-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JNQo2GzDg20C9AvFZquK9dUR/xua7wQBqclnXkjdzCCc0DSuSfZw2YPil0B08IBr rNi+wAOz5oS/v6U0D6CB0g== 0001157523-05-003437.txt : 20050419 0001157523-05-003437.hdr.sgml : 20050419 20050419093050 ACCESSION NUMBER: 0001157523-05-003437 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050419 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050419 DATE AS OF CHANGE: 20050419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STATE STREET CORP CENTRAL INDEX KEY: 0000093751 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 042456637 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07511 FILM NUMBER: 05758186 BUSINESS ADDRESS: STREET 1: 225 FRANKLIN ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6177863000 MAIL ADDRESS: STREET 1: 225 FRANKLIN STREET CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: STATE STREET BOSTON FINANCIAL CORP DATE OF NAME CHANGE: 19780525 8-K 1 a4867439.txt STATE STREET CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: April 19, 2005 State Street Corporation ----------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 0-5108 04-2456637 - ----------------------- ----------------------- ------------------------- (State of Incorporation) (Commission File Number) (IRS Employer Identification Number) One Lincoln Street, Boston, Massachusetts 02111 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (617) 786-3000 -------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition. On April 19, 2005, State Street Corporation issued a news release announcing results of operations and related financial information for the first quarter of 2005. The news release is furnished herewith as Exhibit 99.1, and is incorporated herein by reference. Item 9.01. Financial Statements and Exhibits. (c) State Street Corporation's news release, dated April 19, 2005 is furnished herewith as Exhibit 99.1. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. STATE STREET CORPORATION By: /s/ Edward J. Resch -------------------------------------------- Name: Edward J. Resch Title: Executive Vice President and Chief Financial Officer Date: April 19, 2005 EXHIBIT INDEX Exhibit Description - ------- ----------- 99.1 Form of news release dated April 19, 2005 EX-99.1 2 a4867439ex991.txt EXHIBIT 99.1 Exhibit 99.1 State Street Corporation Announces Strong Increases in Servicing and Management Fees in First Quarter of 2005; Expense Initiatives Implemented in Second Half of 2004 Showing Results BOSTON--(BUSINESS WIRE)--April 19, 2005--State Street Corporation announced today first-quarter earnings per share of $0.67, up 6% from $0.63 in last year's first quarter which included $0.04 per share for merger and integration costs associated with the acquisition of a substantial portion of Deutsche Bank's Global Securities Services (GSS) business. Revenue of $1.3 billion in the first quarter of 2005 is up 7%, or $89 million, compared to $1.2 billion in the year-ago quarter. Total expenses in the first quarter of 2005 of $966 million are up 6%, or $58 million, compared to $908 million in the year-ago quarter. Net income of $226 million was up $9 million, or 4% from $217 million a year ago. For the first quarter of 2005, return on stockholders' equity was 15.0% compared to 14.8% in the first quarter of 2004. Ronald E. Logue, State Street's chairman and chief executive officer, said, "I am pleased with our overall results. We're making progress in some key areas, most notably expense controls, which has resulted in positive operating leverage in the first quarter on a consecutive quarter basis. We continue to see significant increases in fee revenue, both on a year-over-year and on a consecutive quarter basis. We are still dealing with some issues that will temper our results for the remainder of the year, particularly rising interest rates and the ongoing repositioning of our real estate. "Looking to the rest of the year, we are focused on achieving our operating goals for revenue and earnings per share growth, as well as return on equity, and continue to expect that they will fall toward the lower end of the previously announced ranges." FIRST QUARTER RESULTS VS. YEAR-AGO QUARTER Servicing fees were up 8%, to $599 million from $555 million in last year's first quarter. The increase was attributable to new business from existing and new clients in 2005 and higher equity market valuations. Total assets under custody were $9.5 trillion, up 1%, compared with $9.4 trillion in the year-ago quarter. Daily average values for the S&P 500 Index were up 5% from the first quarter of 2004; daily average values for the MSCI(R) EAFE Index(SM) were up 14%. Investment management fees, generated by State Street Global Advisors, were $177 million, up 20% from $147 million a year ago. Management fees reflected continued new business and an increase in average month-end equity valuations. Total assets under management were $1.4 trillion, up 11%, compared to $1.2 trillion the previous year. Securities lending revenue was $70 million in the quarter, up 9% compared to $64 million in the year-ago quarter, reflecting an increase in the volume of securities lent. Trading services revenue, which includes foreign exchange trading revenue and brokerage and other fees, was $167 million for the quarter, flat with a year ago. The increase in brokerage fees and other revenue, driven by strong transition management business, was offset by lower foreign exchange trading revenue, attributable to lower volatilities. Net interest revenue on a fully taxable-equivalent basis was $223 million, an increase of $9 million from $214 million a year ago. Net interest revenue from leveraged leases in the first quarter of 2004 included a $19 million reduction in interest revenue due to a change in the applicable state tax rate. Excluding this reduction from last year's results, net interest income would have declined due to the rising rate environment driven by the seven rate increases over the past fifteen months. Expenses increased from $908 million to $966 million, up $58 million, or 6%. Salaries and benefits expenses were up 13% to $524 million, primarily due to the significant new business wins in the second half of 2004 and the impact of merit adjustments and benefits expense, net of the effect of the reduction in force in the fourth quarter. Expenses for information systems & communications declined $13 million, or 9%, to $126 million due to reductions related to the conversion of the Deutsche Bank's Global Securities Services business, partially offset by increases due to the new data center coming fully on line in the fourth quarter of 2004. The increase in expenses also included higher transaction processing services, up 13% to $108 million, due to higher volumes in the investment servicing business. Other expenses rose 13%, or $13 million to $116 million due to increases in professional services related to growth initiatives. The effective tax rate in the first quarter of 2005 was 34.0%, compared to 30.4% in the first quarter of 2004. The lower effective tax rate in the prior year's first quarter was due to an $18 million benefit related to a cumulative state tax rate adjustment for leveraged leases. State Street purchased approximately 2.9 million shares of its common stock during the first quarter at an average price of $45.35 per share. The remaining authorization to purchase shares is 15 million shares. FIRST-QUARTER RESULTS VS. FOURTH QUARTER First-quarter net income per share of $0.67 compares to net income per share of $0.55 in the fourth quarter, an increase of 22%, driven by positive operating leverage. Included in the fourth quarter results is a $12 million charge, or $0.02 per share, for merger and integration costs associated with the GSS business. Total revenue in the first quarter of $1.31 billion is up 3% versus $1.27 billion in the fourth quarter which included gains of $7 million in securities sales and $18 million from a reduction in the loan loss provision. Total expenses were $966 million, down 3% versus $992 in the fourth quarter. Return on stockholders equity of 15.0% in the first quarter compared with 11.9% in the fourth quarter. Servicing fees were up 5% to $599 million and management fees were up 6% to $177 million primarily due to new business. Securities lending revenue increased 21%, from $58 million to $70 million, due to increased volumes and improved spreads. Trading services revenue was up from $161 million to $167 million. Processing fees and other were up $11 million, or 15%, from $73 million to $84 million. Salaries and employee benefits totaled $524 million, an increase of $13 million, or 3%, from $511 million. In addition, the results of the fourth quarter of 2004 included a $21 million cost of a reduction in force. Other expenses were up $4 million from $112 million to $116 million. Occupancy expense decreased to $92 million from $101 million (which included a $16 million loss on a sub-tenant agreement). ADDITIONAL INFORMATION The Company continues to implement plans to reduce its real estate portfolio and expects to sublease on a long-term basis approximately 150,000 square feet in its headquarters building. During the second quarter, it anticipates recognizing a pretax charge of $23 to $25 million due to this transaction. All per share amounts represent fully diluted earnings per share. INVESTOR CONFERENCE CALL State Street will webcast an investor conference call today, Tuesday, April 19, 2005, at 9:30 a.m. EDT, available at www.statestreet.com/stockholder. The conference call will also be available via telephone, at +1 719/457-2617 (confirmation code 859081). 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. 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 specialist in providing institutional investors with investment servicing, investment management and investment research and trading. With $9.5 trillion in assets under custody and $1.4 trillion in assets under management, State Street operates in 25 countries and more than 100 markets worldwide and employs 19,850 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 and Canada, or +1 202/266-3340 outside those countries. This news announcement contains forward-looking statements 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 in currency markets, consolidations among clients and competitors, 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 2004 annual report on Form 10-K 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, April 19, 2005, and the Corporation will not undertake efforts to revise those forward-looking statements to reflect events after this date. STATE STREET CORPORATION Press Release Addendum Financial Highlights March 31, 2005 Quarter ended % Change --------------------------------- Q1 Q1 (Dollars in millions, except March 31, Dec. 31, March 31, vs. vs. per share information) 2005 2004 2004 Q4 Q1 - ---------------------------------------------------------------------- Total Revenue $1,308 $ 1,271 $1,219 3% 7% Total Expenses 966 992 908 (3) 6 Net Income 226 184 217 23 4 Earning Per Share: Basic .68 .55 .65 24 5 Diluted .67 .55 .63 22 6 Cash dividends Declared Per Share .17 .17 .15 Closing price per share of common stock 43.72 49.12 52.13 Return on Equity 15.0% 11.9% 14.8% Assets under custody (AUC) (in billions) 9,519 9,497 9,422 Assets under management (AUM) (in billions) 1,374 1,354 1,241 STATE STREET CORPORATION Press Release Addendum SELECTED FINANCIAL INFORMATION Three months ended March 31, 2005 and 2004 Quarter Ended ---------------------------- (Dollars in millions, except per share March 31, March 31, information) 2005 2004 (3) % Change - ------------------------------------------------------------ --------- Fee Revenue: Servicing fees $ 599 $ 555 8% Management fees 177 147 20 Securities lending 70 64 9 Trading services 167 167 - Processing fees and other 84 80 5 --------- --------- Total fee revenue 1,097 1,013 8 Net Interest Revenue: Interest revenue 603 384 57 Interest expense 391 181 116 --------- --------- Net interest revenue (1) 212 203 4 Provision for loan losses - - --------- --------- Net interest revenue after provision for loan losses 212 203 4 Gain (loss) on the sales of available-for- sale investment securities, net (1) 3 (133) -------- -------- Total revenue 1,308 1,219 7 Operating Expenses: Salaries and employee benefits 524 462 13 Information systems and communications 126 139 (9) Transaction processing services 108 96 13 Occupancy 92 90 2 Merger and integration costs (2) - 18 (100) Other 116 103 13 --------- --------- Total operating expenses 966 908 6 --------- --------- Income before income tax expense 342 311 Income tax expense 116 94 --------- --------- Net income $ 226 $ 217 4 ========= ========= Earnings Per Share: Basic $ .68 $ .65 5 Diluted .67 .63 6 OTHER SELECTED FINANCIAL INFORMATION Average Shares Outstanding (in thousands): Basic 331,563 334,635 Diluted 334,653 342,129 Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States. (1) Net interest revenue on a fully taxable-equivalent basis was $223 million and $214 million for the three months ended March 31, 2005 and 2004. (2) Reported earnings for March 31, 2004 included $18 million of pre-tax merger and integration costs ($.04 per share) relating to the integration of the Deutsche Bank Global Securities Service Business (GSS). (3) Certain prior period amounts have been reclassified to conform to current period presentation. STATE STREET CORPORATION Press Release Addendum SELECTED FINANCIAL INFORMATION Three months ended March 31, 2005 and December 31, 2004 Quarter Ended ---------------------------- March December (Dollars in millions, except per share 31, 31, information) 2005 2004 (3) % Change - ---------------------------------------------------------- --------- Fee Revenue: Servicing fees $ 599 $ 570 5% Management fees 177 167 6 Securities lending 70 58 21 Trading services 167 161 4 Processing fees and other 84 73 15 --------- --------- Total fee revenue 1,097 1,029 7 Net Interest Revenue: Interest revenue 603 532 13 Interest expense 391 315 24 --------- --------- Net interest revenue (1) 212 217 (2) Provision for loan losses - (18) (100) --------- --------- Net interest revenue after provision for loan losses 212 235 (10) Gain (loss) on the sales of available- for-sale investment securities, net (1) 7 (114) --------- --------- Total revenue 1,308 1,271 3 Operating Expenses: Salaries and employee benefits 524 511 3 Information systems and communications 126 131 (4) Transaction processing services 108 104 4 Occupancy 92 101 (9) Merger and integration costs (2) - 12 (100) Restructuring costs - 21 (100) Other 116 112 4 --------- --------- Total operating expenses 966 992 (3) --------- --------- Income before income tax expense 342 279 Income tax expense 116 95 --------- --------- Net income $ 226 $ 184 23 ========= ========= Earnings Per Share: Basic $ .68 $ .55 24 Diluted .67 .55 22 OTHER SELECTED FINANCIAL INFORMATION Average Shares Outstanding (in thousands): Basic 331,563 333,238 Diluted 334,653 336,964 Consolidated Statement of Income prepared in accordance with accounting principles generally accepted in the United States. (1) Net interest revenue on a fully taxable-equivalent basis was $223 million and $229 million for the three months ended March 31, 2005 and December 31, 2004. (2) Reported earnings for December 31, 2004 included $12 million of pre-tax merger and integration costs ($.02 per share) related to the integration of the Deutsche Bank Global Securities Service Business (GSS). (3) Certain prior period amounts have been reclassified to conform to current period presentation. STATE STREET CORPORATION Press Release Addendum CONSOLIDATED STATEMENT OF CONDITION - ---------------------------------------------------------------------- (Dollars in millions, except March 31, December 31, March 31, share information) 2005 2004 2004 - ---------------------------------------------------------------------- Assets Cash and due from banks $ 2,926 $ 2,035 $ 2,379 Interest-bearing deposits with banks 20,160 20,634 27,228 Securities purchased under resale agreements 12,699 12,878 13,968 Federal funds sold 1,000 5,450 1,000 Trading account assets 521 745 347 Investment securities 48,213 37,571 34,605 Loans (less allowance of $18, $18 and $36) 4,830 4,611 4,968 Premises and equipment 1,450 1,444 1,238 Accrued income receivable 1,174 1,204 1,014 Goodwill 1,472 1,497 1,329 Other intangible assets 485 494 542 Other assets 5,164 5,477 4,278 ------------- ------------ ------------ Total assets $100,094 $94,040 $92,896 ============= ============ ============ Liabilities Deposits: Noninterest-bearing $ 10,301 $13,671 $ 9,352 Interest-bearing -- U.S. 2,711 2,843 6,826 Interest-bearing -- Non-U.S. 45,306 38,615 37,334 ------------- ------------ ------------ Total deposits 58,318 55,129 53,512 Securities sold under repurchase agreements 20,698 21,881 21,811 Federal funds purchased 1,739 435 2,083 Other short-term borrowings 2,840 1,343 1,434 Accrued taxes and other expenses 2,410 2,603 2,386 Other liabilities 5,628 4,032 3,484 Long-term debt 2,436 2,458 2,244 ------------- ------------ ------------ Total liabilities 94,069 87,881 86,954 Shareholders' Equity Preferred stock, no par: authorized 3,500,000; issued none Common stock, $1 par: authorized 500,000,000 shares; issued 337,126,000, 337,126,000 and 337,130,000 337 337 337 Surplus 282 289 298 Retained earnings 5,759 5,590 5,174 Accumulated other comprehensive income (95) 92 207 Treasury stock (at cost 5,849,000, 3,481,000 and 1,705,000 shares) (258) (149) (74) - -------------------------------------------- ------------ ------------ Total shareholders' equity 6,025 6,159 5,942 ------------- ------------ ------------ Total liabilities and shareholders' equity $100,094 $94,040 $92,896 ============= ============ ============ CONTACT: State Street Corporation Edward J. Resch, 617-664-1110 Investors: Kelley MacDonald, 617-664-3477 Media: Hannah Grove, 617-664-3377 -----END PRIVACY-ENHANCED MESSAGE-----