STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2009

Summary

State Street Corporation (STT) reported its first quarter 2009 financial results on May 4, 2009, reflecting the ongoing impact of the global financial crisis. Total revenue declined by 22% year-over-year to $2.00 billion, primarily driven by a 27% decrease in fee revenue. This decline was largely due to reduced servicing and management fees, stemming from significant drops in equity market valuations, with the S&P 500 down 40% and MSCI EAFE down 47% in average daily terms compared to the prior year. Expenses were reduced by 26% to $1.30 billion, largely due to a 31% decrease in salaries and benefits, reflecting lower incentive compensation and workforce reductions. This expense control allowed for positive operating leverage, with net income available to common shareholders falling 16% to $445 million ($1.02 per diluted share), compared to $530 million ($1.35 per diluted share) in the first quarter of 2008. The company experienced a significant decrease in assets under custody to $11.34 trillion and assets under management to $1.40 trillion, reflecting the market downturn. A provision for loan losses of $84 million was recorded, primarily related to commercial real estate loans purchased in 2008. Despite the challenging environment, State Street maintained strong regulatory capital ratios, exceeding minimum requirements, and reported sufficient liquidity to meet its obligations.

Key Highlights

• 1Total revenue decreased by 22% to $2.00 billion compared to the prior year's first quarter, impacted by market instability.
• 2Fee revenue declined by 27% to $1.42 billion, with servicing fees down 20% and management fees down 35%, reflecting lower asset valuations.
• 3Total expenses decreased by 26% to $1.30 billion, primarily due to a 31% reduction in salaries and employee benefits, aided by workforce adjustments.
• 4Net income available to common shareholders was $445 million ($1.02 per diluted share), a decrease of 16% from the prior year, but expense management led to positive operating leverage.
• 5Assets under custody fell by 24% year-over-year to $11.34 trillion, and assets under management decreased by 29% to $1.40 trillion.
• 6A provision for loan losses of $84 million was established, mainly due to deteriorating commercial real estate market conditions.
• 7State Street maintained robust regulatory capital ratios, all of which exceeded minimum and 'well-capitalized' requirements.

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