What drove the significant increase in total revenue for the third quarter of 2005?

Total revenue increased by 18% to $1.39 billion in the third quarter of 2005, primarily driven by strong growth in fee revenue across its core business lines. Servicing fees rose 9%, management fees increased by 21%, securities lending revenue surged 54%, and trading services revenue saw a 59% jump compared to the prior year period. This growth was attributed to new business from existing and new clients, higher equity market valuations, and increased trading volumes.

What is the impact of the Bel Air Investment Advisors LLC divestiture on State Street's financial results?

State Street recognized a net loss of $107 million from discontinued operations in the third quarter of 2005, primarily due to a planned divestiture of its ownership interest in Bel Air Investment Advisors LLC. This resulted in a pre-tax charge of $165 million, which included a goodwill write-off and asset write-downs, partially offset by a $58 million tax benefit. This charge impacted the overall net income, although the core business operations showed strong performance.

How is State Street managing its investment securities portfolio in the current interest rate environment?

State Street has adjusted its investment securities portfolio to better position itself in a rising short-term interest rate environment. The portfolio has a higher percentage of collateralized mortgage obligations and floating-rate, asset-backed securities, and a lower percentage of U.S. Treasuries and direct obligations of federal agencies compared to the prior year. The company continues to invest conservatively in highly-rated securities (96% AA and AAA rated), aiming to balance risk and return.

What are State Street's stated financial goals for 2005 and beyond?

State Street has set financial goals for 2005 and beyond, including annual growth in operating earnings per share from continuing operations of 10% to 15%, annual operating revenue growth of 8% to 12%, and an annual operating return on shareholders' equity from continuing operations of 14% to 17%. For the full year 2005, the company expects to be at the lower end of the revenue growth range and in the middle of the ranges for operating earnings per share and return on equity growth.

STT/STT-PG 10-Q Quarterly Report Q3 FY2005

Summary

State Street Corporation reported strong performance for the third quarter and the first nine months of 2005, driven by significant growth in fee revenue across its Investment Servicing and Investment Management segments. Total revenue increased by 18% year-over-year for the quarter and 10% for the nine-month period, outpacing expense growth. Net income from continuing operations saw a substantial rise, reflecting robust fee income from servicing, management, securities lending, and trading services, bolstered by favorable market conditions and new business wins. However, the company also reported a net loss from discontinued operations due to the planned divestiture of its investment in Bel Air Investment Advisors LLC, which resulted in a significant charge. Despite this, the core business demonstrated resilience and growth. The company's financial condition remains solid, with capital ratios well above regulatory requirements. State Street continues to focus on its strategic goals of growing operating earnings, revenue, and return on equity. Management is navigating a dynamic environment, including interest rate changes and regulatory developments, with a proactive risk management approach. Investors should note the positive trends in fee revenue generation and the strategic focus on core institutional investor services, while being aware of the impact of the Bel Air divestiture on overall net income.

Key Highlights

1Total revenue increased by 18% to $1.39 billion in Q3 2005 compared to $1.17 billion in Q3 2004.
2Net income from continuing operations rose 41% to $250 million in Q3 2005 from $177 million in Q3 2004.
3Fee revenue grew by 18% to $1.14 billion in Q3 2005, driven by strong performance in servicing, management, securities lending, and trading services.
4Return on shareholders' equity from continuing operations improved to 15.9% in Q3 2005 from 11.7% in Q3 2004.
5The company incurred a net loss of $107 million from discontinued operations related to the divestiture of Bel Air Investment Advisors LLC.
6Investment Servicing revenue increased by 15% year-over-year for the quarter, and Investment Management revenue grew by 29%.
7State Street's capital ratios remained strong, exceeding regulatory minimums.

STATE STREET CORP Quarterly Report for Q3 Ended Sep 30, 2005

Summary

Key Highlights

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