What were the primary drivers of State Street's revenue growth in the first quarter of 2007?

State Street's revenue growth was primarily driven by a 9% increase in total fee revenue, fueled by stronger servicing fees (up 9%) and management fees (up 19%), attributed to net new business and favorable equity market performance. Additionally, net interest revenue surged by 22%, benefiting from higher customer deposits and a favorable interest rate environment.

How did operating expenses perform relative to revenue growth?

Operating expenses increased by 10.7%, which was slightly less than the revenue growth of 11.4%. This resulted in positive operating leverage, indicating the company's ability to manage expenses effectively while growing its top line.

What is the status of the planned acquisition of Investors Financial Services Corp.?

State Street announced a definitive agreement to acquire Investors Financial Services Corp. in February 2007. The transaction is subject to regulatory and shareholder approvals and was expected to close in the middle of 2007.

How did State Street Global Advisors (SSgA) perform during the quarter?

SSgA demonstrated strong performance by generating $76 billion in net new business for assets under management during the first quarter of 2007. Approximately 70% of this new business was in active management products, indicating a successful push into higher-margin strategies.

STT/STT-PG 10-Q Quarterly Report Q1 FY2007

Summary

State Street Corporation (STT) reported solid financial results for the first quarter ended March 31, 2007, demonstrating year-over-year growth across key metrics. Total revenue increased by 11% to $1.7 billion, driven by a robust 9% rise in total fee revenue and a significant 22% increase in net interest revenue. This top-line growth, coupled with well-managed operating expenses that grew slightly less than revenue (10.7% vs. 11.4%), resulted in income from continuing operations of $314 million, an 11% increase over the prior year. Diluted earnings per share (EPS) from continuing operations also saw an 11% improvement, rising to $0.93. The company highlighted strong performance in its core businesses, with notable growth in servicing fees (up 9%) and management fees (up 19%), supported by increased net new business and favorable market conditions. State Street Global Advisors (SSgA) experienced substantial net new business in assets under management. The company also achieved record levels in assets under custody and assets under management by the end of the quarter. Management reaffirmed its long-term financial goals and provided revised 2007 outlook, factoring in the planned acquisition of Investors Financial Services Corp., which is expected to close mid-year.

Key Highlights

1Total revenue grew 11% year-over-year to $1.7 billion, driven by strong fee and net interest revenue.
2Net income from continuing operations increased 11% to $314 million, with diluted EPS from continuing operations also up 11% to $0.93.
3Total fee revenue increased 9%, with notable growth in servicing fees (+9%) and management fees (+19%), reflecting new business and market appreciation.
4Net interest revenue saw a significant 22% increase, driven by higher customer deposits and favorable interest rate environments.
5State Street achieved positive operating leverage, with revenue growth outpacing expense growth.
6Assets under custody reached a record $12.33 trillion, and assets under management reached a record $1.85 trillion.
7The company announced a definitive agreement to acquire Investors Financial Services Corp., expected to close in mid-2007.

STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2007

Summary

Key Highlights

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