10-QPeriod: Q3 FY2010

STATE STREET CORP Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 5, 2010For Securities:STTSTT-PG

Summary

State Street Corporation (STT) reported solid results for the third quarter of 2010, demonstrating a recovery from the challenging financial environment of the previous year. Total revenue increased by 3% year-over-year, driven by a significant 7% rise in fee revenue, largely attributed to acquisitions and improved equity market valuations. The company successfully integrated its acquisitions of Intesa Sanpaolo's securities services business and Mourant International Finance Administration, which contributed positively to revenue and assets under custody and administration. Despite a decline in trading and securities finance revenue due to market conditions, fee revenue from servicing and management fees showed resilience. The company also managed its expenses effectively, with total expenses decreasing by 12% year-over-year, partly due to the absence of a significant legal exposure provision recorded in the prior year. Overall, STT appears to be navigating the post-financial crisis landscape effectively, with a focus on strengthening its core servicing and management businesses.

Financial Highlights

35 data points
Beta

Revenue

$2.31B

Net Income

$546.00M

23.6% Net Margin

EPS (Diluted)

$1.08

Total Assets

$172.96B

Free Cash Flow

-$2.49B

Financial Statements
Beta
Revenue$2.31B
Interest Expense$180.00M
Net Income$546.00M
EPS (Basic)$1.09
EPS (Diluted)$1.08
Shares Outstanding (Basic)495.73M
Shares Outstanding (Diluted)498.16M

Key Highlights

  • 1Total revenue increased by 3% to $2.31 billion compared to Q3 2009, driven by a 7% increase in fee revenue.
  • 2Servicing fees increased by 19% year-over-year, significantly boosted by recent acquisitions and improved equity market valuations.
  • 3Total expenses decreased by 12% year-over-year, largely due to the absence of a $250 million provision for legal exposure recorded in Q3 2009.
  • 4Assets under custody and administration grew to $20.23 trillion, an 8% increase from year-end 2009.
  • 5Assets under management were $1.90 trillion, a slight decrease from year-end 2009 but a 10% increase year-over-year.
  • 6Earnings per diluted share were $1.08, a significant improvement from $0.66 in Q3 2009.

Frequently Asked Questions

The acquisitions of Intesa Sanpaolo's securities services business and Mourant International Finance Administration, completed in Q2 2010, contributed approximately $120 million in revenue and $90 million in expenses during Q3 2010. These acquisitions also led to an increase in assets under custody and administration.

These segments experienced declines in the quarter, with trading services revenue down 15% due to lower foreign exchange spreads and volumes, and securities finance revenue down 35% due to lower spreads and client demand. The company expects market influences to continue to affect these areas.

State Street has demonstrated effective expense management, with total expenses decreasing by 12% compared to the prior year's third quarter. This reduction was primarily driven by the absence of a large provision for legal exposure recorded in the prior year, alongside increases in operational expenses related to acquisitions.

State Street and its subsidiary, State Street Bank, met all capital adequacy requirements at September 30, 2010. Their Tier 1 risk-based capital ratios were 15.8% and 15.7% respectively, well above regulatory minimums.