8-KEarnings & ResultsOther EventsExhibits & Filings

STATE STREET CORP 8-K Report, Financial Results (Jul 7, 2010)

Filed July 7, 2010For Securities:STTSTT-PG

Summary

State Street Corporation filed an 8-K on July 7, 2010, to announce a significant after-tax charge of $251 million for the second quarter of 2010, primarily related to its securities lending operations. This charge includes a $330 million cash contribution to certain common and collective trust funds managed by State Street Global Advisors (SSgA) that engage in securities lending. This contribution aims to establish a market-based net asset value of $1.00 per unit for these collateral pools as of June 30, 2010, and to facilitate the removal of redemption restrictions by August 2010. The company also disclosed a reserve of $75 million to address potential inconsistencies in the implementation of redemption restrictions for certain agency lending collateral pools. These actions are part of State Street's ongoing efforts to resolve issues stemming from financial market disruptions in 2008 and are being undertaken while cooperating with the Securities and Exchange Commission's investigation and addressing civil litigation related to its securities lending programs. Investors should note this significant one-time charge impacting Q2 2010 results and the ongoing regulatory scrutiny.

Key Highlights

  • 1State Street Corporation (STT) reported a $251 million after-tax charge for Q2 2010, impacting financial results.
  • 2The charge includes a $330 million cash contribution to SSgA-managed common and collective trust funds involved in securities lending.
  • 3The contribution aims to set the collateral pool net asset value at $1.00 per unit as of June 30, 2010.
  • 4Redemption restrictions on these SSgA Lending Funds are expected to be removed by August 2010.
  • 5An additional $75 million reserve was established to address identified inconsistencies with redemption restrictions on agency lending collateral pools.
  • 6The company is cooperating with the SEC on an investigation and addressing civil litigation related to its securities lending programs.
  • 7The filing includes forward-looking statements detailing various business, market, and regulatory risks.

Frequently Asked Questions

The charge is primarily due to a $330 million cash contribution made to certain common and collective trust funds managed by State Street Global Advisors (SSgA) that engage in securities lending. This contribution was made to establish a market-based net asset value per unit of $1.00 for the collateral pools and to enable the removal of redemption restrictions.

Establishing a $1.00 net asset value per unit aims to standardize and clarify the value of the collateral pools managed by SSgA. This action, along with the cash contribution, is intended to resolve issues that arose during the 2008 financial market disruptions and to facilitate the lifting of redemption restrictions, which are expected by August 2010.

Agency lending collateral pools are related to State Street's agency lending program for third-party investment managers and asset owners. The company identified potential inconsistencies in how redemption restrictions were applied to certain of these pools. A reserve of $75 million has been set aside to address these issues and potential liabilities arising from them.

Yes, State Street has stated it is cooperating with the Securities and Exchange Commission (SEC) in its investigation and is addressing civil litigation concerning its securities lending programs. The actions announced in this filing are part of the company's efforts to resolve these matters.