01—Abstract
Summary
Summary of the 10-K filed February 22, 2002. Cited figures are marked; the original filing is the authoritative source.
State Street Corporation's 2001 10-K filing highlights a strong performance despite a challenging economic environment, marked by slow global growth, weak stock market performance, and the impact of the September 11th terrorist attacks.
The company reported its 24th consecutive year of double-digit growth in operating earnings per share, demonstrating resilience and strategic execution. Revenue growth was primarily driven by increased servicing fees, bolstered by new client wins and strong securities lending revenue, along with a favorable interest rate environment impacting net interest revenue. Key to State Street's success in 2001 was its continued focus on serving sophisticated global investors with integrated products and services.
The company's strategic focus on client orientation, global reach, and technological advantage positions it well to capitalize on global trends such as financial services convergence, the growing need for retirement security, and the outsourcing of non-core activities by investment managers. Despite market headwinds, State Street managed expense growth effectively, aligning it with revenue growth, and maintained a strong capital position.
02—Key points
Key Highlights
- Achieved 24th consecutive year of double-digit operating earnings per share growth.
- Total operating revenue increased by 8% to $3.9 billion, with a record fourth-quarter revenue of $1 billion.
- Operating expenses grew 8%, matching revenue growth, demonstrating effective cost management.
- Assets under custody reached $6.2 trillion, and assets under management grew to $775 billion.
- Servicing fees increased 14% driven by new client wins and securities lending revenue.
- State Street's capital ratios (Tier 1 at 13.6%, Total Capital at 14.5%) remained strong and well above regulatory minimums.
- The company maintained a leading position in serving mutual funds, collective funds, and pension plans globally.
03—Questions
Frequently Asked Questions
What were the primary drivers of State Street's revenue growth in 2001?
State Street's revenue growth in 2001 was primarily driven by an increase in servicing fees, which rose 14%, fueled by several large client wins installed in late 2000 and throughout 2001, as well as strong revenue from securities lending. Net interest revenue also contributed significantly, benefiting from growth in the company's balance sheet and a favorable interest rate environment with multiple reductions in the U.S. federal funds target rate.
How did State Street manage its expenses in 2001?
State Street successfully tempered expense growth in 2001, with operating expenses increasing by 8%, aligning with revenue growth. This was achieved through careful pacing of spending on strategic initiatives and technology projects, and a significant reduction in the rate of expense growth compared to the previous year. Key expense categories that increased were salaries and employee benefits, reflecting additional staff for new business, and information systems and communications, due to ongoing technology investments.
What is State Street's financial goal for revenue growth?
State Street's primary financial goal is sustainable real growth in earnings per share. A supporting goal is to achieve 12.5% real compound annual growth in total revenue from 2000 through 2010. The company also aims for an annual return on stockholders' equity of 18%, which it exceeded in 2001 with an operating ROE of 18.2%.
What are the main business segments of State Street?
State Street reports its business in two main segments: Investment Servicing and Investment Management. Investment Servicing includes services such as custody, accounting, daily pricing, foreign exchange, and securities lending for institutional investors. Investment Management encompasses asset management, investment research, and trading services.
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