What were the primary drivers of revenue growth in the second quarter of 2007?

Revenue growth was primarily driven by a 12% increase in total fee revenue, fueled by strong performance in servicing fees (up 12%), management fees (up 22%), and securities finance revenue (up 27%). Net interest revenue also contributed significantly, with a 47% increase due to higher customer deposits and favorable interest rate environments.

What significant corporate actions did State Street undertake in the second quarter of 2007?

State Street completed the acquisition of Investors Financial Services Corp. for approximately $4.2 billion and entered into a $1 billion accelerated share repurchase agreement. The company also issued $1.5 billion in debt.

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

SSgA generated $32 billion in net new business assets under management in the second quarter and $108 billion year-to-date. Approximately 75% of this new business was in higher-fee active management products, contributing to SSgA's revenue growth and a pre-tax operating margin of 38%.

What is State Street's outlook for the remainder of 2007 following the acquisition?

Following the acquisition of Investors Financial, State Street revised its full-year 2007 outlook upwards, projecting operating-basis revenue growth of 20% to 22%, and operating-basis earnings per share growth from continuing operations of 10% to 15%.

STT/STT-PG 10-Q Quarterly Report Q2 FY2007

Summary

State Street Corporation (STT) reported strong financial performance for the second quarter and first six months of 2007. The company demonstrated robust revenue growth, outpacing expense increases, resulting in positive operating leverage. Key drivers of this growth included significant increases in servicing fees, management fees, and securities finance revenue, bolstered by strong net new business and favorable equity market performance. Net interest revenue also saw substantial growth due to a favorable funding mix and higher interest rates. State Street completed the acquisition of Investors Financial Services Corp. in July 2007, which is expected to be accreted to earnings and further enhance growth. The company also announced a significant $1 billion accelerated share repurchase program, signaling confidence in its financial position and commitment to shareholder value.

Key Highlights

1Total revenue increased by 16% year-over-year for the second quarter and 14% for the first six months of 2007, driven by strong fee revenue growth.
2Net income surged by 61% to $366 million in Q2 2007 and by 34% to $680 million for the first six months of 2007, with diluted EPS rising to $1.07 and $2.00, respectively.
3Servicing fees grew 12% in Q2 and 11% year-to-date, while management fees increased by 22% in Q2 and 21% year-to-date, reflecting strong business development and market conditions.
4Net interest revenue increased by 47% year-over-year in Q2 and 34% year-to-date, with net interest margin expanding significantly due to a favorable funding mix and higher interest rates.
5State Street completed the acquisition of Investors Financial Services Corp. on July 2, 2007, for approximately $4.2 billion, which will be included in financial results from the third quarter onwards.
6The company initiated a $1 billion accelerated share repurchase program in July 2007, demonstrating a commitment to returning capital to shareholders.
7Assets under custody reached a record $13.04 trillion at June 30, 2007, up 20% year-over-year, and assets under management increased to $1.93 trillion, up 26% year-over-year.

STATE STREET CORP Quarterly Report for Q2 Ended Jun 30, 2007

Summary

Key Highlights

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