What were the main drivers of revenue growth in the third quarter of 2006?

Revenue growth was primarily driven by a 10% increase in fee revenue, notably from servicing and management fees, and a 13% increase in net interest revenue. This was supported by growth in assets under custody and management, and a more favorable interest-earning asset and deposit mix.

How did operating expenses perform in comparison to revenue growth?

Operating expenses increased by 8% in the third quarter of 2006 compared to the prior year, which was less than the 9% revenue growth. This resulted in positive operating leverage, indicating that revenue grew faster than expenses.

What is the impact of the tax-related charges mentioned in the filing?

For the first nine months of 2006, diluted EPS from continuing operations included $0.25 per share in tax-related charges related to the Tax Increase Prevention and Reconciliation Act (TIPRA) and a provision for potential IRS issues. Excluding these charges, EPS growth was significantly higher, demonstrating strong underlying operational performance.

How is State Street managing its capital and liquidity?

State Street maintained strong regulatory capital ratios, well above required minimums, indicating a solid financial foundation. The company also reported substantial liquid assets and continuous access to capital markets, demonstrating more than sufficient liquidity to meet its commitments and business needs.

STT/STT-PG 10-Q Quarterly Report Q3 FY2006

Summary

State Street Corporation (STT) reported strong performance for the third quarter and the first nine months of 2006, exceeding its internal financial goals. Total revenue increased by 9% for the quarter and 16% year-to-date, driven by robust growth in fee revenue (up 10% quarterly, 15% year-to-date) and net interest revenue (up 13% quarterly, 19% year-to-date). This growth was supported by strong performance in Investment Servicing and Investment Management segments, with notable increases in servicing, management, and trading services fees. The company demonstrated effective expense management, with operating expenses growing at a slower pace than revenue, leading to positive operating leverage. Diluted earnings per share (EPS) from continuing operations saw an 11% increase for the quarter and a 13% increase year-to-date. Excluding certain tax-related charges in the first nine months of 2006, EPS growth was even more pronounced. State Street's balance sheet remained strong, with total assets increasing to $112.31 billion and shareholders' equity rising to $7.02 billion. The company also maintained robust capital adequacy ratios, well above regulatory requirements.

Key Highlights

1Total revenue increased by 9% for Q3 2006 and 16% for the first nine months of 2006, compared to the prior year periods.
2Fee revenue grew by 10% in Q3 and 15% year-to-date, primarily from increases in servicing and management fees, reflecting strong client asset growth.
3Net interest revenue increased by 13% in Q3 and 19% year-to-date, benefiting from higher interest-earning assets and a more favorable deposit mix.
4Diluted EPS from continuing operations grew 11% to $0.83 in Q3 2006, and 13% to $2.35 for the first nine months.
5Total assets grew to $112.31 billion as of September 30, 2006, up from $97.97 billion at year-end 2005.
6Shareholders' equity increased to $7.02 billion as of September 30, 2006.
7Capital ratios remained strong, exceeding regulatory requirements, with Tier 1 risk-based capital at 12.2% and total risk-based capital at 14.3% for State Street.

STATE STREET CORP Quarterly Report for Q3 Ended Sep 30, 2006

Summary

Key Highlights

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