clients choose; the ability to complete acquisitions, joint ventures and divestitures, including the ability to obtain regulatory approvals, the ability to arrange financing as required and the ability to satisfy closing conditions; the risks that acquired businesses and joint ventures will not achieve their anticipated financial and operational benefits or will not be integrated successfully, or that the integration will take longer than anticipated, that expected synergies will not be achieved or unexpected disynergies will be experienced, that client and deposit retention goals will not be met, that other regulatory or operational challenges will be experienced and that disruptions from the transaction will harm our relationships with our clients, our employees or regulators; our ability to recognize emerging needs of our clients and to develop products that are responsive to such trends and profitable to us, the performance of and demand for the products and services we offer, and the potential for new products and services to impose additional costs on us and expose us to increased operational risk; our ability to anticipate and manage the level and timing of redemptions and withdrawals from our collateral pools and other collective investment products; our ability to control operating risks, data security breach risks, information technology systems risks and outsourcing risks, and our ability to protect our intellectual property rights, the possibility of errors in the quantitative models we use to manage our business and the possibility that our controls will prove insufficient, fail or be circumvented; 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 affect 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 2012 Annual Report on Form 10-K 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 presentation speak only as of the date hereof, October 22, 2013, and we do not undertake efforts to revise those forward-looking statements to reflect events after that date. This presentation presents certain highlights of, and also material supplemental to, State Street Corporation’s (State Street’s) news release announcing its third-quarter 2013 financial results. That news release contains a more detailed discussion of many of the matters described in this presentation and is accompanied by detailed financial tables. This presentation is designed to be reviewed together with that news release, which is available on State Street’s website and is incorporated herein by reference.
3 • GAAP-basis earnings per share, or EPS, of $1.17 decreased 5.6% from $1.24 in Q2 ’13 and decreased 14.0% from $1.36 in Q3 ’12 • Total GAAP-basis revenue decreased 5.3% to $2.43 billion from $2.56 billion in Q2 ’13 and was up 2.9% from $2.36 billion in Q3 ’12 • Operating-basis(1) EPS of $1.19 decreased 4.0% from $1.24 in Q2 ’13 and was up 20.2% from $0.99 in Q3 ’12 • Total operating-basis revenue(1) was $2.47 billion, down 4.3% from $2.58 billion in Q2 ’13 and up 3.4% from $2.39 billion in Q3 ’12 • Core total asset servicing and asset management fees of $1.49 billion are slightly higher than Q2 ’13 and up 10.1% from $1.35 billion in Q3 ’12 • New business(2) – New assets to be serviced of $200 billion – 47 new alternative asset servicing mandates – Net new assets to be managed by SSgA of $(15) billion – Pipeline remains strong and well diversified (1) Includes operating-basis (non-GAAP) financial information where noted. Operating-basis financial highlights are a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. (2) Only a portion of such new mandates have been installed and are reflected in our assets under custody and administration and our assets under management as of September 30, 2013. Distribution fees from the SPDR® Gold Exchange-Traded Fund, or ETF, are recorded in brokerage and other fee revenue and not in management fee revenue. Third-Quarter 2013 Financial Summary(1)
4 Year-to-Date and Third-Quarter 2013 Financial Highlights(1) • Key operating-basis (non-GAAP)(1) financial metrics – EPS of $3.38 for the nine months ended September 30, 2013, a 19.4% increase compared to the same period in 2012 – EPS of $1.19 for Q3 ’13, a 4.0% decrease sequentially and an increase of 20.2% over Q3 ’12 – Pre-tax margin of 30.2% for the nine months ended September 30, 2013; 31.7% for Q3 ’13 – Return on equity of 10.4% for the nine months ended September 30, 2013; 11.0% for Q3 ’13 • Operating-basis (non-GAAP)(1) fee revenue – Total fee revenue for the nine months ended September 30, 2013 increased 8.3% to $5.8 billion compared to the same period in 2012 – Total fee revenue for Q3 ‘13 was $1.9 billion, an increase of 9.2% compared to Q3 ’12 – Total fee revenue growth for the nine months ended September 30, 2013 and Q3 ’13 compared to the same periods in 2012 was primarily due to equity market appreciation, net new business, revenue added by the Q4 ’12 Goldman Sachs Administration Services (GSAS) acquisition, and increased volumes related to foreign exchange trading – Total fee revenue was sequentially lower primarily due to the seasonal decline in securities finance and a summer slowdown in trading services • Operating-basis (non-GAAP)(1) expenses – Continued good execution in managing expenses – Achieved positive operating leverage(2) of 229 bps for the nine months ended September 30, 2013 compared to the same period in 2012 – Business Operations and Information Technology Transformation program remains on track to deliver additional pre-tax expense savings(3) in 2013 of approximately $220 million – Overall program pre-tax run-rate expense savings(3) expected to be in the range of $575 million to $625 million by 2015, unchanged from initial plan (1) Includes operating-basis (non-GAAP) financial information where noted. Operating-basis financial highlights are a non-GAAP presentation. See pages 6,8,10 and 11 of this presentation for a GAAP-basis presentation of the referenced information for the relevant periods. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. (2) Operating leverage is defined as the rate of growth of total revenue less the rate of growth of total expenses, each as determined on an operating basis. Operating leverage comparing the nine months ended September 30, 2013 to the same period in 2012 and the third quarter of 2013 to each of the second quarter of 2013 and the third quarter of 2012 is presented in the addendum linked to this presentation. (3) Estimated pre-tax expense savings relate only to the Business Operations and Information Technology Transformation program and are based on projected improvement from total 2010 operating-basis expenses. Actual total expenses of the Company have increased since 2010, and may increase or decrease in the future, due to other factors.
5 Third-Quarter 2013 Financial Highlights(1) (Continued) • Operating-basis (non-GAAP)(1) net interest revenue (NIR) and net interest margin (NIM) – Operating-basis NIR(1) and NIM(1) were pressured by the low interest-rate environment as expected – NIR decreased 5.0% to $553 million from Q2 ’13 due to lower yields on and lower levels of earning assets, partially offset by lower liability costs – NIM of 1.27% decreased from 1.31% in Q2 ’13 • Strong capital position – Return of capital to shareholders through common stock purchases and dividends – Purchased approximately 8.2 million shares of our common stock in Q3 ’13, at an average price of $68.57 per share for a total cost of approximately $560 million, under the March 2013 program authorizing the purchase of up to $2.1 billion of common stock through March 31, 2014 – Declared a $0.26-per-share quarterly common stock dividend – Declared a non-cumulative quarterly perpetual preferred stock, Series C dividend of $0.33 per depositary share – Capital ratios remain strong(2) – Tier 1 common ratio was 15.5% as of September 30, 2013, as calculated using currently applicable regulatory requirements under Basel I rules – Estimated pro forma Basel III tier 1 common ratio as of September 30, 2013 was 10.2% (standardized approach) and 11.3% (advanced approach), each calculated in conformity with the July 2013 final rule issued by the Federal Reserve. Under the final rule, the lower of these two Basel III tier 1 common ratios will apply in the assessment of our capital adequacy for regulatory purposes (1) Includes operating-basis (non-GAAP) financial information where noted. Operating-basis financial highlights are a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. (2) Estimated pro forma Basel III tier 1 common ratios are preliminary, reflect tier 1 common equity calculated under the July 2013 final rule as applicable on its January 1, 2014 effective date and are based on State Street’s present interpretations, expectations and understanding of the final rule. Refer to pages 15 and 16 of this presentation for important information about the July 2013 final rule, State Street's calculations of its tier 1 common ratios thereunder and factors that could influence State Street's calculation of its tier 1 common ratios. Unless otherwise specified, all capital ratios referenced in this presentation refer to State Street and not State Street Bank and Trust Company. Refer to the addendum linked to this presentation for a further description of these ratios, and for reconciliations applicable to State Street’s tier 1 common ratio.
6 Summary of Third-Quarter 2013 GAAP-Basis Financial Results $ in millions, except per share data Q3 '13 Q2 '13 Q3 '12 vs Q2 '13 vs Q3 '12 Revenue 2,425$ 2,560$ 2,356$ (5.3)% 2.9% Expenses 1,722 1,798 1,415 (4.2) 21.7 Earnings per share (EPS) 1.17 1.24 1.36 (5.6) (14.0) Return on average common equity (ROE) 10.8% 11.3% 13.3% Pre-tax operating margin 29.0 29.8 39.9 Average diluted common shares outstanding 452.2 461.0 480.0 % change (1) (1) Amount reflects a credit of $277 million, composed of recoveries of $362 million associated with the 2008 Lehman Brothers bankruptcy, partly offset by provisions for litigation exposure and other costs of $85 million.
7 Summary of Third-Quarter 2013 Operating-Basis (Non-GAAP) Financial Results(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. (2) Operating leverage is defined as the rate of growth of total revenue less the rate of growth of total expenses, each as determined on an operating basis. Operating leverage comparing the third quarter of 2013 to each of the second quarter of 2013 and the third quarter of 2012 is presented in the addendum linked to this presentation. Achieved Positive Operating Leverage compared to Q3 ’12(2) $ in millions, except per share data Q3 '13 Q2 '13 Q3 '12 vs Q2 '13 vs Q3 '12 Revenue 2,469$ 2,580$ 2,387$ (4.3)% 3.4% Expenses 1,687 1,753 1,664 (3.8) 1.4 EPS 1.19 1.24 0.99 (4.0) 20.2 ROE 11.0% 11.3% 9.6% Net interest margin 1.27 1.31 1.44 Pre-tax operating margin 31.7 32.1 30.3 Operating leverage(2) (54) bps 206 bps Average diluted common shares outstanding 452.2 461.0 480.0 Change
8 Summary of Nine Months Ended September 30, 2013 GAAP-Basis Financial Results $ in millions, except per share data September 30, 2013 September 30, 2012 % change Revenue 7,420$ 7,200$ 3.1% Expenses 5,346 5,022 6.5 EPS 3.40 3.19 6.6 ROE 10.4% 10.7% Pre-tax operating margin 28.0 30.3 Average diluted common shares outstanding 458.4 485.8 Nine Months Ended (1) (1) Amount reflects a credit of $277 million, composed of recoveries of $362 million associated with the 2008 Lehman Brothers bankruptcy, partly offset by provisions for litigation exposure and other costs of $85 million, recorded in the third quarter of 2012.
9 Summary of Nine Months Ended September 30, 2013 Operating-Basis (Non-GAAP) Financial Results(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. (2) Operating leverage is defined as the rate of growth of total revenue less the rate of growth of total expenses, each as determined on an operating basis. Operating leverage comparing the nine months ended September 30, 2013 to the same period in 2012 is presented in the addendum linked to this presentation. Achieved Positive Operating Leverage compared to Nine Months ended September 30, 2012(2) $ in millions, except per share data September 30, 2013 September 30, 2012 Change Revenue 7,519$ 7,267$ 3.5% Expenses 5,252 5,191 1.2 EPS 3.38 2.83 19.4 ROE 10.4% 9.5% Net interest margin 1.30 1.50 Pre-tax operating margin 30.2 28.6 Operating leverage(2) 229 bps Average diluted shares outstanding 458.4 485.8 Nine Months Ended
10 GAAP-Basis Revenue $ in millions Q3 '13 Q2 '13 Q3 '12 Servicing fees 1,211$ 0.8% 10.1% Management fees 276 (0.4) 10.0 Trading services revenue 256 (13.5) 10.3 Securities finance revenue 74 (43.5) (18.7) Processing fees and other revenue 66 - 46.7 Net interest revenue 546 (8.4) (11.8) Gains (losses) related to investment securities, net (4) (42.9) (122.2) Total revenue 2,425$ (5.3)% 2.9% % change
11 GAAP-Basis Expenses NM – not meaningful $ in millions Q3 '13 Q2 '13 Q3 '12 Compensation and employee benefits 903$ (1.5)% (1.4)% Information systems and communications 235 - 11.4 Transaction processing services 185 (0.5) 8.8 Occupancy 113 (0.9) (1.7) Claims resolution - - NM Acquisition and restructuring costs 30 - 7.1 Other 256 (19.0) (24.0) Total expenses 1,722$ (4.2)% 21.7% % change
12 Operating-Basis (Non-GAAP) Revenue(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. (2) Estimates are based on numerous management assumptions. Estimates assume that interest rates globally and client deposits remain at or around current levels for the remainder of the year and actual results may differ. Key Drivers • As compared to Q3’12, growth in servicing fees primarily driven by stronger global equity markets, the acquired GSAS business and net new business; sequential-quarter growth in servicing fees primarily due to stronger global equity markets, partially offset by lower transaction volumes • Management fees increased compared to Q3 ’12 primarily due to stronger global equity markets and net new business and were relatively unchanged compared to Q2 ’13 • Trading services revenue increased over Q3 ’12 primarily due to higher volumes and volatilities in foreign exchange trading and decreased from Q2 ’13 primarily due to lower volumes and volatilities in foreign exchange trading • Securities finance revenue decreased from Q3 ’12 primarily due to lower spreads and decreased from Q2 ’13 primarily due to seasonality and lower spreads and volumes • Processing fees and other revenue increased compared to Q3 ’12, primarily due to fee revenue associated with our investment in bank-owned life insurance • NIR declined on year-ago quarter and sequential-quarter basis due to persistent low interest rates; NIM of 1.27% for Q3 ’13 down from 1.31% in Q2 ’13 due to lower yields on earning assets, partly offset by lower liability costs Continued Strength in Core Business $ in millions Q3 '13 Q2 '13 Q3 '12 Servicing fees 1,211$ 0.8% 10.1% Management fees 276 (0.4) 10.0 Trading services revenue 256 (13.5) 10.3 Securities finance revenue 74 (43.5) (18.7) Processing fees and other revenue 103 3.0 22.6 Net interest revenue 553 (5.0) (9.5) Gains (losses) r l ted to investment securities, net (4) (42.9) (122.2) Total operating-b is revenue 2,469$ (4.3)% 3.4% % change Operating-Basis NIR Outlook • For full-year 2013, we expect(2): • Average earning assets to grow ~5% compared to 2012 • NIM to be slightly below 130 bps • NIR to be $170 to $180 million below 2012 full- year NIR
13 Operating-Basis (Non-GAAP) Expenses(1) Key Drivers • Compensation and employee benefits expenses decreased from Q3 ’12 primarily due to savings associated with the execution of the Business Operations and Information Technology Transformation program and lower benefit costs, partially offset by an increase in costs to support new business and higher incentive compensation; decreased from Q2 ’13 primarily due to lower benefit costs resulting from plan changes and savings associated with the execution of the Business Operations and Information Technology Transformation program, partially offset by an increase in costs to support new business • Information systems and communications expenses were up from the year-ago quarter, primarily related to the planned transition of certain functions to service providers as part of the Business Operations and Information Technology Transformation program, as well as costs to support new business • Transaction processing services expenses were up from the year-ago quarter primarily due to higher equity market values and higher transaction volumes in the asset servicing business • Other expenses decreased on a sequential quarter basis due primarily to a Q3 ‘13 gain of $19 million from the sale of a legacy Lehman Brothers-related asset, lower litigation costs (including a Lehman Brothers-related recovery of $11 million in Q3 ‘13), and lower professional services fees and sales promotion costs. These were partially offset by a new Federal Reserve supervisory assessment of $7 million Continued Strong Expense Management (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. . $ in millions Q3 '13 Q2 '13 Q3 '12 Compensation and employee benefits 903$ (1.5)% (1.4)% Information systems and communications 235 - 11.4 Transaction processing services 185 (0.5) 8.8 Occupancy 113 (0.9) (1.7) Other 251 (16.6) (0.4) Total operatin -b is expenses 1,687$ (3.8)% 1.4% % change
14 Balance Sheet Highlights Third Quarter 2013(1) (2) Investment Portfolio • Size: $117 billion, unchanged from end of Q2 ‘13 • Credit profile: approximately 88% AAA / AA • Fixed-rate/Floating-rate mix: 44% / 56% • Duration: 1.9 years • Unrealized after-tax mark-to-market (MTM) loss: $79 million • Other-than-temporary impairment (OTTI): $10 million • Purchased $5.5 billion in Q3 ‘13; average yield: 2.15% • Discount accretion of $28 million in Q3 ’13 related to former conduit assets; approximately $603 million expected to accrue over the remaining lives of the former conduit securities(3) Interest rate risk metrics • Economic value of equity (EVE)(4): (14.5)% of total regulatory capital(5) as of Q3 ’13-end, versus (14.8)% as of Q2’13-end, and (12.3)% as of Q3’12-end (in the up-200-bps shock to quarter-end interest-rate levels hypothetical scenario) • Unrealized after-tax MTM loss sensitivity: approximately $(1.3) billion after-tax (in the up- 100-bps shock to quarter-end interest-rate levels hypothetical scenario) • Duration gap: 0.43 years; Q3 ‘13 range: 0.43 years to 0.56 years Other Balance Sheet Activity • Participated in senior secured bank loans: $511 million, floating rate, primarily BB/B-rated (1) As of period-end where applicable. (2) See appendix included with this presentation for a description of the investment portfolio. (3) Based on numerous assumptions, including holding the securities to maturity, anticipated prepayment speeds and credit quality. (4) For additional information regarding EVE, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in State Street’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and its subsequent Quarterly Reports on Form 10-Q, filed with the SEC. (5) Total regulatory capital is defined as the sum of tier 1 and tier 2 risk-based capital.
15 Capital Footnotes (1), (2) and (3) provided on page 16. Third-Quarter 2013 Highlights • Maintained a strong capital position • In Q3 ’13, purchased approximately 8.2 million common shares at an average price of $68.57 per share and a total cost of approximately $560 million • $1 billion remaining available for purchase under the March 2013 program, authorizing the purchase of up to $2.1 billion of common stock through March 31, 2014 Returning Capital to Shareholders Remains a Priority While Managing a Strong Capital Position Capital Ratios as of September 30, 2013(1) Total capital 19.8% Tier 1 capital 17.3% Tier 1 leverage State Street Corporation 7.2% State Street Bank and Trust Company 6.5% Tier 1 common 15.5% Tangible common equity (TCE) 6.8% Estimated pro forma Basel III tier 1 common ratio as of September 30, 2013(2) Estimated pro forma tier 1 common ratio calculated under July 2013 Basel III final rule, as of September 30, 2013 (standardized approach) 10.2% Estimated pro forma tier 1 common ratio calculated under July 2013 Basel III final rule, as of September 30, 2013 (advanced approach) 11.3% Estimated pro forma Basel III Supplementary Leverage Ratio as of September 30, 2013(3) State Street Corporation 5.4% State Street Bank and Trust Company 5.0%
16 (1) Unless otherwise specified, all capital ratios referenced above and elsewhere in this presentation refer to State Street and not State Street Bank and Trust Company, or State Street Bank. Refer to the addendum linked to this presentation for a further description of these ratios, and for reconciliations applicable to State Street's tier 1 common and tangible common equity, or TCE, ratios presented above. (2) On July 2, 2013, the Federal Reserve issued a rule intended to implement the Basel III framework in the U.S. The final rule consolidated, with revisions, three separate Notices of Proposed Rulemaking, or NPRs, originally issued by the Federal Reserve in June 2012. State Street's transition period with respect to the final rule has not yet commenced. Under the final rule, the lower of State Street’s tier 1 common ratio calculated under the Basel III advanced approach, referred to as the advanced approach, and under the Basel III standardized approach, referred to as the standardized approach, will be State Street’s effective tier 1 common ratio used in connection with the assessment of its capital adequacy for regulatory purposes. These calculations differ from calculations done in conformity with the June 2012 NPRs. The estimated pro forma Basel III tier 1 common ratios presented in the table above as of September 30, 2013 are preliminary estimates by State Street, calculated in conformity with the advanced and standardized approaches in the July 2013 final rule. Each of these calculations reflects tier 1 common equity calculated under the final rule as applicable on its January 1, 2014 effective date and is based on State Street's present interpretations, expectations and understanding of the final rule as of October 22, 2013. The estimated pro forma Basel III tier 1 common ratio as of September 30, 2013, calculated in conformity with the advanced approach in the July 2013 final rule, reflects calculations and determinations with respect to State Street's capital and related matters as of September 30, 2013, based on State Street and external data, quantitative formulae, statistical models, historical correlations and assumptions, collectively referred to as “advanced systems”, in effect and used by State Street for those purposes as of October 22, 2013. Significant components of these advanced systems involve the exercise of judgment by State Street and its regulators, and these advanced systems may not accurately represent or calculate the scenarios, circumstances, outputs or other results for which they are designed or intended. Due to the influence of changes in these advanced systems, whether resulting from changes in data inputs, regulation or regulatory supervision or interpretation, State Street-specific or market activities or experiences or other updates or factors, State Street expects that its advanced systems and its capital ratios calculated in conformity with the Basel III framework will change and may be volatile over time, and that those latter changes or volatility could be material as calculated and measured from period to period. Refer to the addendum linked to this presentation for information concerning the specified capital ratios and for reconciliations of State Street's estimated pro forma Basel III tier 1 common ratios to the tier 1 common ratio calculated using currently applicable regulatory requirements under Basel I rules. (3) On July 9, 2013, the Federal Reserve and the FDIC issued an NPR proposing to enhance leverage ratio standards for U.S. bank holding companies with at least $700 billion in consolidated total assets or at least $10 trillion in total assets under custody, and their insured depository institution subsidiaries. If adopted, these enhanced standards would apply to State Street and State Street Bank, and would require State Street and State Street Bank to maintain Basel III supplementary leverage ratios of at least 5% and 6%, respectively, in order to avoid specified restrictions on capital distributions and other consequences. These proposed enhancements serve as an “add-on” requirement to the similar 3% minimum supplementary leverage ratio proposed by the Basel Committee and reflected in the Federal Reserve’s July 2013 final rule described in note (2) above. The estimated pro forma Basel III supplementary leverage ratios presented above for State Street and State Street Bank are preliminary estimates, calculated in conformity with the July 2013 NPR. Each of these calculations is based on State Street's present interpretations, expectations and understanding of the July 2013 NPR as of October 22, 2013. The proposed supplementary leverage ratio is calculated as the simple arithmetic mean of the ratios of tier 1 capital to total leverage exposure, each calculated in conformity with the July 2013 final rule, as of the last day of each month in the reporting quarter. Total leverage exposure is defined as the sum of on-balance sheet assets, net of amounts deducted from tier 1 capital, as defined, plus certain off-balance sheet exposures, including, for example, the potential future exposure of derivative contracts and unfunded lending and other commitments. This calculation differs from the tier 1 leverage ratio calculated in conformity with currently applicable regulatory requirements, referred to as Basel I, which ratio is calculated as the ratio of tier 1 capital as of the end of the reporting quarter to adjusted quarterly average on-balance sheet assets, as defined. The Basel I ratio does not include off- balance sheet exposures. Footnotes to Page 15
17 APPENDIX A. Investment Portfolio B. Non-GAAP Measures and Capital Ratios Pages 18-24 25
18 A. Investment Portfolio
19 Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. OECD=Organization for Economic Cooperation and Development FFELP=Federal Family Education Loan Program Government / Agency Structured Securities Unsecured Credit Treasuries Agency debentures Agency mortgages Small Business Administration loans OECD governments FFELP student loans Asset-backed securities (ABS) Mortgage-backed securities (MBS) Commercial mortgage-backed securities (CMBS) Covered bonds Corporate bonds Municipals $50 billion $49 billion $18 billion Investment Portfolio Investment Portfolio as of September 30, 2013
20 • Assets selected using rigorous credit process • Diversified by asset class and geography • 88.2% rated AAA / AA • Constructed to perform well through periods of economic weakness • Unrealized after-tax available for sale (AFS) gain, and held to maturity (HTM) mark-to-market (MTM) loss net to = $(79)M(1) Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. (1) At 9/30/13: after-tax unrealized MTM gain/(loss) includes after-tax unrealized gain on securities available for sale of $131 million, after-tax unrealized loss on securities held to maturity of $(86) million and after-tax unrealized loss primarily related to securities previously transferred from available for sale to held to maturity of $(124) million. (2) Beginning in August 2011, U.S. Treasuries and Agencies/Agency MBS became split rated – AAA by Moody’s and AA by S&P. For dates after August 2011, these securities are classified separately in the table above and not included in either the AAA or AA classifications. (3) Certain securities previously categorized as Not Rated, are now included in the AAA category, based on Moody’s/S&P ratings. $ in billions U.S. Treasuries & Agencies(2) AAA AA A BBB <BBB Not Rated(3) Total Unrealized After-tax MTM Gain / (Loss) ($M) 9/30/13 $30.4 $50.4 $22.2 $7.8 $3.4 $2.4 $0.1 $116.7 $(79) 26.0% 43.2% 19.0% 6.7% 2.9% 2.1% 0.1% 100.0% 12/31/12 $37.6 $46.0 $22.7 $8.5 $3.2 $2.1 $0.1 $120.2 $698 31.3% 38.2% 18.9% 7.1% 2.7% 1.7% 0.1% 100.0% 12/31/11 $32.6 $49.9 $15.5 $7.0 $2.5 $2.2 $0.1 $109.8 $(374) 29.7% 45.4% 14.1% 6.4% 2.3% 2.0% 0.1% 100.0% 12/31/10 $74.8 $10.6 $5.5 $2.3 $1.9 $0.2 $95.3 $(504) 78.5% 11.1% 5.8% 2.4% 2.0% 0.2% 100.0% 12/31/09 $67.9 $11.3 $6.8 $3.5 $7.5 $0.3 $97.3 $(2,286) 69.7% 11.6% 7.0% 3.6% 7.8% 0.3% 100.0% Investment Portfolio Investment Portfolio Detail as of September 30, 2013
21 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Fixed Rate / Floating Rate Government/Agency securities 62% 18% 20% — — — — $9.3 8.0% $(210) 92% / 8% Asset-backed securities — 68% 24% 4% 1% 3% — 54.6 46.8 30 3% / 97% Mortgage-backed securities 92% 3% 1% 1% 1% 2% — 26.8 22.9 13 85% / 15% Commercial mortgage- backed securities 2% 81% 8% 7% 1% 1% — 6.1 5.2 (1) 63% / 37% Corporate bonds — — 12% 54% 34% — — 6.5 5.6 86 95% / 5% Covered bonds — 100% — — — — — 2.2 1.9 5 31% / 69% Municipal bonds — 20% 64% 14% 1% — 1% 6.9 5.9 13 99% / 1% Clipper tax-exempt bonds/other — 48% 37% 13% — — 2% 4.3 3.7 (15) 23% / 77% TOTAL PORTFOLIO 26% 43% 19% 7% 3% 2% 0% $116.7(2) 100.0% $(79)(2) 44% / 56% Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. (1) U.S. Treasuries and Agencies/Agency MBS are split rated - AAA by Moody’s and AA+ by S&P. These securities are classified separately in the table above and not included in either the AAA or AA classifications. (2) At 9/30/13: after-tax unrealized MTM gain/(loss) includes after-tax unrealized gain on securities available for sale of $131 million, after-tax unrealized loss on securities held to maturity of $(86) million and after-tax unrealized loss primarily related to securities previously transferred from available for sale to held to maturity of $(124) million. Investment Portfolio Holdings by Asset Class as of September 30, 2013
22 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Student Loans — 31% 66% 2% — 1% — $16.6 30.4% $(121) Credit Cards — 99% — — 1% — — 10.8 19.8 (6) Auto/Equipment — 98% — 1% 1% — — 5.0 9.1 6 Non-US RMBS — 82% 4% 6% 2% 6% — 14.9 27.3 129 CLOs — 77% 23% — — — — 5.5 10.1 74 Sub-Prime — 3% 3% 27% 13% 54% — 1.4 2.6 (59) HELOC — — — 63% — 37% — 0.0 0.0 (1) Other — — 3% 73% 23% 1% — 0.4 0.7 8 TOTAL ABS — 68% 24% 4% 1% 3% — $54.6 100.0% $30 Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. (1) U.S. Treasuries and Agencies/Agency MBS are split rated - AAA by Moody’s and AA+ by S&P. These securities are classified separately in the table above and not included in either the AAA or AA classifications. RMBS = Residential Mortgage Backed Securities; CLO = Collateralized Loan Obligation; HELOC = Home Equity Line of Credit Investment Portfolio Asset-backed Securities Holdings as of September 30, 2013
23 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Agency MBS 100% — — — — — — $24.6 74.8% $11 Non-Agency MBS — 36% 8% 14% 13% 29% — 2.2 6.7 2 CMBS 2% 81% 8% 7% 1% 1% — 6.1 18.5 (1) TOTAL MBS 75% 18% 2% 2% 1% 2% — $32.9 100.0% $12 Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. (1) U.S. Treasuries and Agencies/Agency MBS are split rated - AAA by Moody’s and AA+ by S&P. These securities are classified separately in the table above and not included in either the AAA or AA classifications. Investment Portfolio Mortgage-backed Securities Holdings as of September 30, 2013
24 Non-U.S. Investments: Ratings Non-U.S. Investments: Asset Class (1) Sovereign debt is reflected in the government agency column. (2) Country of collateral used except for corporates, where country of issuer is used. Excludes equity securities of approximately $0.2 billion. (1) Investment Portfolio Non-U.S. Investment Summary as of September 30, 2013 September 30, 2013 Book Book Value ($B) Value Average Gov't/ ABS ABS Corporate Covered ($B) Rating Agency (1) FRMBS All Other Bonds Bonds Other United Kingdom 10.5$ AAA -$ 7.5$ 2.4$ 0.4$ 0.2$ -$ Australia 5.9 AA - 3.2 1.0 0.2 0.6 0.9 Netherlands 4.2 AAA - 3.7 0.2 0.1 0.2 - Germany 2.2 AAA - - 2.2 - - - Canada 2.1 AAA 1.6 - - 0.3 0.2 - France 1.6 AAA - - 0.9 0.2 0.5 - Japan 1.0 AA 1.0 - - - - - Korea 0.9 AA 0.9 - - - - - Norway 0.5 AAA - - 0.2 - 0.3 - Italy 0.3 BBB - 0.1 - 0.2 - - Spain 0.3 BBB - 0.2 0.1 - - - Finland 0.3 AAA - - - - 0.3 - Irela d 0.1 B - 0.1 - - - - Portugal 0.1 BB - 0.1 - - - - Other 0.2 A - - - 0.2 - - Non-U.S. Investments (2) 30.2$ 3.5$ 14.9$ 7.0$ 1.6$ 2.3$ 0.9$ U.S. Investments 86.5 Total Portfolio 116.7$ AAA 78.1% AA 9.6% A 6.7% BBB 2.8% BB 2.1% <BB 0.7% Gov't/Agency, 11.6% ABS: FRMBS, 49.3% ABS: All Other, 23.2% Corp, 5.3% Covered, 7.6% Other, 3.0%
25 B. Non-GAAP Measures and Capital Ratios Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. To access the addendum go to www.statestreet.com/stockholder and click on “Filings & Reports – Financial Trends”.