8-KEarnings & ResultsOther EventsExhibits & Filings

STATE STREET CORP 8-K Report, Financial Results (Dec 9, 2010)

Filed December 9, 2010For Securities:STTSTT-PG

Summary

State Street Corporation (STT) filed an 8-K on December 9, 2010, to announce a strategic repositioning of its investment portfolio. The company sold approximately $11 billion in investment securities, primarily comprising U.S. and non-U.S. mortgage-backed and asset-backed securities. This action was taken to enhance balance sheet flexibility, improve regulatory capital ratios under evolving standards, and reduce exposure to certain asset classes. The transaction is expected to result in a pre-tax and after-tax loss of approximately $350 million, which will be recognized in the fourth quarter of 2010. The company also noted that this repositioning would have increased the concentration of highly-rated (AAA and AA) investment securities in its portfolio to approximately 88% from 82% as of September 30, 2010.

Key Highlights

  • 1State Street sold approximately $11 billion of investment securities.
  • 2The sale targeted mortgage-backed and asset-backed securities.
  • 3The primary objectives were to increase capital flexibility, enhance regulatory capital ratios, and reduce exposure to specific asset classes.
  • 4A pre-tax and after-tax loss of approximately $350 million is expected in Q4 2010.
  • 5The transaction is expected to increase the proportion of AAA and AA rated securities in the portfolio.
  • 6This action is in response to evolving regulatory capital standards and market conditions.

Frequently Asked Questions

State Street sold these securities to strategically reposition its investment portfolio, aiming to increase balance sheet flexibility, improve its regulatory capital ratios under evolving standards (like Basel III), and reduce its exposure to certain asset classes considered less desirable or riskier in the current environment.

The primary assets sold were U.S. non-agency mortgage-backed securities ($4.1 billion), U.S. asset-backed securities ($3.7 billion), non-U.S. mortgage-backed securities ($2.5 billion), and non-U.S. asset-backed securities ($0.6 billion).

Yes, the transaction is expected to result in a pre-tax and after-tax loss of approximately $350 million, which will be recorded in the fourth quarter of 2010. The after-tax loss is nearly the same as the pre-tax loss due to the partial write-off of a deferred tax asset related to the sold securities.

The sale is expected to improve the credit quality of the remaining portfolio. As of September 30, 2010, after the repositioning, the concentration of AAA and AA rated investment securities would have increased to approximately 88%, up from 82% prior to the transaction.