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STATE STREET CORP Annual Report, Year Ended Dec 31, 1994

Filing Date
Filed March 29, 1995
Period End
December 31, 1994
Securities
STTSTT-PG
In the record · 2016–202610-K1210-Q328-K196

STT filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 196 current reports (8-K) between 2016 and 2026.

  1. Restructuring8-K · Mar ’16Mar ’16
  2. FY2017 annual report10-K · Feb ’18Feb ’18
  3. Leadership change8-K · Mar ’21Mar ’21
  4. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed March 29, 1995. Cited figures are marked; the original filing is the authoritative source.

State Street Boston Corporation's 1994 10-K shows a bank holding company whose earnings are driven mainly by fee revenue from financial asset services (custody, accounting, recordkeeping, and trust services) rather than traditional lending.

In 1994 net income rose 15% to $207.4 milliona, and fully diluted EPS reached $2.68, up from $2.33. Total revenue grew 17% to $1.36 billion, with fee revenue (72% of total revenue) up 18% to $981.0 million. Return on equity held at 17.5% and the dividend payout ratio was 22%.

Total assets were $21.7 billionb, of which 74% were investment securities and money market assets and only 15% were loans. The company reports assets under custody of $1.6 trillion, bonds under trusteeship of $210 billion, and assets under management of $160 billion. The main risks for investors are margin compression and cost growth.

Net interest margin declined to 2.04% from 2.08% as the rate spread narrowed to 1.41%, and the company is liability-sensitive, so rising rates hurt net interest revenue. Operating expenses rose 18% to $1.0 billionc, and management said strategic investment spending was about 10% of revenue in 1993 and 1994. It plans to reduce that spending to roughly 8% by year-end 1995.

Credit quality improved: net charge-offs fell to 0.23% of average loans from 0.63%, and non-performing assets dropped to $27.4 milliond. Management also flagged a slowdown in U.S. mutual fund growth and cross-border investing as possible headwinds for 1995 revenue growth. Looking ahead, management expects continued double-digit EPS growth for the next few years and a 12.5% real revenue growth goal for the 1990s.

Two events shape 2026-era context from the filing: the stock moved to the NYSE in February 1995, and the acquisition of Investors Fiduciary Trust Company closed in January 1995 with 5,972,222 shares issued. That acquisition is accounted for as a pooling of interests, with no expected earnings dilution in 1995.

02—Key points

Key Highlights

  1. Net income rose 15% to $207.4 million in 1994, and fully diluted EPS rose 15% to $2.68 from $2.33.
  2. Fee revenue grew 18% to $981.0 million and made up 72% of total revenue of $1.36 billion, reflecting a diversified, fee-based model.
  3. Global custody scale: $1.6 trillion in assets under custody, the leading U.S. mutual fund custodian (36% of registered funds), and $210 billion in bonds under trusteeship.
  4. Net interest margin fell to 2.04% from 2.08% and the rate spread narrowed to 1.41%, leaving the company liability-sensitive to rising rates.
  5. Credit quality improved: net charge-offs fell to $7.7 million (0.23% of average loans) from $16.3 million, and non-performing assets dropped to $27.4 million.
  6. Operating expenses rose 18% to $1.0 billion, with investment spending at about 10% of revenue, which management plans to reduce to about 8% by year-end 1995.
  7. Acquired Investors Fiduciary Trust Company on January 31, 1995, adding about $115 billion in mutual fund assets under custody, and listed on the NYSE in February 1995.

03—Questions

Frequently Asked Questions

  1. What is driving State Street's earnings growth?

    Most growth comes from fee revenue, which rose 18% to $981.0 million. Fiduciary compensation (custody, accounting, and trust services) was $717.4 million, up 14%. Foreign exchange trading revenue grew 38% to $113.8 million, and processing service fees grew 45% to $66.8 million. Net interest revenue also rose 16%, to $391.0 million on a taxable-equivalent basis.

  2. Is the company's net interest margin under pressure?

    Yes. Net interest margin fell to 2.04% from 2.08% as the spread between rates earned and rates paid narrowed to 1.41%. Management said the company is liability-sensitive in the short term, so rising rates pressure net interest revenue. Growth in noninterest-bearing deposits and asset growth partly offset this.

  3. How strong is the company's credit exposure?

    Credit exposure is low. Loans were only 15% of total assets at year-end 1994, compared with more than 55% at comparable banks. Net charge-offs fell to 0.23% of average loans, non-performing assets fell to $27.4 million, and the allowance for loan losses was $58.2 million, or 1.80% of loans. Management expects 1995 charge-offs to be similar to 1994 levels.

  4. What are the main risks to growth heading into 1995?

    Management cited a slowdown in U.S. mutual fund growth, a slowdown in cross-border investing, and rising interest rates. New U.S. mutual fund sales fell 48% in 1994. Operating expenses also rose 18%, though management plans to reduce investment spending to about 8% of revenue by the end of 1995.

  5. What is the significance of the Investors Fiduciary Trust Company acquisition?

    The acquisition closed on January 31, 1995, and added roughly $115 billion in mutual fund assets under custody. State Street issued 5,972,222 shares to complete it. It is accounted for as a pooling of interests, so prior periods will be restated, and management expects no earnings dilution in 1995 apart from a one-time cost of $0.03 per share in the first quarter.

04—Continue

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