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| 8-K - FORM 8-K - STATE STREET CORP | d297302d8k.htm |
 9
February 2012 Investor and Analyst Forum
Building from Strength
Exhibit 99.1 |
 2
2011 Performance and
Strategic Direction
JOSEPH L. HOOLEY
Chairman, President and Chief Executive Officer
Globalization
SCOTT POWERS
Chief Executive Officer, State Street Global Advisors
JOSEPH C. ANTONELLIS
Vice Chairman
PETER O’NEILL
Executive Vice President, International
Business Operations and
Information Technology
Transformation Program
JAMES S. PHALEN
Executive Vice President
CHRISTOPHER PERRETTA
Chief Information Officer
Financial Update
EDWARD J. RESCH
Executive Vice President and Chief Financial Officer
Building from Strength
Topics for Discussion |
 3
This
presentation
contains
forward-looking
statements
as
defined
by
United
States
securities
laws,
including
statements
relating
to
our
goals
and
expectations
regarding
our
business,
financial
and
capital
condition,
results
of
operations,
investment
portfolio
performance
and
strategies,
the
financial
and
market
outlook,
governmental
and
regulatory
initiatives
and
developments,
and
the
business
environment.
Forward-looking
statements
are
often,
but
not
always,
identified
by
such
forward-looking
terminology
as
"plan,"
“program,”
"expect,"
"look,"
"believe,"
"anticipate,"
"estimate,"
"seek,"
"may,"
"will,"
"trend,"
"target,”
and
"goal,"
or
similar
statements
or
variations
of
such
terms.
These
statements
are
not
guarantees
of
future
performance,
are
inherently
uncertain,
are
based
on
current
assumptions
that
are
difficult
to
predict
and
involve
a
number
of
risks
and
uncertainties.
Therefore,
actual
outcomes
and
results
may
differ
materially
from
what
is
expressed
in
those
statements,
and
those
statements
should
not
be
relied
upon
as
representing
our
expectations
or
beliefs
as
of
any
date
subsequent
to
February
9,
2012.
Important
factors
that
may
affect
future
results
and
outcomes
include,
but
are
not
limited
to:
the
manner
in
which
the
Federal
Reserve
and
other
regulators
implement
the
Dodd-Frank
Act,
Basel
III
and
other
regulatory
initiatives
in
the
U.S.
and
internationally,
including
any
increases
in
the
minimum
regulatory
capital
ratios
applicable
to
us
and
regulatory
developments
that
result
in
changes
to
our
operating
model
or
other
changes
to
the
provision
of
our
services
in
order
to
comply
with
or
respond
to
such
regulations;
required
regulatory
capital
ratios
under
Basel
II
and
Basel
III,
in
each
case
as
fully
implemented
by
State
Street
and
State
Street
Bank
(and
in
the
case
of
Basel
III,
when
finally
adopted
by
the
Federal
Reserve),
which
may
result
in
the
need
for
substantial
additional
capital
or
increased
levels
of
liquidity
in
the
future;
approvals
required
by
the
Federal
Reserve
or
other
regulators
for
the
use,
allocation
or
distribution
of
our
capital
or
other
specific
capital
actions
or
programs,
including
equity
repurchases,
which
approvals
may
restrict
or
limit
our
growth
plans,
distributions
to
shareholders,
equity
repurchase
programs
or
other
capital
initiatives;
changes
in
law
or
regulation
that
may
adversely
affect
our,
our
clients’
or
our
counterparties’
business
activities
and
the
products
or
services
that
we
sell,
including
additional
or
increased
taxes
or
assessments
thereon,
capital
adequacy
requirements
and
changes
that
expose
us
to
risks
related
to
compliance;
financial
market
disruptions
and
the
economic
recession,
whether
in
the
U.S.,
Europe
or
other
regions
internationally;
the
liquidity
of
the
U.S.
and
international
securities
markets,
particularly
the
markets
for
fixed-income
securities,
and
the
liquidity
requirements
of
our
clients;
increases
in
the
volatility
of,
or
declines
in
the
levels
of,
our
net
interest
revenue,
changes
in
the
composition
of
the
assets
on
our
consolidated
balance
sheet
and
the
possibility
that
we
may
be
required
to
change
the
manner
in
which
we
fund
those
assets;
the
financial
strength
and
continuing
viability
of
the
counterparties
with
which
we
or
our
clients
do
business
and
to
which
we
have
investment,
credit
or
financial
exposure
including,
for
example,
the
direct
and
indirect
effects
on
counterparties
of
the
pending
sovereign
debt
risks
in
Europe;
the
credit
quality,
credit
agency
ratings,
and
fair
values
of
the
securities
in
our
investment
securities
portfolio,
a
deterioration
or
downgrade
of
which
could
lead
to
other-than-temporary
impairment
of
the
respective
securities
and
the
recognition
of
an
impairment
loss
in
our
consolidated
statement
of
income;
delays
or
difficulties
in
the
execution
of
our
previously
announced
business
operations
and
information
technology
transformation
program,
which
could
lead
to
changes
in
our
estimates
of
the
charges,
expenses
or
savings
associated
with
the
planned
program,
resulting
in
increased
volatility
of
our
earnings;
the
maintenance
of
credit
agency
ratings
for
our
debt
and
depository
obligations
as
well
as
the
level
of
credibility
of
credit
agency
ratings;
the
results
of,
and
costs
associated
with,
government
investigations,
litigation,
and
similar
claims,
disputes,
or
proceedings;
the
risks
that
acquired
businesses
and
joint
ventures
will
not
be
integrated
successfully,
or
that
the
integration
will
take
longer
than
anticipated,
that
expected
synergies
will
not
be
achieved
or
unexpected
disynergies
will
be
experienced,
that
client
and
deposit
retention
goals
will
not
be
met,
that
other
regulatory
or
operational
challenges
will
be
experienced
and
that
disruptions
from
the
transaction
will
harm
relationships
with
clients,
employees
or
regulators;
the
ability
to
complete
acquisitions,
divestitures
and
joint
ventures,
including
the
ability
to
obtain
regulatory
approvals,
the
ability
to
arrange
financing
as
required
and
the
ability
to
satisfy
closing
conditions;
the
performance
of
and
demand
for
the
products
and
services
we
offer,
including
the
level
and
timing
of
redemptions
and
withdrawals
from
our
collateral
pools
and
other
collective
investment
products;
the
possibility
that
our
clients
will
incur
substantial
losses
in
investment
pools
where
we
act
as
agent,
and
the
possibility
of
significant
reductions
in
the
valuation
of
assets;
our
ability
to
attract
deposits
and
other
low-cost,
short-term
funding;
potential
changes
to
the
competitive
environment,
including
changes
due
to
the
effects
of
consolidation,
and
perceptions
of
State
Street
as
a
suitable
service
provider
or
counterparty;
the
level
and
volatility
of
interest
rates
and
the
performance
and
volatility
of
securities,
credit,
currency
and
other
markets
in
the
U.S.
and
internationally;
our
ability
to
measure
the
fair
value
of
the
investment
securities
on
our
consolidated
balance
sheet;
our
ability
to
control
operating
risks,
data
security
breach
risks,
information
technology
systems
risks
and
outsourcing
risks,
and
our
ability
to
protect
our
intellectual
property
rights,
the
possibility
of
errors
in
the
quantitative
models
we
use
to
manage
our
business
and
the
possibility
that
our
controls
will
prove
insufficient,
fail
or
be
circumvented;
adverse
publicity
or
other
reputational
harm;
our
ability
to
grow
revenue,
attract
and/or
retain
and
compensate
highly
skilled
people,
control
expenses
and
attract
the
capital
necessary
to
achieve
our
business
goals
and
comply
with
regulatory
requirements;
the
potential
for
new
products
and
services
to
impose
additional
costs
on
us
and
expose
us
to
increased
operational
risk;
changes
in
accounting
standards
and
practices;
and
changes
in
tax
legislation
and
in
the
interpretation
of
existing
tax
laws
by
U.S.
and
non-U.S.
tax
authorities
that
affect
the
amount
of
taxes
due.
Other
important
factors
that
could
cause
actual
results
to
differ
materially
from
those
indicated
by
any
forward-looking
statements
are
set
forth
in
our
2010
Annual
Report
on
Form
10-K
and
our
subsequent
SEC
filings.
We
encourage
investors
to
read
these
filings,
particularly
the
sections
on
risk
factors,
for
additional
information
with
respect
to
any
forward-looking
statements
and
prior
to
making
any
investment
decision.
The
forward-looking
statements
contained
in
this
presentation
speak
only
as
of
the
date
hereof,
February
9,
2012,
and
we
do
not
undertake
efforts
to
revise
those
forward-looking
statements
to
reflect
events
after
that
date.
Building from Strength
Reminder |
 4
Building from Strength
Agenda
2011 Performance
Strategic Direction
Globalization
Business Operations and
Information Technology Transformation Program
Financial Update
Summary |
 Building from Strength
Agenda
2011 Performance
–
Jay Hooley
Strategic Direction
Globalization
Business Operations and
Information Technology Transformation Program
Financial Update
Summary
5 |
 6
2011 Performance
Resilience in a Challenging Environment
$ in millions
12/31/11
1
12/31/10
1
% Change
Revenue
$9,502
$8,714
+9.0%
Expenses
$6,789
$6,176
+ 9.9%
EPS
$3.73
$3.40
+9.7%
ROE
9.9%
10.4%
-50 bps
OPERATING-BASIS RESULTS FOR THE TWELVE MONTHS
ENDED¹ •
Strengthened capital position; re-initiated common stock buyback and increased
common stock dividend
•
Deepened client relationships
•
Continued market leadership
•
Effectively managed expenses, including Business Operations and Information
Technology Transformation Program
•
Outperformed peers
1
Financial information presented on an operating, or non-GAAP, basis (which is
adjusted to exclude, among other things, conduit-related discount accretion). For a description of
GAAP and operating-basis results, and related reconciliations, please see the
Appendix. 6 |
 7
2011 Performance
Strengthened Capital Position
State Street Corporation
“Well
Capitalized”¹
12/31/11
Actual under Basel I
12/31/11
Adjusted to Reflect
Basel III Proposal²
Tier 1 Capital
6.0%
18.9%
13.3%
Tier 1 Common Ratio³
—
16.9%
12.1%
Tier 1 Leverage
5.0%
4
7.3%
5.6%
Total Capital
10.0%
20.5%
14.9%
Tangible Common Equity
5
—
7.3%
7.3%
1
Except as noted in note 4 below, minimum ratios for “Well
Capitalized” are defined by Federal regulators under Basel I.
2
Calculated based on State Street’s estimates, based upon published statements
of the Basel Committee and the Federal Reserve, of the effects of the requirements under Basel III
affecting capital. See Appendix for a description of the specified capital
ratios and related reconciliations of these ratios to ratios calculated under current regulations.
3 The tier 1 common ratio is not required by GAAP or on a recurring basis by
bank regulations. See Appendix for a description of this ratio and related reconciliations.
4 Minimum ratio for “Well Capitalized,”
as defined by Federal regulators, applies to State Street Bank and Trust only and
is therefore stated only as a reference point. 5 As defined by State
Street. The Tangible Common Equity ratio is not required by GAAP or on
a recurring basis by bank regulations. See Appendix for a description of this ratio
and related reconciliations. |
 8
Average Number of Products Used
Average Length of Relationship
Top 100 Clients
14.2 Products
20.3 Years
Top 1,000 Clients
8.5 Products
11.4 Years
2011 Performance
Deepened Client Relationships
Growing Momentum in Core Businesses
Asset Servicing Fee
Revenue +11%
1
•
Deepened client relationships: 80% of new revenue growth
came from existing clients
•
Differentiated solutions
•
Flight to quality
Asset Management
Fee Revenue +11%
1
•
Improved performance (68% of funds outperformed their one-
year benchmarks)
2
•
New products: introduced 32 new ETFs
•
Enhanced distribution
1
Compared to 2010.
2
As of December 31, 2011. |
 9
2011 Performance
Deepened Client Relationships
Business
2011 New
Wins
1
($BN)
%
Installed through
Q4
($BN)
To be Installed
($BN)
US Asset Servicing
$820.8
58.3%
$736.1
$84.7
Non-US Asset Servicing
$587.1
41.7%
$401.6
$185.5
Total Asset Servicing
$1,407.9
$1,137.7
$270.2
US Asset Management
$468.1
61.8%
$455.1
$13.0
Non-US Asset Management
$289.1
38.2%
$282.1
$7.0
Total Asset Management
$757.2
$737.2
$20.0
1
Assets as of 12/31/11. |
 10
Alternative Assets Under
Administration as of 6/30/11
Custody Assets Held by
Global Custodians as of 12/31/11
Global Middle Office
Outsourcing as of 6/30/11
2011 Performance
Continued Market Leadership
Source: ICFA Annual Fund Admin Survey 2011.
*STT AuA at 12/31/2011 was $816BN.
Source: Scrip Issue Global Report (9/2011).
Source: Company reports and Globalcustody.net
Data for BNY, State Street, reflect AUA as of
12/31/2011; as of 9/30/11 for BNP Paribas and
Societe Generale; as of 12/31/10 for HSBC; all others
reflect AUC data: JP Morgan, Citi, & Northern Trust,
as of 12/31/11; CACEIS as of 3/31/11. |
 11
AUM, $BN
Global Assets
Managed as of 12/31/11
$BN
Global Securities Lending
Q4 2011 Average Assets on Loan
Global ETF Assets
Managed as of 12/31/11
2011 Performance
Continued
Market Leadership
AUM, $BN
Source: Company reports
*BlackRock as of 12/31/10.
Source: Company reports/websites; Strategic Insight
for Vanguard.
*Fidelity as of 11/2011.
Source: ETF Landscape Report (12/2011). |
 12
Progress in 2011
•
Effectively balanced need for investment and
expense control
•
Reduced full-year ratio of compensation to revenue
to 40.2%
•
Implemented targeted staff reductions
•
Accelerated Business Operations and Information
Technology Transformation Program in view
of environment
–
Achieved $86 million in annual pre-tax, run-
rate expense savings
1
2011 Performance
Effectively Managed Expenses
1 Excluded
restructuring
charges;
compared
to
2010,
all
else
being
equal.
Annual
pre-tax,
run-rate
expense
savings
related
only
to
the
Business
Operations
and
Information
Technology Transformation program; actual operating expenses of the Company may
increase or decrease due to other factors. |
 13
2011 Performance
Outperformed Peers
Operating / Adjusted-Basis
Results Full-Year 2011 vs. 2010
STT
BK
NTRS
Revenue Growth
9.0%
6.3%
3.3%
EPS Growth
9.7%
(7.0)%
(9.1)%
Pre-tax Margin
28.6%
25.0%
23.6%
Return on Equity
9.9%
8.6%
8.5%
Net Interest Margin
1.52%
2
1.36%
1.27%
Tier 1 Common
16.9%
13.4%
12.1%
Tier 1 Common (under Basel III)
12.1%
7.1%
12.3%
1
Tier
1
common
and
Tier
1
common
(under
Basel
III)
data
stated
as
of
12/31/11.
Each
company’s
operating/adjusted
(non-GAAP)
presentation
may
be
calculated
differently
and
therefore
may
not
be
comparable
to
other
companies’
operating/adjusted
(non-GAAP)
presentations.
Please
review
each
company’s
public
filings
and
earnings
reports
for a
description, to the extent contained therein, of their respective
operating/adjusted presentations (including capital ratios). For STT, financial data is presented on an operating,
(non-GAAP) basis, and tier 1 common ratios include non-GAAP data in their
calculation (in addition to Basel III ratios based upon various estimates). For a description of this
operating-basis presentation, as well as a description of referenced ratios and
related reconciliations, see the Appendix. 2 Includes excess client
deposits. 1 |
 14
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
1-Year Total Return: 12/31/2010 - 12/31/2011
2011 Performance
Outperformed Peers
Bank of New York Mellon Corp.
Northern Trust Corp.
S&P 500 / Financials
State Street Corp.
STT -11.5%
S & P Fin. -17.1%
NTRS -26.6%
BK -32.3%
Source: FactSet
STT Total Return Significantly Outperformed Primary Peers and Broader Financial
Index |
 15
1/09
4/09
7/09
10/09
1/10
4/10
7/10
10/10
1/11
4/11
7/11
10/11
-80%
-60%
-40%
-20%
0%
20%
40%
60%
3-Year Total Return: 12/31/2008 - 12/31/2011
2011 Performance
Outperformed Peers
Bank of New York Mellon Corp.
Northern Trust Corp.
S&P 500 / Financials
State Street Corp.
STT 4.5%
S & P Fin. 9.0%
NTRS -18.5%
BK -26.0%
Source: FactSet
STT Total Return Significantly Outperformed Primary Peers
12/11 |
 16
Building from Strength
Agenda
2011 Performance
Strategic Direction
–
Jay Hooley
Globalization
Business Operations and
Information Technology Transformation Program
Financial Update
Summary |
 17
Strategic Direction
•
Expand market share and share of wallet
•
Aggressively manage client profitability
•
Double non-US revenue by 2014, compared
to 2009
•
Develop client-driven solutions
•
Accelerate new product development
•
Driven by technology and business process
transformation
•
Complemented by a flexible workforce
•
Invest in deep local market expertise
•
Increase dividends / share purchases
•
Pursue attractive acquisitions
Drive Profitable Growth
Develop and Attract Top Talent
Transform Operating Model
Invest in Innovation
Leverage Capital Strength |
 18
Strategic Direction
Long-Term Trends Support Growth
•
Ongoing globalization of investment and
distribution channels
•
Driven by demographics, especially in
Europe and Asia
•
Evolution of retirement / savings schemes
•
Driving growth in outsourcing
•
Growth in alternative assets globally
•
Solutions orientation within
asset management
•
Fostered by regulatory requirements
•
Increasing requirement for
global capabilities
Globalization
Retirement Savings
Complexity
Consolidation |
   19
Year ended
12/31/01
2
Year ended
12/31/11
% Change
Revenue
3
$3.8BN
$9.5BN
+150%
Non-US Revenue
3
$1.0BN
$3.9BN
+290%
Employees
4
18,840
29,740
+58%
Non-US Employees
4
4,200
13,350
+218%
Strategic Direction
Globalization
1 Based on AUA; Company data as of 12/31/11.
2 Data exclude the revenue and employees associated with the Corporate Trust
and Private Asset Management businesses divested in 2002 and 2003, respectively.
3 Financial information presented on an operating, or non-GAAP, basis
(which is adjusted to exclude, among other things, conduit-related discount accretion).
For a description of GAAP and operating-basis revenue, and related
reconciliations, please see the Appendix. 4 At period
end. •
Globalization of asset pools continues to accelerate
•
Europe 10-year asset growth = 1024%
1
•
Asia Pacific 10-year asset growth = 403%
1 |
 20
Strategic Direction
Retirement Savings
2005
2007
2008
2011E
2015E
APAC
Europe
Latin America
Other
Non-US Retirement Growth
US Retirement Growth
2005
2007
2008
2011E
2015E
DB
DC
IRA
$13.2T
$16.0T
$12.4T
$16.0T
$20.7T
10.1%
CAGR
7.6%
CAGR
$6.6T
$8.5T
$7.4T
$9.8T
$13.6T
13.5%
CAGR
9.1%
CAGR
Almost 50% of non-US retirement asset growth
(2011 –
2015) expected to come from Europe
Source: Cerulli Associates , Global Markets 2011.
DC and IRA assets expected to lead US
retirement growth, with 8.7% and 9.3%
expected CAGRs (2008 –
2015), respectively
Global
Retirement
Assets
Are
Expected
to
Grow
at
a
CAGR
of
7.4%
from
2011
through
2015 |
   21
•
Globalization
•
Regulation
•
Need for transparency around risk management
•
Enhanced data reporting
Hedge Fund Servicing
•
Largest servicer in the world
1
in a market sized at
$1.98TN
2
and growing at an estimated 12% CAGR
from 2010 through 2014
3
Investment Manager
Operations Outsourcing
•
No. 1 provider
4
in a market of about $65TN
5
Investment Management
Solutions
•
Offer customized strategic and tactical asset
allocation solutions globally
Strategic Direction
Complexity
DRIVEN BY
1
ICFA
Annual
Fund
Administration
Survey,
2011.
2
Hedge
Fund
Research,
9/30/11.
3
BCG,
Global
Asset
Management
Report,
7/2011.
4
Scrip
Issue
Global
Report,
9/2011.
5
Data
as
of
12/31/10
in
Pensions
&
Investment/Wyatt
Watson,
10/31/11. |
 22
Strategic Direction
Consolidation: Top 20 Companies by AUC / AUA
1
($TN)
Source:
Company
reports,
Global
Custody.net.
1
Data
for
BNY,
State
Street,
reflect
AUA
as
of
12/31/2011;
as
of
9/30/11
for
BNP
Paribas,
Societe
Generale,
RBC
Dexia;
as
of
12/31/10
for
HSBC;
all
others
reflect
AUC
data:
JP
Morgan,
Citi,
&
Northern
Trust,
as
of
12/31/11;
UBS,
Nordea,
Pictet
as
of
9/30/11;
CACEIS
as
of
3/31/11;
SEB
as
of
1/31/11;
Brown
Brothers,
SIX
SIS,
Santander,
NAB
as
of
12/31/10.
Driven by Global Scale and Capital Requirements |
 23
Building from Strength
Agenda
2011 Performance
Strategic Direction
Globalization
–
Scott Powers, Joseph C. Antonellis, Peter O’Neill
Business Operations and
Information Technology Transformation Program
Financial Update
Summary |
   24
Globalization
Competitive Advantage
MIDDLE OFFICE
BACK OFFICE
Key
Opportunities
•
Client focus on core competencies heightening demand for
outsourced solutions
•
Need for greater transparency and data management driving
demand for value added solutions
•
Separation of Alpha and Beta fueling opportunities in
asset management
Integrated Solutions Across Investment Spectrum
FRONT OFFICE
•
Investment Management
•
Investment Solutions
•
Investment Research
•
Trade Execution and
Implementation
•
Investment Valuation
•
Performance and Risk Reporting
•
Regulatory Reporting
•
Trade Clearing and Settlement
•
Cash and Collateral Management
•
Reconciliation and
Position Reporting
•
Data Management
•
Fund Accounting
•
Fund Administration
•
Custody
•
Transfer Agency |
          25
1
As of December 31, 2011.
NORTH AMERICA
$1,328BN AUM
$16,367BN AUC / A
EUROPE, MIDDLE
EAST, AFRICA
$320BN AUM
$4,400BN AUC / A
ASIA PACIFIC
$210BN AUM
$1,040BN AUC / A
10-year Revenue CAGRs (2001 –
2011): US = 7.5% and non-US = 14.1%
Spanning the Globe with Investment
Servicing and Investment Management
Globalization
Strong Global Footprint
1 |
                         26
Globalization
Strong Global Footprint –
Europe, Middle East, and Africa 10-Year View (2001 –
2011)
14 Countries, 9,000 Employees
SWITZERLAND
LUXEMBOURG
IRELAND
CHANNEL ISLANDS
GREAT BRITAIN
BELGIUM
GERMANY
FRANCE
ITALY
POLAND
THE NETHERLANDS
UAE
QATAR
SOUTH AFRICA
Major Acquisition
New Office Opened
Existing Office
AUSTRIA |
 27
Globalization
European Collectives, Pension, Insurance Markets: $22.4TN
1
1
Total
Market
size
includes
STT
key
European
markets
serviced:
UK,
Netherlands,
Germany,
Ireland
/
Luxembourg
(Offshore
Assets),
Italy,
Spain,
Switzerland
and
France.
2
EFAMA
Quarterly
Statistical
Release,
3rd
Quarter,
November
2011,
No.47,
Combined
UCITS
&
Non-UCITS.
3
CEA
Insurance
YE
2010
Report;
2010
and
2001
total
insurers’
investment
portfolio
assets.
4
Cerulli,
Quantitative
Update,
Global
Markets,
YE
2005
&
June
2011;
Towers
Watson,
Global
Pension
Asset
Study
Feb
2011
&
Watson
Wyatt
2007
Global
Pension
Asset
Study. |
 28
Globalization
Growing Faster Than the Market
European Collective,
Pension and Insurance Market
2001 –
2011
1
CAGR: 8.7%
$9.7TN
2001
$22.4TN
2011
1
Total assets include seven key European markets: UK, Netherlands, Germany, Ireland
/ Luxembourg offshore assets, Italy, Spain, Switzerland and France. Sources: efama,
Quarterly Statistical Release, Fourth Quarter 2001, Combined UCITS & Non UCITS;
CEA Statistics, European Insurance In Figures December 2010; Table 9 total insurers
investment portfolio; Cerulli, Quantitative Update, Global Markets, June 2011 &
Watson Wyatt 2001 & 2007 Global Pension Asset Study.
2 AUA represents all European assets under custody / administration.
|
         29
Globalization
Strong Global Footprint –
Asia Pacific 10-Year View (2001 –
2011)
10 Countries, 6,900 Employees
1
SOUTH KOREA
SINGAPORE
HONG KONG
BRUNEI
TAIWAN
CHINA
JAPAN
New Office
Opened / Underway
Existing Office
MALAYSIA
INDIA
AUSTRALIA
1
Includes JV employees in India. |
 30
Globalization
Asia Pacific Collectives, Pension, Insurance and Government-related
Overall Market Size and Market Share: $21.6TN
1
Total
assets
include
eight
key
markets:
Japan,
Australia,
Hong
Kong,
South
Korea,
Taiwan,
China,
India
and
Singapore.
2
ICI (9/11).
3
Towers
Watson
Global
Pension
Study
2011;
Cerulli
Quantitative
Updates:
Global
Markets,
2011.
4
National
insurancewebsites
(12/10);
STT
Estimates.
5
Government
websites,
World
Bank
country
international
reserves
statistics,
and
State
Street
estimates;
Japan
includes
Japan
Post
(9/10);
Taiwan
includes
Chunghwa
Post,
formerly Taiwan Post (9/10).
1 |
 31
Globalization
Growing Faster Than the Market
Asia Pacific Collective, Insurance,
Pension, and Government Market Growth
2001 –
2011
1
CAGR: 11.5%
$7.3TN
2001
$21.6TN
2011
State Street APAC AUM Growth
2001 –
2011
CAGR: 20.0%
$34BN
2001
$210BN
2011
State Street APAC / AUA
2
Growth
2001 –
2011
CAGR: 17.5%
$207BN
2001
$1,040BN
2011
1
Total assets include eight key markets: Japan, Australia, Hong Kong, South Korea,
Taiwan, China, India and Singapore. Sources: ICI (9/11):Towers Watson Global Pension Study
2011; Cerulli Quantitative Updates: Global Markets, 2011; National insurance
websites (12/10); Government websites, World Bank country international reserves statistics, Japan
includes Japan Post (9/10); Taiwan includes Chunghwa Post, formerly Taiwan Post
(9/10) and STT estimates. 2
AUA represents assets from Asia Pacific under custody /administration.
|
 32
Globalization
Growth Strategies
New Sources of Value
Innovation
Increased Business
Complexity
Regulation &
Compliance
Data Integration
and Complexity
Operational Efficiency
Trends Fueling Growth
Client Challenges
Growth Priorities
Globalization
Retirement Savings
Complexity
Consolidation
Expand Local
Market Capabilities
and Footprint
Integrate Solutions
across Investment
Management Servicing
and Trading
Accelerate New
Product Development
Grow Through
Acquisitions and JVs
Deepen Client
Relationships |
 33
Building from Strength
Agenda
2011 Performance
Strategic Direction
Globalization
Business Operations and
Information Technology Transformation Program –
James S. Phalen, Christopher Perretta
Financial Update
Summary |
 34
Goals
•
Position the company for accelerated growth
•
Achieve estimated annual pre-tax, run-rate expense savings of
$575MN
to
$625MN
by
the
end
of
2014
for
full
effect
in
2015
1
•
Achieve, by the end of 2015, a 400bp improvement in
operating-basis pre-tax margin, compared to 2010 operating-
basis
pre-tax
margin,
assuming
all
else
being
equal
Business Operations and
Information Technology Transformation Program
Overview
1
Compared to 2010, all else being equal, estimated annual pre-tax, run-rate
expense savings and operating-basis pre-tax margin improvement relate only to the Business
Operations and Information Technology Transformation program; actual operating
expenses and operating margin of the Company may increase or decrease due to other factors.
Includes operating-basis information. Operating-basis information is
a non-GAAP presentation. See Appendix for a description of operating-basis information.
1 |
 35
Business Operations and
Information Technology Transformation Program
Estimated Annual Pre-tax, Run-rate Expense Savings
$MN
2011
2012
2013
2014
2015
Business Operations Transformation
$158
$260
$370
$430
$440
Information Technology
Transformation
6
20
100
150
160
Net Benefits Before Non-recurring
Project-related Expenses
164
280
470
580
600
Less: Non-recurring
Project-related Operating Expenses
78
100
70
40
0
Annual Pre-tax, Run-rate
Expense
Savings
$86
$180
$400
$540
$600
1 Compared
to
2010,
all
else
being
equal.
The
full
effect
of
the
annual
pre-tax,
run-rate
savings
is
not
expected
to
be
experienced
until
2015.
Chart
data
based
on
the
approximate
mid-point of the range of the estimated annual pre-tax, run-rate
expense savings of $575MN-$625MN at the end of 2014, for full effect in 2015; estimated savings for individual
years
may
vary
up
or
down
based
on
the
execution
of
the
Business
Operations
and
Information
Technology
Transformation
program.
Annual
pre-tax,
run-rate
expense
savings
relate only to the Business Operations and Information Technology Transformation
program; actual operating expenses of the Company may increase or decrease due to other
factors.
1 |
 36
Business Operations and
Information Technology Transformation Program
Operations Plan
14 Core Business
14 Core Business
Operations
Operations
Processes are
Processes are
in Scope
in Scope
2012 Milestones
•
Four key operations
transformation levers
–
Process
transformation
–
Automation
–
Consolidation
–
Workforce
optimization
•
Operations
transformation
portfolio includes
160+ initiatives
•
Initiatives have
been sequenced
into master plan
through 2014
•
Establish two additional
global Centers of
Excellence for a total of
seven overall
•
Achieve 20% targeted
automation benefits
•
Establish two new
low-cost locations
to balance our
global footprint |
 37
Business Operations and
Information Technology Transformation Program
IT Plan
Industrial-strength
Application Development
Key Program Benefits
Proprietary Real-time
Information
•
Automation /
capacity on demand
•
Accelerated time
to market
•
Integrated security
environment
•
Real-time data
infrastructure
•
Advanced platform
for product
innovation
•
Strengthened
client service
2012 Milestones
•
Scale cloud computing
platform to enable
major migrations in
2013 and 2014
•
Realize 20% of the
expected benefits from
our IT application
portfolio rationalization
•
Substantially complete
transition to previously
announced strategic
servicing relationships |
 38
Business Operations and
Information Technology Transformation Program
Industry View
1
Relative
position
for
“State
Street”
represents
State
Street
estimates. |
 39
Business Operations and
Information Technology Transformation Program
Competitive Advantage
Speed
•
Cloud cuts new product development time by 30%
•
Automated provisioning/compute on demand
•
More client value, delivered faster –
20% onboarding
improvement
Agility
•
Powerful, proprietary real-time data analytics
•
Any device, any time, any where
•
Core operating model leverages global footprint
•
Business scalability supports organic and M&A growth
Efficiency
•
Automation to reduce client risk and increase efficiency
•
Global operating model implementing straight-through
processing in core systems
•
Become industry’s best AND lowest cost provider |
 40
Building from Strength
Agenda
2011 Performance
Strategic Direction
Globalization
Business Operations and
Information Technology Transformation Program
Financial
Update
–
Edward
J.
Resch
Summary |
 41
Financial Update
2012 Environment
Fourth-Quarter Drivers
Environmental Factors in 2012
Expectations for 2012
Investment Portfolio Management
Capital |
 42
Financial Update
Fourth-Quarter Drivers
Revenue
•
Clients moved away from international and emerging markets,
reducing servicing and asset management fees
•
Weak capital markets lowered foreign exchange revenue
•
Excess client deposits increased net interest revenue, but
reduced NIM
•
Impact of the stronger US dollar
•
Solid new business wins continued
Expense
•
Accelerated Business Operations and Information Technology
Transformation program
•
Targeted staff reductions
•
Reduced incentive compensation
•
Controlled headcount and compensation
•
Withdrew from our fixed-income trading initiative |
 43
Financial Update
Economic and Market Factors in 2012
•
US GDP growth expected to slow to about 2%
•
Eurozone uncertainty expected to continue with GDP in 2012 to decline
about (0.5)%
•
Worldwide administered rates expected to remain low
•
Consumer confidence expected to remain muted
•
Expect S & P 500 to increase on average 5% to 1328 and MSCI EAFE®
to
decline on average 7% to 1494
•
Strong dollar expected to continue
•
Continued regulatory uncertainty |
 44
Financial Update
Expectations for 2012
Revenue
•
Execute effective cross-sell strategy
•
Attract new business in fast-growing product areas
•
Increase rigor in pricing
•
Prudently manage the investment portfolio
Expense
•
Execute Business Operations and Information Technology
Transformation program
•
Reduce compensation-to-revenue ratio by about 100 basis points,
assuming modest revenue growth
•
Expect increased regulatory and compliance costs
•
Continue to invest in technology through the cycle |
 45
Financial Update
Expectations for 2012: Market-Driven Revenues
1 Based on data from Data Explorers Universe as of period end.
2 Based on STT’s customer-weighted volumes.
|
 46
Interest-rate
Assumptions
for 2012
•
Worldwide administered rates on hold through 2012
•
Yield curves retain current shape
Investment Portfolio
•
Duration: 1.49
years driving balance sheet gap of 0.36 years
•
89% AAA / AA rated; fixed / floating ratio: 41% / 59%
•
Growth in 2012 to be consistent with growth of
underlying business
Reinvestment
Strategy
•
Expect about $20BN to mature or pay down in 2012
•
Expect to purchase primarily AAA-
and AA-rated Agency
mortgage-backed securities and asset-backed securities
Peripheral Country
Exposure
1
•
No sovereign exposure
•
$1.2BN in securities, primarily RMBS –
performing well
Financial Update
Investment Portfolio Management
1
Portugal, Ireland, Italy, Greece and Spain. 2 Information stated on an
operating, or non-GAAP, basis (which is adjusted to exclude, among other things, discount accretion).
For a description of operating-basis information, please see the
Appendix. 2012
Operating-Basis
NIM
Expected
to
be
in
Range
of
145
to
155
bps
2 |
 47
Financial Update
Capital: Deployment
CCAR in Process
•
Response expected by mid-March
Dividend
•
Payout ratio target: 20% –
25%
Share Purchase Program
•
Expect to return as much capital to shareholders
as allowed
Acquisitions
•
Expect to be opportunistic and disciplined
•
Criteria:
–
Aligned with our strategy
–
Expect accretion within the first full year of operation
–
Projected return to be higher than our WACC |
 48
Financial Update
Capital:
Return
on
Equity
Target
1
Improved Operating
Margin
•
Successful execution of Business Operations and Information
Technology Transformation program
Interest Rates
•
A more normalized rate environment
(3% FF; 5% 10-year U.S. Treasury)
Capital Management
•
Migrate from earnings-based to capital-ratio
distribution model
Tier
1
Common
Ratio
1
•
Manage to 10% ratio, assuming a 1% G-SIB buffer
Realization of These Drivers is Expected to Result
in a Long-Term ROE
2
Target Range of 12% to 15%
1 Estimated under Basel III regulations, as understood, at fully
phased-in levels. 2 Stated on an operating, or non-GAAP,
basis (which is adjusted to exclude, among other things, conduit-related discount accretion). For a description of operating-basis
information, please see the Appendix. |
 49
Building from Strength
Agenda
2011 Performance
Strategic Direction
Globalization
Business Operations and Information Technology
Transformation Program
Financial Update
Summary
–
Jay
Hooley |
 Summary
Building from Strength
Resilience
Amid Challenges
Focused Strategy
Fueled by Macro Trends
Leading
Global Footprint
Rigorous Expense and
Balance Sheet Management
Strong Capital
Driving
Long-term
Shareholder
Value
50 |
 APPENDIX
51 |
STATE STREET CORPORATION
RECONCILIATION OF OPERATING-BASIS RESULTS
State Street prepares its consolidated statement of income in accordance with accounting principles generally accepted in the U.S., or GAAP. In addition, State Street presents financial information on a non-GAAP basis, referred to as “operating” basis. Management measures and compares certain financial information on an operating basis, as it believes that this presentation supports meaningful comparisons from period to period and the analysis of comparable financial trends with respect to State Street’s normal ongoing business operations. Management believes that operating-basis financial information, which reports revenue from non-taxable sources on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of the normal course of business, facilitates an investor’s understanding and analysis of State Street’s underlying financial performance and trends in addition to financial information prepared in accordance with GAAP. The tables presented below reconcile financial information prepared on an operating basis to financial information prepared and reported in accordance with GAAP.
| (Dollars in millions, except per share amounts) |
Year Ended December 31, 2010 | Year Ended December 31, 2011 | % Change | |||||||||||||||||||||||||
| Reported Results |
Adjustments | Operating-Basis Results |
Reported Results |
Adjustments | Operating-Basis Results |
2011 vs. 2010 |
||||||||||||||||||||||
| Total fee revenue |
$ | 6,540 | $ | 6,540 | $ | 7,194 | $ | 7,194 | ||||||||||||||||||||
| Net interest revenue |
2,699 | $ | (583 | )(1) | 2,116 | 2,333 | $ | (92 | )(7) | 2,241 | ||||||||||||||||||
| Gains (Losses) related to investment securities, net: |
(286 | ) | 344 | (2) | 58 | 67 | — | 67 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
8,953 | (239 | ) | 8,714 | 9,594 | (92 | ) | 9,502 | 9.0 | % | ||||||||||||||||||
| Provision for loan losses |
25 | — | 25 | — | — | — | ||||||||||||||||||||||
| Total expenses |
6,842 | (666 | )(3) | 6,176 | 7,058 | (269 | )(8) | 6,789 | 9.9 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Income before income tax expense |
2,086 | 427 | 2,513 | 2,536 | 177 | 2,713 | ||||||||||||||||||||||
| Income tax expense |
530 | 146 | (4) | 676 | 616 | 79 | (9) | 695 | ||||||||||||||||||||
| Tax-equivalent adjustment |
— | 129 | (5) | 129 | — | 128 | (5) | 128 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net income |
$ | 1,556 | $ | 152 | $ | 1,708 | $ | 1,920 | $ | (30 | ) | $ | 1,890 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Adjustments to net income: |
||||||||||||||||||||||||||||
| Dividend on preferred stock |
$ | — | $ | — | $ | — | $ | (20 | ) | $ | — | $ | (20 | ) | ||||||||||||||
| Earnings allocated to participating securities |
(16 | ) | (2 | )(6) | (18 | ) | (18 | ) | — | (18 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net income available to common shareholders |
$ | 1,540 | $ | 150 | $ | 1,690 | $ | 1,882 | $ | (30 | ) | $ | 1,852 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted earnings per common share |
$ | 3.09 | $ | .31 | $ | 3.40 | $ | 3.79 | $ | (.06 | ) | $ | 3.73 | 9.7 | % | |||||||||||||
| Average diluted common shares outstanding (in thousands) |
497,924 | 497,924 | 497,924 | 496,072 | 496,072 | 496,072 | ||||||||||||||||||||||
| Return on common equity |
9.5 | % | 0.9 | % | 10.4 | % | 10.0 | % | (0.1 | )% | 9.9 | % | (50 | )bps | ||||||||||||||
| Net interest margin(10) |
2.24 | % | (0.56 | )% | 1.68 | % | 1.67 | % | (0.15 | )% | 1.52 | % | ||||||||||||||||
| Pre-tax margin(11) |
23.3 | % | 5.5 | % | 28.8 | % | 26.4 | % | 2.2 | % | 28.6 | % | ||||||||||||||||
| (1) | Represents tax-equivalent adjustment of $129 million, not included in reported results, net of $712 million of discount accretion related to former conduit securities. |
| (2) | Represents a net loss related to a repositioning of the investment portfolio. |
| (3) | Represents $89 million of integration costs; $156 million of restructuring charges related to the business operations and information technology transformation program; a charge, composed of $330 million to provide for a one-time cash contribution to the SSgA lending fund collateral pools and liquidating trusts and $9 million of associated costs; $75 million to establish a reserve to address potential inconsistencies in the application of redemption policy for agency lending collateral pools; and $7 million of tax on bonus payments to employees in the U.K. |
| (4) | Represents a discrete tax benefit of $180 million related to former conduit assets and the net tax effect of non-operating adjustments. |
| (5) | Represents tax-equivalent adjustment, not included in reported results. |
| (6) | Represents effect of the difference between reported and operating-basis earnings on allocation to participating securities. |
| (7) | Represents tax-equivalent adjustment of $128 million, not included in reported results, net of $220 million of discount accretion related to former conduit securities. |
| (8) | Represents $71 million of integration costs related to previous acquisitions; a $55 million indemnification benefit for an income tax claim related to the 2010 acquisition of the Italian securities services business; $133 million of restructuring charges related to the business operations and information technology transformation program; and $120 million of restructuring charges mainly related to our withdrawal from our fixed-income trading initiative. |
| (9) | Represents a discrete tax benefit of $103 million related to former conduit assets, income tax expense of $55 million related to the indemnification benefit described in note (8), and the net tax effect of non-operating adjustments. |
| (10) | Reported margin for the year ended December 31, 2010 represents fully taxable-equivalent net interest revenue of $2.83 billion (reported net interest revenue of $2.70 billion plus a tax-equivalent adjustment of $129 million) as a percentage of reported average interest-earning assets for the period. Reported margin for the year ended December 31, 2011 represents fully taxable-equivalent net interest revenue of $2.46 billion (reported net interest revenue of $2.33 billion plus a tax-equivalent adjustment of $128 million) as a percentage of reported average interest-earning assets for the period. |
| (11) | Represents income before income tax expense as a percentage of total revenue. |
STATE STREET CORPORATION
Reconciliations of Tangible Common Equity and Tier 1 Common Ratios
December 31, 2011
The ratio of tangible common equity to adjusted tangible assets, or TCE ratio, is calculated by dividing consolidated total common shareholders’ equity by consolidated total assets, after reducing both amounts by goodwill and other intangible assets net of related deferred taxes. Total assets reflected in the TCE ratio also exclude cash balances on deposit at the Federal Reserve Bank and other central banks in excess of required reserves. The TCE ratio is not required by GAAP or by bank regulations, but is a metric used by management to evaluate the adequacy of State Street’s capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and adjusted tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.
The tier 1 risk-based common, or tier 1 common, ratio is calculated by dividing tier 1 capital, which is calculated in accordance with applicable bank regulatory requirements, less non-common elements, including preferred stock and qualifying trust preferred securities, by total risk-weighted assets, which assets are also calculated in accordance with applicable bank regulatory requirements. The tier 1 common ratio is not required by GAAP or on a recurring basis by bank regulations. However, this ratio has been used by the Federal Reserve in connection with its evaluation of the capital adequacy of certain large U.S. bank holding companies. In addition, management is currently monitoring this ratio, along with the other capital ratios, in evaluating State Street’s capital levels and believes that, at this time, the ratio may be of interest to investors.
The table set forth below presents the calculations of State Street’s ratios of tangible common equity to total tangible assets, and tier 1 common capital to total risk-weighted assets.
| (Dollars in millions) |
December 31, 2011 |
|||||
| Consolidated Total Assets |
$ | 216,302 | ||||
| Less: |
||||||
| Goodwill |
5,645 | |||||
| Other intangible assets |
2,459 | |||||
| Excess reserves held at central banks |
50,094 | |||||
|
|
|
|||||
| Adjusted assets |
158,104 | |||||
| Plus deferred tax liabilities |
757 | |||||
|
|
|
|||||
| Total tangible assets |
A | $ | 158,861 | |||
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|
|
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| Consolidated Total Common Shareholders’ Equity |
$ | 18,898 | ||||
| Less: |
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| Goodwill |
5,645 | |||||
| Other intangible assets |
2,459 | |||||
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|
|
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| Adjusted equity |
10,794 | |||||
| Plus deferred tax liabilities |
757 | |||||
|
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|
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| Total tangible common equity |
B | $ | 11,551 | |||
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|
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| Tangible common equity ratio |
B/A | 7.3 | % | |||
| Tier 1 Capital |
$ | 13,625 | ||||
| Less: |
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| Trust preferred securities |
950 | |||||
| Preferred stock |
500 | |||||
|
|
|
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| Tier 1 common capital |
C | $ | 12,175 | |||
|
|
|
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| Total risk-weighted assets |
D | $ | 72,234 | |||
| Ratio of tier 1 common capital to total risk-weighted assets |
C/D | 16.9 | % | |||
STATE STREET CORPORATION
BASEL III CAPITAL RECONCILIATION
December 31, 2011
The table set forth below reconciles State Street’s capital ratios calculated in accordance with currently applicable bank regulatory requirements, as well as the tier 1 common ratio, to estimated ratios calculated in accordance with Basel III as State Street currently understands the impact of the Basel III requirements.
| (Dollars in millions) |
Current Requirements (1) |
Basel III Requirements (2) |
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| Tier 1 capital |
$ | 13,625 | A | $ | 13,030 | |||||
| Less: |
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| Trust preferred securities |
950 | 637 | ||||||||
| Preferred stock |
500 | 500 | ||||||||
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| Tier 1 common capital |
12,175 | B | 11,893 | |||||||
| Total capital |
14,823 | C | 14,682 | |||||||
| Total risk-weighted assets |
72,234 | D | 98,335 | |||||||
| Adjusted quarterly average assets |
186,021 | E | 231,924 | |||||||
| Tier 1 capital ratio |
18.9 | % | A/D | 13.3 | % | |||||
| Total capital ratio |
20.5 | % | C/D | 14.9 | % | |||||
| Tier 1 common ratio |
16.9 | % | B/D | 12.1 | % | |||||
| Tier 1 leverage ratio |
7.3 | % | A/E | 5.6 | % | |||||
| (1) | Actual (unaudited) total capital, tier 1 capital and tier 1 leverage ratios were calculated in accordance with currently applicable bank regulatory requirements. Tier 1 common ratio was calculated by dividing (a) tier 1 capital less non-common elements including qualifying perpetual preferred stock, qualifying minority interest in subsidiaries and qualifying trust preferred securities (tier 1 common capital), by (b) total risk-weighted assets, which were calculated in accordance with currently applicable bank regulatory requirements. |
| (2) | For purposes of the calculations in accordance with Basel III (see below), total capital, tier 1 capital and tier 1 leverage ratios, total risk-weighted assets and adjusted quarterly average assets were calculated based on State Street’s estimates, based on published statements of the Basel Committee and the Federal Reserve, of the effects of the requirements under Basel III affecting capital. The tier 1 common ratio was calculated by dividing (a) tier 1 common capital (as described in footnote (1)), but with tier 1 capital calculated in accordance with Basel III by, (b) total risk-weighted assets, which are calculated in accordance with Basel III. State Street calculates its capital ratios in accordance with the requirements of the Board of Governors of the Federal Reserve System, which has not yet adopted Basel III. There remains considerable uncertainty concerning the timing for adoption and implementation of Basel III by the Federal Reserve. When adopted, the Federal Reserve may implement Basel III with some or more modifications or adjustments. Therefore, State Street’s current understanding of Basel III, as reflected in the table above, may be different from the ultimate application of Basel III by the Federal Reserve to State Street. |
| • | Tier 1 capital used in the calculation of the tier 1 capital and tier 1 leverage ratios decreased by $595 million, as a result of applying estimated Basel III requirements to tier 1 capital of $13.625 billion as of December 31, 2011. Total capital used in the calculation of the total capital ratio decreased by $141 million, as a result of applying estimated Basel III requirements to total capital of $14.823 billion as of December 31, 2011. |
| • | Tier 1 common capital used in the calculation of the tier 1 common ratio was $11.893 billion, reflecting the adjustments to tier 1 capital described in the first bullet above. Tier 1 common capital used in the calculation is therefore calculated as adjusted tier 1 capital of $13.030 billion less non-common elements of capital, composed of trust preferred securities of $637 million and preferred stock of $500 million as of December 31, 2011, resulting in tier 1 common capital of $11.893 billion. At December 31, 2011, there was no qualifying minority interest in subsidiaries. |
| • | Total risk-weighted assets used in the calculation of the total capital, tier 1 capital and tier 1 common ratios increased by $26.101 billion as a result of applying estimated Basel III requirements to total risk-weighted assets of $72.234 billion as of December 31, 2011. |
| • | Consolidated adjusted quarterly average assets used in the calculation of the leverage ratio increased by $45.903 billion as a result of applying estimated Basel III requirements to the actual consolidated adjusted quarterly average assets of $186.021 billion as of December 31, 2011. |
STATE STREET CORPORATION
RECONCILIATION OF OPERATING-BASIS RESULTS
State Street prepares its consolidated statement of income in accordance with accounting principles generally accepted in the U.S., or GAAP. In addition, State Street presents financial information on a non-GAAP basis, referred to as “operating” basis. Management measures and compares certain financial information on an operating basis, as it believes that this presentation supports meaningful comparisons from period to period and the analysis of comparable financial trends with respect to State Street’s normal ongoing business operations. Management believes that operating-basis financial information, which reports revenue from non-taxable sources on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of the normal course of business, facilitates an investor’s understanding and analysis of State Street’s underlying financial performance and trends in addition to financial information prepared in accordance with GAAP. The tables presented below reconcile financial information prepared on an operating basis to financial information prepared in accordance with GAAP.
| Year Ended December 31, 2001 | Year Ended December 31, 2011 | |||||||||||||||||||||||||||
| (Dollars in millions) |
Reported Results |
Adjustments | Operating-Basis Results |
Reported Results |
Adjustments | Operating-Basis Results |
% Change 2001 - 2011 |
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| Total fee revenue |
$ | 2,769 | $ | (122 | )(1) | $ | 2,647 | $ | 7,194 | $ | 7,194 | |||||||||||||||||
| Net interest revenue |
1,025 | 42 | (2) | 1,067 | 2,333 | $ | (92 | )(3) | 2,241 | |||||||||||||||||||
| Gains related to investment securities, net: |
43 | — | 43 | 67 | — | 67 | ||||||||||||||||||||||
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| Total revenue |
$ | 3,837 | $ | (80 | ) | $ | 3,757 | $ | 9,594 | $ | (92 | ) | $ | 9,502 | 152.9 | % | ||||||||||||
| (1) | Represents revenue associated with the Corporate Trust and Private Management businesses divested in 2002 and 2003, respectively. |
| (2) | Represents tax-equivalent adjustment of $42 million, not included in reported results. |
| (3) | Represents tax-equivalent adjustment of $128 million, not included in reported results, net of $220 million of discount accretion related to former conduit securities. |