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0
Building on our Strategy to Drive
Sustainable Growth and Returns
Barclays Annual Financial Services Conference
Eric W. Aboaf
Chief Financial Officer
Tuesday, September 12, 2017
Exhibit 99.1
1
This presentation contains forward-looking statements. These statements are not guarantees of
future performance, are inherently uncertain, are based on assumptions that are difficult to
predict and have a number of risks and uncertainties. The forward-looking statements in this
presentation speak only as of September 12, 2017, and State Street does not undertake efforts
to revise forward-looking statements. See “Forward-Looking Statements” in the Appendix for
more information, including a description of certain factors that could affect future results and
outcomes.
Financial information in this presentation is presented on an operating-basis, a non-GAAP
presentation, unless stated otherwise. Refer to the Appendix for explanations of our non-GAAP
financial measures, including changes made to our operating-basis presentation, and
reconciliations of our operating-basis financial information.
Preface and forward-looking statements
2
We have a broad-based franchise with a strong global footprint
Well positioned for changing industry landscape and leading market positions support
continued business growth opportunity
Significant opportunity to expand our client base and deepen relationships
Strong first half of 2017 as compared to the first half of 2016 driven by broad-based business
momentum, leveraging industry trends and advancing Beacon:
Growth in assets under custody and administration (AUCA) and fee revenue led by
equity market appreciation, new business activities and flows
Disciplined balance sheet management drove higher net interest income (NII) and and net
interest margin (NIM)
Delivering strong operating leverage helping improve operating margins, grow
earnings and increase returns
Prudently investing through Beacon while sustaining expense discipline throughout the
organization
Focused on a combination of sustainable growth and returns
Executive Summary
3
Delivering new perspectives and
insights into risk management
and investment strategy
Providing customized asset
servicing solutions that support
traditional and alternative
investments
Creating access to alpha,
insights, liquidity and financing by
enhancing portfolio values
Providing access to investment
strategies and insights that help
achieve financial objectives
Our focused franchise
• Proven experience, with approximately $2.6 trillion assets under management1 as of
June 30, 2017
• Access to a wide range of investment strategies across the risk/return spectrum
• With approximately $566 billion1 in global ETF assets under management as of June 30,
2017, we have one of the broadest ranges of ETFs in the industry
• Delivering investment research, foreign exchange (FX) trading and securities lending
• Providing liquidity across 34 international markets, with approximately $3.6 trillion in
lendable assets as of June 30, 2017
• $21.1 trillion in foreign exchange and interbank volume traded in 2016
• AUCA of approximately $31 trillion as of June 30, 2017
• One of the world’s leading investment service providers
• Fund accounting and administration, custody, investment operations outsourcing,
recordkeeping, and performance and analytics
• Integrated solutions across the lifecycle of trades
• Aligning research and advisory, portfolio performance and risk analytics, information and
data management to deliver innovation
• Customized and flexible multi-asset class products and services
Refer to the Appendix included with this presentation for footnote 1.
Primary focus of today’s discussion
4
Equities
$17.3
56%
Fixed
Income
$10.1
32%
State Street is a broad-based franchise with a strong global
footprint
Official
Institutions
Asset
Owners
Asset
Managers
Insurance
Companies
Alternative
Asset
Managers
By Product
Classification
By Financial
Instrument
By Geographic
Location
AUCA of $31.0T mix as of June 30, 2017
$ in trillions
Mutual
Funds
$7.1
23%
Collective
Funds,
Excl ETFs
$6.4
21%
ETFs
$2.2
7%
Pension
Products
$5.9
19%
Insurance
and Other
Products
$9.4
30%
Americas
$23.0
74%
EMEA
$6.5
21% APAC
$1.6
5%
Short Term and Other
Investments $3.6, 12%
5
We are well positioned for a changing industry landscape
• Defined Benefits (DB) to Defined Contribution (DC) and Retail shifts due to demographics (e.g., DC to IRA) driving
new flows and requiring added tools and capabilities
• Frozen DB plans require new skills, leading to new outsourcing
• Globally, investors continue to shift from Active to Passive, driven by fee sensitivity and relative performance of
strategies, with passive strategies’ share of overall global AUM increasing significantly
• Distribution complexity and costs increasing, resulting in demand for globally integrated operating model solutions
• Asset managers seeking product structures and distribution channels to deliver access (e.g., offshore-domiciled
vehicles via Luxembourg / Ireland)
• Offshore markets are ~10% of global AUM, but capturing ~30% of global flows1
• With structurally depressed returns, many investors are employing a bar-bell strategy and simultaneously
increasing allocation to Alternatives and Passive to meet return targets
• Within Alternatives, Private Equity and Real Estate are expected to grow faster than Hedge Funds2
• Lower-for-longer interest rates driving demand for fee-productive solutions
• Increasing product complexity due to the convergence between traditional and alternative asset managers
• Asset managers are reacting to multiple challenges (e.g., fee compression, shares of flows going to top-10
players, shrinking industry revenues in 2016) through M&A/consolidation and outsourcing non-core activities to
reduce costs
• Asset Owners demanding asset management portfolio tools, infrastructure, and technology and bringing
investment management in-house
• Increasing complexity and intensity from multiple regulators / legislation (e.g., MiFID II; DOL; SEC Modernization,
AIFMD; Solvency II; Form PF)
• Increasing trading and liquidity challenges and requirements, creating opportunities to address client needs with
new solutions
• Data proliferation and analytics providing new insights, but at a cost, pushing clients to look for partners to support
infrastructure and reduce costs
Examples:
Refer to the Appendix included with this presentation for footnotes 1 and 2.
Industry Trends:
Shift to Barbell
Product Mix
DC Expansion and
DB Contraction
Active
Outflows
Products
Globalizing
Fee
Compression
Regulatory
Pressure
Strong ETF
Growth Globally
Power to
Distribution
Industry
Consolidation
Disruptive
Technology
6
Our leading market positions support continued business
growth opportunity
STT,
20%
ETFs1
Industry: ~$4T
#1 in Servicing
Alternative
Investments2
Industry: ~$9T
#1 in Hedge Funds
#1 in Real Estate
#2 in Private Equity
Global
STT,
54%
Refer to the Appendix included with this presentation for footnotes 1 to 10.
STT,
42% STT,
29%
Domestic European (Core5)
Industry: ~$12T6
#1 in Custody (UK)8
#2 in Depository
Services (Germany)9
Substantial position in Italy
Offshore Fund Market10
Industry: ~$6T
#1 in Servicing
STT,
22%
STT,
27%
Americas
EMEA
U.S. Mutual Funds3
Industry: ~$27T
#1 in Servicing
Pension Funds4
Industry: ~$12T
#1 in Servicing
Industry Trends:
Shift to Barbell
Product Mix
DC Expansion and
DB Contraction
Active
Outflows
Products
Globalizing
Fee
Compression
Regulatory
Pressure
Strong ETF
Growth Globally
Power to
Distribution
Industry
Consolidation
Disruptive
Technology
7
estimated
estimated
estimated
7
Penetration of top 100 companies for mutual
funds, insurance, pension funds and
alternatives1:
We see significant opportunities to expand our client base
and relationships
Refer to the Appendix included with this presentation for footnote 1.
Industry Trends:
Shift to Barbell
Product Mix
DC Expansion and
DB Contraction
Active
Outflows
Products
Globalizing
Fee
Compression
Regulatory
Pressure
Strong ETF
Growth Globally
Power to
Distribution
Industry
Consolidation
Disruptive
Technology
66 61 57
38
34 39 43
62
Mutual Fund
Complexes
Insurance Alternative
Managers
Pension
Funds
Non-Clients
State Street Clients
• Targeting the right new clients:
−Focusing on identifying the next
generation of industry leaders
−Concentrating on client base that are
multi-country and have more
sophisticated products
• Identifying opportunities to serve more
assets of existing clients:
−Expecting large clients to move to
consolidate service providers
−M&A in Asset Management industry
putting more assets up for bid
• Offering more products on assets we
already service with existing clients:
−Our top 25 clients use an average of
~17 products as compared to our top
1,000 clients using only ~8
−Total size of our client’s
outsourceable wallets is expanding
as more clients are considering
outsourcing activities that they have
traditionally managed in-house
8
Providing clients with
access to specialized
research, Direct &
Indirect FX trading,
securities lending,
Enhanced Custody,
and innovative portfolio
solutions to help
enhance and preserve
the value of clients’
portfolios
Our suite of back to front office services and the expansion
of outsourcing also enable us to deepen client relationships
Trading &
Investment
Research
Investment
Operations
(Middle Office
Outsourcing)
Fund
Accounting
Fund
Administration
Global
Custody
Back Office (In Between) Middle Office Front Office
State Street Global Services1
State Street
Global Markets
Our integrated solutions support the
investment management value chain including:
Data & Analytics
Digital platform for client interactions spanning from back to front office
Holding, safekeeping,
and servicing client
assets and provides
transaction processing,
settlement, and
network information
Comprehensive set of
services tailored to
meet back office client
needs, and offers
financial and regulatory
reporting, compliance
monitoring, treasury
services, tax services,
and legal administration
Global suite of
integrated solutions for
Asset Managers and
Asset Owners looking
to contain costs,
reduce risks, and
streamline operations
such as investment
recordkeeping and
performance analytics
and measurement
Global accounting
platform for NAV
calculations, which also
provides flexibility,
supporting local tax
requirements,
international financial
reporting standards,
and GAAP accounting
Industry Trends:
Shift to Barbell
Product Mix
DC Expansion and
DB Contraction
Active
Outflows
Products
Globalizing
Fee
Compression
Regulatory
Pressure
Strong ETF
Growth Globally
Power to
Distribution
Industry
Consolidation
Disruptive
Technology
State Street Global Exchange
Refer to the Appendix included with this presentation for footnote 1.
9
Industry Trends:
Shift to Barbell
Product Mix
DC Expansion and
DB Contraction
Active
Outflows
Products
Globalizing
Fee
Compression
Regulatory
Pressure
Strong ETF
Growth Globally
Power to
Distribution
Industry
Consolidation
Disruptive
Technology
Although we are focused on growth, we are also actively
measuring and managing margins and returns
State Street Client Return on Capital (ROC) and Net Income Before Tax
(NIBT) Margin Framework:
%
Address delivery costs with
digitization/ standardization – further
our scale, improve our processes and
automate activities to drive greater
efficiencies
B Work with clients to make
relationship more equitable –
• Review balance sheet usage
• Review product mix
• Address delivery costs
D
Review balance sheet usage
and product mix – address costs
of balance sheet usage, while also
examining product mix and
penetration
C Continually innovating solutions to
sustain and deepen relationships –
deliver more value to clients over time
A
Client ROC
Client NIBT Margin
10
Growth in AUCA has been strong and accelerated in the last
six quarters
AUCA
$ in trillions as of period-end % YoY growth
26.9 27.8
29.2 28.8
29.8
31.0
(5%)
12%
(10%)
(5%)
-
5%
10%
15%
20%
25%
-
5
10
15
20
25
30
35
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1H16
YoY ∆: (3%)
2H16
YoY ∆: 5%
1H17
YoY ∆: 12%
1H17 vs 1H16 Highlights:
• AUCA growth reflects:
−Growth from market appreciation
−New business across a breadth of products,
particularly in U.S. and EMEA
−Higher inflows in the U.S. from asset
managers and ETFs
• Growth was partially offset by the continued
rotation out of hedge funds
(Approximate $B as
of period-end)
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
New asset servicing
mandates
264 750 212 180 110 135
Yet to be installed 400 1,040 500 440 375 370
New Business Metrics
11
Continued business momentum in the first half of 2017 has
delivered strong fee revenue growth
Fee Revenue
$ in millions % Fee revenue YoY growth
2,033 2,130
2,213 2,200
2,268 2,324
(4%)
9%
(35%)
(30%)
(25%)
(20%)
(15%)
(10%)
(5%)
-
5%
10%
15%
-
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1H16
YoY ∆: (3%)
2H16
YoY ∆: 5%,
3% due to GEAM
1H17
YoY ∆: 10%,
3% due to GEAM
Servicing fees Markets revenue2 Management fees Proc. fees & oth.
Operating-Basis (Non-GAAP)1
1
1H17 vs 1H16 Highlights:
• 10% fee revenue growth due to strong
business momentum:
−Servicing fees growth of 4% driven by
strengthening equity markets, net new
business and continued client flows in ETFs
−Global Markets growth of 6%2 driven by gains
in market share in FX trading and continued
growth in the enhanced custody business
−Management fees grew 40%, benefiting from
the acquired GEAM operations, strengthening
equity markets and higher revenue-yielding
ETF net flows
−Processing fees and other revenue grew
22% primarily driven by the 1Q17 pre-tax gain
associated with the sale of the BFDS/IFDS
U.K. joint venture interests of $30M
Refer to the Appendix included with this presentation for footnotes 1 and 2.
12
Higher NII & NIM primarily driven by higher U.S. market
interest rates and disciplined liability management
NII1
$ in millions % YoY growth
Average Interest-Earning Assets & NIM
$ in billions NIM %
539 546 537 547 553
617
(5%)
13%
(10%)
(5%)
-
5%
10%
15%
20%
25%
-
100
200
300
400
500
600
700
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Refer to the Appendix included with this presentation for footnote 1.
1H17 vs 1H16 Highlights:
• Strengthening NII primarily reflecting:
−Higher U.S. market interest rates in
conjunction with disciplined liability pricing
−Lower wholesale CD balances
− Increase partially offset by lower investment
securities balances
• Higher NIM primarily driven by higher U.S.
market interest rates and continued disciplined
liability pricing, partially offset by a smaller
investment portfolio
1H16
YoY ∆: (3%)
2H16
YoY ∆: 4%
1H17
YoY ∆: 8%
194
198
202 202
192
195
1.12%
1.27%
0.95%
1.00%
1.05%
1.10%
1.15%
1.20%
1.25%
1.30%
170
175
180
185
190
195
200
205
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Operating-Basis (Non-GAAP)1
13
Careful pacing of investments and expense discipline helped
generate positive operating leverage in 1H17
Expenses
$ in Millions % YoY growth
1,943 1,828 1,909
2,143 2,057 1,960
0%
18%
7%
4%
(5%)
-
5%
10%
15%
20%
-
500
1,000
1,500
2,000
2,500
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Fee Operating & Total Operating Leverage
Operating-Basis (Non-GAAP)
249
1,8941
Refer to the Appendix included with this presentation for footnote 1.
1H17 vs 1H16 Highlights:
• Carefully managing expenses and Beacon
savings helped generate positive operating
leverage:
−Compensation & benefits continues to support
new business activities and regulatory
initiatives
− Information systems and communications
driven by planned investments and new
business
−Other expenses driven by costs associated
with the acquired GEAM operations, as well as
regulatory and insurance expense
• 4Q16 included an acceleration of compensation expense
of $249M1. Excluding this:
− 4Q16 YoY expense growth would have been 4%
− 2H16 YoY expense growth would have been 3%
− 4Q16 YoY total operating leverage would have been
216bps
− 4Q16 YoY fee operating leverage would have been
196bps
bps 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Total Operating Leverage
Excl. comp. acceleration,
where noted
(372) 91 253 (1,153)
2161
217 272
Fee Operating Leverage
Excl. comp. acceleration,
where noted
(361) 79 293 (1,173)
1961
569 189
1H16 YoY ∆: (1%)
2H16 YoY ∆: 10%
(3%1 excl. comp.
acceleration),
3% due to GEAM
1H17 YoY ∆: 7%,
3% due to GEAM
1
Expense YoY Growth
Expense excl. comp.
acceleration YoY Growth
1H17
Fee Operating
Leverage: 379bps
14
Year Over
Year Changes:
∆ from
2015
to 2016
∆ from
2016
to 2017
Expense benefits $210 $230
Investment expenses ($35) ($90)
Net expense savings $175 $140
Beacon’s benefits are helping to fund investments to drive
both future savings and future growth
Breakdown of Benefits by Beacon Driver:
(%)
Contribution to Gross
Expense Benefits
2016
Actual
2017
Estimate
Transaction Processing,
Fund Accounting,
Fund Administration
and operating model
optimizations
80% 70%
Application,
platform rationalization
and optimization
10% 15%
Corporate
divisions, procurement,
real estate optimization
and SSGA
10% 15%
Beacon Operating-Basis Financials1,2:
($M, FY)
Continuing to invest to improve effectiveness, efficiency and
risk excellence, while also driving future revenue opportunities
Driving
scale of
our global
model
Expanding
connectivity
across the
enterprise
Investing
in next
generation
of platforms
Operating-Basis (Non-GAAP)
Refer to the Appendix included with this presentation for footnotes 1 and 2.
15
Strong first half of 2017 driven by broad-based performance,
resulting in 18% EPS growth and ROE of 12%
Operating-Basis (Non-GAAP)1,2
Diluted Earnings per Share (EPS)
$ % YoY growth
0.98
1.46
1.35
1.48
1.21
1.67
(16%)
14%
(20%)
(10%)
-
10%
20%
30%
-
0.40
0.80
1.20
1.60
2.00
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1H16
YoY ∆: (3%)
2H16
YoY ∆: 20%
1H17
YoY ∆: 18%
Average Return on Equity (ROE)
% YoY change in bps
8.4
12.3
11.1
12.5
10.4
13.7
(200)bps
140bps
(250)
(150)
(50)
50
150
250
-
5
10
15
20
25
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1H16
YoY ∆: (70)bps
2H16
YoY ∆: 157bps
1H17
YoY ∆: 160bps
1H17 vs 1H16 Highlights:
• EPS growth of 18% driven by strong fee
revenue and NII growth from higher equity
markets, new business wins and client activity,
as well as higher U.S. market interest rates
• Fee revenue growth of 10% supported by
continued business momentum, strong Markets
activity, and the acquired GEAM operations
• Generated positive fee operating leverage of
379bps while carefully pacing investments to
drive future growth
• Improved pre-tax operating margin to 29.8%,
an increase of 180bps
• ROE improved 160bps to 12.0% through
stronger earnings and capital return
Refer to the Appendix included with this presentation for footnote 1.
16
Advance our digital leadership through Beacon
We are focused on both sustainable growth and returns
Continue to invest in new products and solutions
Achieve our financial goals
Drive growth from the core franchise
17
Questions
and
Answers
Building on our Strategy to Drive
Sustainable Growth and Returns
Barclays Annual Financial Services Conference
Eric W. Aboaf
Chief Financial Officer
Tuesday, September 12, 2017
18
APPENDIX
Slide footnotes 19 – 20
Forward looking statements 21
Reconciliations of Operating-Basis (Non-GAAP) Financial Information 22 – 31
Definitions 32 – 33
19
Slide footnotes
Footnote to slide 3:
1 AUM reflects approximately $34 billion (as of June 30, 2017) with respect to which State Street Global Markets, LLC (SSGM) serves as marketing agent;
SSGM and State Street Global Advisors (SSGA) are affiliated.
Footnotes to slide 5:
1 Morningstar Direct.
2 BCG and McKinsey both project PERE to grow much faster than hedge funds, with BCG putting PERE at 9-10% and HFs at 4-5%; HF and RE projections
from PWC 2013-20E, PE from Trivago 2016-2026E, PE estimate from PWC ~9% 2013-20E, PWC report titled “Alternative AM in 2020”.
Footnotes to slide 6:
1 Industry data sourced from ETFGI, Blackrock Research, NSX for May 2017 data as of June 2017; STT estimated AUA market position calculated based on
industry data.
2 Industry data sourced from eVestment Alternative Fund Administration 2017 Industry Survey dated April 27, 2017, which uses 2016 year-end data. STT
estimated AUA market position based on weighted average of hedge funds, funds of hedge funds, private equity , and real estate as compared to the total
survey.
3 AUCA data includes Mutual Funds Assets Under Custody and/or Administration (outsourced); Data from 2017 Mutual Fund Service Guide (2016 YE Custody
and Fund Accounting- Full Service 5yr snapshots)
4 Money Market Directory as of December 31, 2016.
5 U.K., Germany, and Italy
6 U.K. data sourced from Cerulli and Investment Association, and Germany data sourced from Cerulli. Calculated estimate of managed assets size for U.K.
and Germany based on and as of December 2016. Italy data sourced from the Italian Association of Asset Managers and based on 2016 managed assets
size for Italy as of May 19, 2017.
7 STT estimated market position based on weighted average of STT’s AUCA for U.K., Germany and Italy divided by Cerulli’s calculated estimate of industry
managed asset size for U.K. and Germany, and the Italian Association of Asset Managers’ calculated estimate of industry managed asset size for Italy as of
December 2016.
8 Source: Investment Association (IA) website - IA Company Rankings as at February 2016. State Street Custodian market share identified using prospectus’s
for all Asset Managers / Funds with AUM greater than £1bn (As identified on the IA website). Fund Administration: IA website - IA Fund Statistics allocated to
each provider based on the Custodian / Depositary. Ranking based on Fund Administration market share.
9 Depositary services for German-based investment funds sourced from Verwahrstellenstatistik des BVI as of December 31, 2016.
10 Offshore market industry data includes Luxembourg and Ireland domiciled funds only; Industry data sourced from Monterey Insight Ireland June 2016 and
Luxembourg December 2016; STT estimated AUA market position based on internal company analysis using weighted average of market position in
Luxembourg and Ireland.
Footnote to slide 7:
1 Internal company analysis; Mutual Funds: Morningstar; Insurance: SNL; Alternative Managers: Willis Towers Watson 2017 Global Alternatives Survey; and
Pension Funds: Money Market Directory as of December 31, 2016.
Footnote to slide 8:
1 State Street Global Services includes State Street Investment Manager Services, our middle office outsourcing arm of the business.
20
Slide footnotes
Footnotes to slide 11:
1 The 1Q17 operating-basis results included a pre-tax gain of approximately $30M on the sale of State Street's interest in Boston Financial Data Services, Inc.
(BFDS) and International Financial Data Services Limited (IFDS U.K.), reflecting a change in our operating-basis presentation effective in 1Q17 to include
gains/losses on sales of businesses. In 2Q16, under our historical presentation, operating-basis results excluded a $53M pretax gain on the sale of
WM/Reuters business, and such results have not been revised.
2 Markets revenue includes the entire trading services and securities finance revenue line items. Also included in the trading services revenue line is
distribution fees we generate from GLD in the SSGA business. In 1Q16, 2Q16, 3Q16, 4Q16, 1Q17 and 2Q17, the portion of trading services related to SSGA
was $14M, $13M, $19M, $15M, $18M and $17M, respectively.
Footnote to slide 12:
1 Beginning in 1Q17, management will no longer present discount accretion associated with former conduit securities as an operating-basis adjustment.
Therefore, 1Q17 and 2Q17 operating-basis results included $5M and $6M, respectively, of discount accretion. In 1Q16, 2Q16, 3Q16 and 4Q16, operating-
basis NII excluded $15M, $15M, $42M and $10M of discount accretion, respectively, and such results have not been revised.
Footnote to slide 13:
1 Referenced results excludes the effects of $249M of accelerated compensation expense in 4Q16. Please refer to the Appendix for reconciliations of those
results to our operating-basis presentation.
Footnotes to slide 14:
1 Estimated year-over-year pre-tax expense savings improvement relate only to Beacon and the targeted staff reductions announced as part of our 3Q15
financial results (includes targeted staff reductions in October 2015), all else equal. The full effect of the savings generated each year will be felt the following
year. Actual expenses may increase or decrease in the future due to other factors.
2 The operating-basis presentation of Beacon savings excludes restructuring charges, which are expected to be announced as Beacon progresses, including
charges of $142M for 2016 and $78M for YTD2Q17 ($62M in 2Q17 and $16M in 1Q17).
Footnotes to slide 15:
1 The 1Q17 operating-basis results included a pre-tax gain of approximately $30M on the sale of State Street's interest in Boston Financial Data Services, Inc.
(BFDS) and International Financial Data Services Limited (IFDS U.K.), reflecting a change in our operating-basis presentation effective in 1Q17 to include
gains/losses on sales of businesses. In 2Q16, under our historical presentation, operating-basis results excluded a $53M pretax gain on the sale of
WM/Reuters business, and such results have not been revised.
2 Beginning in 1Q17, management also will no longer present discount accretion associated with former conduit securities as an operating-basis adjustment.
Therefore, 1Q17 and 2Q17 operating-basis results included $5M and $6M, respectively, of discount accretion. In 1Q16, 2Q16, 3Q16 and 4Q16, operating-
basis NII excluded $15M, $15M, $42M and $10M of discount accretion, respectively, and such results have not been revised.
21
This presentation contains “forward-looking statements”, including statements about our goals and expectations regarding our business, financial and capital condition, results of operations, strategies, financial portfolio performance, dividend and
stock purchase programs, outcomes of legal proceedings, market growth, acquisitions, joint ventures and divestitures, cost savings and transformation initiatives, client growth and new technologies, services and opportunities, as well as industry,
regulatory, economic and market trends, initiatives and developments, the business environment and other matters that do not relate strictly to historical facts. Terminology such as “plan,” “expect,” “intend,” “objective,” “forecast,” “outlook,”
“believe,” “priority,” “anticipate,” “estimate,” “seek,” “may,” “will,” “trend,” “target,” “strategy” and “goal,” or similar statements or variations of such terms, are intended to identify forward-looking statements, although not all forward-looking statements
contain such terms. Forward-looking statements are subject to various risks and uncertainties, which change over time, are based on management's expectations and assumptions at the time the statements are made, and are not guarantees of
future results. Management's expectations and assumptions, and the continued validity of the forward-looking statements, are subject to change due to a broad range of factors affecting the national and global economies, regulatory environment
and the equity, debt, currency and other financial markets, as well as factors specific to State Street and its subsidiaries, including State Street Bank.
Factors that could cause changes in the expectations or assumptions on which forward-looking statements are based cannot be foreseen with certainty and include, but are not limited to: 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 sovereign-debt risks in the U.S., Europe and other
regions; increases in the volatility of, or declines in the level of, our NII, changes in the composition or valuation of the assets recorded in our consolidated statement of condition (and our ability to measure the fair value of investment securities) and
the possibility that we may change the manner in which we fund those assets; the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities and inter-bank credits, and the liquidity requirements of
our clients; the level and volatility of interest rates, the valuation of the U.S. dollar relative to other currencies in which we record revenue or accrue expenses and the performance and volatility of securities, credit, currency and other markets in the
U.S. and internationally; and the impact of monetary and fiscal policy in the United States and internationally on prevailing rates of interest and currency exchange rates in the markets in which we provide services to our clients; 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; our ability to attract deposits and other low-cost, short-term funding, our ability to manage levels of such deposits and the relative portion of our deposits that are determined to be operational under
regulatory guidelines and our ability to deploy deposits in a profitable manner consistent with our liquidity needs, regulatory requirements and risk profile; the manner and timing with which the Federal Reserve and other U.S. and foreign regulators
implement or reevaluate changes to the regulatory framework applicable to our operations, including implementation or modification of the Dodd-Frank Act, the Basel III final rule and European legislation (such as the Alternative Investment Fund
Managers Directive, Undertakings for Collective Investment in Transferable Securities Directives and Markets in Financial Instruments Directive II); among other consequences, these regulatory changes impact the levels of regulatory capital we
must maintain, acceptable levels of credit exposure to third parties, margin requirements applicable to derivatives, and restrictions on banking and financial activities. In addition, our regulatory posture and related expenses have been and will
continue to be affected by changes in regulatory expectations for global systemically important financial institutions applicable to, among other things, risk management, liquidity and capital planning, resolution planning, compliance programs, and
changes in governmental enforcement approaches to perceived failures to comply with regulatory or legal obligations; our resolution plan, submitted to the Federal Reserve and FDIC in June 2017, may not be considered to be sufficient by the
Federal Reserve and the FDIC, due to a number of factors, including, but not limited to, challenges we may experience in interpreting and addressing regulatory expectations, failure to implement remediation in a timely manner, the complexities of
development of a comprehensive plan to resolve a global custodial bank and related costs and dependencies. If we fail to meet regulatory expectations to the satisfaction of the Federal Reserve and the FDIC in our resolution plan submission filed
in June 2017 or any future submission, we could be subject to more stringent capital, leverage or liquidity requirements, or restrictions on our growth, activities or operations; adverse changes in the regulatory ratios that we are required or will be
required to meet, whether arising under the Dodd-Frank Act or the Basel III final rule, or due to changes in regulatory positions, practices or regulations in jurisdictions in which we engage in banking activities, including changes in internal or
external data, formulae, models, assumptions or other advanced systems used in the calculation of our capital ratios that cause changes in those ratios as they are measured from period to period; requirements to obtain the prior approval or non-
objection of the Federal Reserve or other U.S. and non-U.S. regulators for the use, allocation or distribution of our capital or other specific capital actions or corporate activities, including, without limitation, acquisitions, investments in subsidiaries,
dividends and stock purchases, without which our growth plans, distributions to shareholders, share repurchase programs or other capital or corporate initiatives may be restricted; changes in law or regulation, or the enforcement of law or
regulation, that may adversely affect our business activities or those of our clients or our counterparties, and the products or services that we sell, including additional or increased taxes or assessments thereon, capital adequacy requirements,
margin requirements and changes that expose us to risks related to the adequacy of our controls or compliance programs; economic or financial market disruptions in the U.S. or internationally, including those which may result from recessions or
political instability; for example, the U.K.'s decision to exit from the European Union may continue to disrupt financial markets or economic growth in Europe or, similarly, financial markets may react sharply or abruptly to actions taken by the new
administration in the United States; our ability to develop and execute State Street Beacon, our multi-year transformation program to digitize our business, deliver significant value and innovation for our clients and lower expenses across the
organization, any failure of which, in whole or in part, may among other things, reduce our competitive position, diminish the cost-effectiveness of our systems and processes or provide an insufficient return on our associated investment; our ability
to promote a strong culture of risk management, operating controls, compliance oversight, ethical behavior and governance that meets our expectations and those of our clients and our regulators, and the financial, regulatory, reputation and other
consequences of our failure to meet such expectations; the impact on our compliance and controls enhancement programs of the appointment of a monitor under the deferred prosecution agreement with the DOJ and compliance consultant
expected to be appointed under a potential settlement with the SEC, including the potential for such monitor and compliance consultant to require changes to our programs or to identify other issues that require substantial expenditures, changes in
our operations, or payments to clients or reporting to U.S. authorities; the results of our review of our billing practices, including additional amounts we may be required to reimburse clients, as well as potential consequences of such review,
including damage to our client relationships and adverse actions by governmental authorities; the results of, and costs associated with, governmental or regulatory inquiries and investigations, litigation and similar claims, disputes, or civil or criminal
proceedings; changes or potential changes in the amount of compensation we receive from clients for our services, and the mix of services provided by us that clients choose; the large institutional clients on which we focus are often able to exert
considerable market influence, and this, combined with strong competitive market forces, subjects us to significant pressure to reduce the fees we charge, to potentially significant changes in our assets under custody and administration or our
assets under management in the event of the acquisition or loss of a client, in whole or in part, and to potentially significant changes in our fee revenue in the event a client re-balances or changes its investment approach or otherwise re-directs
assets to lower- or higher-fee asset classes; the potential for losses arising from our investments in sponsored investment funds; the possibility that our clients will incur substantial losses in investment pools for which we act as agent, and the
possibility of significant reductions in the liquidity or valuation of assets underlying those pools; our ability to anticipate and manage the level and timing of redemptions and withdrawals from our collateral pools and other collective investment
products; the credit agency ratings of our debt and depositary obligations and investor and client perceptions of our financial strength; adverse publicity, whether specific to State Street or regarding other industry participants or industry-wide
factors, or other reputational harm; our ability to control operational risks, data security breach risks and outsourcing risks, 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; our ability to expand our use of technology to enhance the efficiency, accuracy and reliability of our operations and our dependencies on information
technology and our ability to control related risks, including cyber-crime and other threats to our information technology infrastructure and systems (including those of our third-party service providers) and their effective operation both independently
and with external systems, and complexities and costs of protecting the security of such systems and data; our ability to grow revenue, manage expenses, attract and retain highly skilled people and raise the capital necessary to achieve our
business goals and comply with regulatory requirements and expectations; changes or potential changes to the competitive environment, including changes due to regulatory and technological changes, the effects of industry consolidation and
perceptions of State Street as a suitable service provider or counterparty; our ability to complete acquisitions, joint ventures and divestitures, including the ability to obtain regulatory approvals, the ability to arrange financing as required and the
ability to satisfy closing conditions; the risks that our acquired businesses and joint ventures will not achieve their anticipated financial and operational benefits or will not be integrated successfully, or that the integration will take longer than
anticipated, that expected synergies will not be achieved or unexpected negative synergies or liabilities 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 our relationships with our clients, our employees or regulators; our ability to recognize evolving needs of our clients and to develop products that are responsive to such trends and profitable to us,
the performance of and demand for the products and services we offer, and 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 2016 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 should
not by relied on as representing our expectations or beliefs as of any time subsequent to this presentation, and we do not undertake efforts to revise those forward-looking statements to reflect events after that time.
Forward-looking statements
22
Reconciliation of operating-basis (non-GAAP) financial
information
We provide forward-looking financial estimates and expectations on an operating basis (non-GAAP) because information needed to provide corresponding
GAAP-basis information is primarily dependent on future events or conditions that may be uncertain and are difficult to predict or estimate. Management is
therefore, in general, is unable to provide a reconciliation of our operating-basis forward-looking financial estimates and expectations to a GAAP-basis
presentation.
Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in conformity with
GAAP.
State Street Corporation
Reconciliation of Operating-Basis (Non-GAAP) Financial Information
In addition to presenting State Street’s financial results in conformity with U.S. generally accepted accounting principles, or GAAP, management also presents
results on a non-GAAP, or "operating" basis, as it believes that this presentation supports additional meaningful analysis and comparisons of trends with
respect to State Street’s business operations from period to period, as well as information (such as capital ratios calculated under regulatory standards
scheduled to be effective in the future or other standards) that management also uses in evaluating State Street’s business and activities.
Our operating-basis financial results adjust our GAAP-basis financial results to both: (1) exclude the impact of revenue and expenses outside of State Street’s
normal course of business, such as restructuring charges; and (2) present revenue from non-taxable sources, such as interest income from tax-exempt
investment securities and processing fees and other revenue associated with tax-advantaged adjustments, on a fully taxable-equivalent basis. Management
believes that operating-basis financial information facilitates an investor's further understanding and analysis of State Street's financial performance and
trends, including providing additional insight into our underlying margin and profitability, in addition to financial information prepared and reported in conformity
with GAAP. The tax-equivalent adjustments allow for more meaningful comparisons of yields and margins on assets and the evaluation of investment
opportunities with different tax profiles.
Beginning with the first quarter of 2017, we are simplifying our operating-basis presentation of our financial results and will no longer exclude, as part of the
non-ordinary course adjustment, the effects of gains/losses on sales of businesses or the discount accretion associated with former conduit securities. In the
first quarter of 2017, operating-basis results included a pre-tax gain of approximately $30 million on the sale of our transfer agency joint venture interests. In the
first and second quarters of 2017, operating-basis results included $5 million and $6 million, respectively, of discount accretion. These changes resulted in
total increases in operating-basis revenue of $35 million and $6 million in the first and second quarters of 2017, respectively, relative to our historical operating-
basis presentation. Note that in the second quarter of 2016, operating-basis results excluded a pre-tax gain of approximately $53 million on the sale of the
WM/Reuters business. We believe that that these changes to our operating-basis presentation simplify the overall presentation of our financial results, making
them easier to understand, while, overall, continuing to facilitate a useful and helpful additional understanding of our financial results.
We also believe that the use of other non-GAAP financial measures in the calculation of identified capital ratios is useful to understanding State Street's capital
position and is of interest to investors. Additionally, management may present revenue and expense measures on a constant currency (non-GAAP) basis to
identify the significance of changes in foreign currency exchange rates (which often are variable) in period-to-period comparisons. This presentation
represents the effects of applying prior period weighted average foreign currency exchange rates to current period results.
23
Reconciliation of operating-basis (non-GAAP) financial
information
(Dollars in millions, except per share amounts, or where otherwise noted) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
T o tal R evenue ( 1 ) ( 2 ) ( 3 ) :
Total revenue, GAAP-basis 2,600$ 2,608$ 2,614$ 2,538$ 2,484$ 2,573$ 2,620$ 2,530$ 2,668$ 2,810$
Adjustment to processing fees and other revenue (see below) 53 98 12 31 63 34 134 186 70 89
Adjustment to net interest income (see below) 44 44 43 42 27 25 - 33 43 42
Adjustment to servicing and management fee revenue (see below) (25) (23) (27) (23) - 43 - - - -
Total revenue, operating-basis 2,672$ 2,727$ 2,642$ 2,588$ 2,574$ 2,675$ 2,754$ 2,749$ 2,781$ 2,941$
F ee R evenue ( 1 ) ( 3 ) :
Total fee revenue, GAAP-basis 2,055$ 2,076$ 2,103$ 2,044$ 1,970$ 2,053$ 2,079$ 2,014$ 2,198$ 2,235$
Tax-equivalent adjustment associated with tax-advantaged investments 53 98 95 113 63 87 134 186 70 89
Gain on sale of WM /Reuters Business - - - - - (53) - - - -
Expense billing matter, net - - - - - 43 - - - -
Gain on sale of CRE loan and paydown of CRE loan - - (83) (82) - - - - - -
Total fee revenue, operating-basis 2,108$ 2,174$ 2,115$ 2,075$ 2,033$ 2,130$ 2,213$ 2,200$ 2,268$ 2,324$
Servicing F ees:
Total servicing fees, GAAP-basis 1,268$ 1,319$ 1,289$ 1,277$ 1,242$ 1,239$ 1,303$ 1,289$ 1,296$ 1,339$
Expense billing matter - - - - - 48 - - - -
Total servicing fees, operating-basis 1,268$ 1,319$ 1,289$ 1,277$ 1,242$ 1,287$ 1,303$ 1,289$ 1,296$ 1,339$
M anagement F ees:
Total management fees, GAAP-basis 301$ 304$ 287$ 282$ 270$ 293$ 368$ 361$ 382$ 397$
Expense billing matter - - - - - (5) - - - -
Total management fees, operating-basis 301$ 304$ 287$ 282$ 270$ 288$ 368$ 361$ 382$ 397$
P ro cessing F ees and Other R evenue ( 1 ) :
Total proce sing fees and other revenue, GAAP-basis 61$ 17$ 120$ 111$ 52$ 98$ 5$ (65)$ 112$ 31$
Tax-equivalent adjustment associated with tax-advantaged investments 53 98 95 113 63 87 134 186 70 89
Gain on sale of CRE and CRE loan extinguishment / paydown - - (83) (82) - - - - - -
Gain on sale of WM /Reuters Business - - - - - (53) - - - -
Total processing fees and other revenue, operating-basis 114$ 115$ 132$ 142$ 115$ 132$ 139$ 121$ 182$ 120$
Quarters
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
24
Reconciliation of operating-basis (non-GAAP) financial
information
1Q16
vs.
1Q15
2Q17
vs.
2Q16 1H15 1H16
1H16
vs.
1H15 2H15 2H16
2H16
vs.
2H15
F ee R evenue ( 1 ) ( 3 ) :
Total fee revenue, GAAP-basis (4)% 9 % 4,131$ 4,023$ (3)% 4,147$ 4,093$ (1)%
Tax-equivalent adjustment associated with tax-advantaged investments 151 150 208 320
Gain on sale of WM /Reuters Business - (53) - -
Expense billing matter, net - 43 - -
Gain on sale of CRE loan and paydown of CRE loan - - (165) -
Total fee revenue, operating-basis (4)% 9 % 4,282$ 4,163$ (3)% 4,190$ 4,413$ 5 %
Servicing F ees:
Total servicing fees, GAAP-basis (2)% 8 % 2,587$ 2,481$ (4)% 2,566$ 2,592$ 1%
Expense billing matter - 48 - -
Total servicing fees, operating-basis (2)% 4 % 2,587$ 2,529$ (2)% 2,566$ 2,592$ 1%
Quarters
% Change
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
25
Reconciliation of operating-basis (non-GAAP) financial
information
1H16 1H17
1H17
vs.
1H16
F ee R evenue ( 1 ) ( 3 ) :
Total fee revenue, GAAP-basis 4,023$ 4,433$ 10 %
Tax-equivalent adjustment associated with tax-advantaged investments 150 159
Gain on sale of WM /Reuters Business (53) -
Expense billing matter, net 43 -
Gain on sale of CRE loan and paydown of CRE loan - -
Total fee revenue, operating-basis 4,163$ 4,592$ 10 %
Servicing F ees:
Total servicing fees, GAAP-basis 2,481$ 2,635$ 6 %
Expense billing matter 48 -
Total servicing fees, operating-basis 2,529$ 2,635$ 4 %
M anagement F ees:
Total management fees, GAAP-basis 563$ 779$ 38 %
Expense billing matter (5) -
Total management fees, operating-basis 558$ 779$ 40 %
P ro cessing F ees and Other R evenue ( 1 ) :
Total processing fees and other revenue, GAAP-basis 150$ 143$ (5)%
Tax-equivalent adjustment associated with tax-advantaged investments 150 159
Gain on sale of CRE and CRE loan extinguishment / paydown - -
Gain on sale of WM /Reuters Business (53) -
Total processing fees and other revenue, operating-basis 247$ 302$ 22 %
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
26
Reconciliation of operating-basis (non-GAAP) financial
information
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1Q16
vs.
1Q15
2Q17
vs.
2Q16
N et Interest Inco me & N et Interest M argin ( 2 ) ( 4 ) :
Net interest income, GAAP-basis 546$ 535$ 513$ 494$ 512$ 521$ 537$ 514$ 510$ 575$ (6)% 10 %
Tax-equivalent adjustment associated with tax-exempt
investment securities 44 44 43 42 42 40 42 43 43 42
Net interest income, fully taxable-equivalent basis 590$ 579$ 556$ 536$ 554$ 561$ 579$ 557$ 553$ 617$
Average interest earning assets 226,359$ 233,411$ 221,424$ 200,899$ 194,081$ 198,243$ 202,155$ 202,194$ 191,840$ 195,287$
Net interest margin, fully taxable-equivalent basis 1.06 % 1.00 % 1.00 % 1.06 % 1.15 % 1.14 % 1.14 % 1.09 % 1.17 % 1.27 %
Net interest income, fully taxable-equivalent basis 590$ 579$ 556$ 536$ 554$ 561$ 579$ 557$ 553$ 617$
Discount accretion associated with former conduit securities (25) (23) (27) (23) (15) (15) (42) (10) - -
Net interest income, operating-basis 565$ 556$ 529$ 513$ 539$ 546$ 537$ 547$ 553$ 617$ (5)% 13 %
Average interest earning assets 226,359$ 233,411$ 221,424$ 200,899$ 194,081$ 198,243$ 202,155$ 202,194$ 191,840$ 195,287$
Net interest margin, operating-basis 1.01% 0.96 % 0.95 % 1.01% 1.12 % 1.11% 1.06 % 1.08 % 1.17 % 1.27 %
Effect of discount accretion 0.05 % 0.04 % 0.05 % 0.05 % 0.03 % 0.03 % 0.08 % 0.01% —% —%
1H15 1H16
1H16
vs.
1H15 2H15 2H16
2H16
vs.
2H15 1H16 1H17
1H17
vs.
1H16
N et Interest Inco me & N et Interest M argin ( 2 ) ( 4 ) :
Net interest income, fully taxable-equivalent basis 1,169$ 1,115$ -5% 1,092$ 1,136$ 4% 1,115$ 1,170$ 5%
Net interest income, operating-basis 1,121$ 1,085$ -3% 1,042$ 1,084$ 4% 1,085$ 1,170$ 8%
% ChangeQuarters
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
27
Reconciliation of operating-basis (non-GAAP) financial
information
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1Q16
vs.
1Q15
2Q17
vs.
2Q16
Expenses ( 3 ) :
Total expenses, GAAP-basis 2,097$ 2,134$ 1,962$ 1,857$ 2,050$ 1,860$ 1,984$ 2,183$ 2,086$ 2,031$ (2.2)% 9.2 %
Severance costs associated with staffing realignment 1 - (75) 1 (3) 3 9 2 - -
Provisions for legal contingencies (150) (250) - (15) - - (42) 1 - -
Expense billing matter, net - - - (17) - (15) - - - -
Acquisition costs (5) (3) (7) (5) (7) (7) (33) (22) (12) (9)
Restructuring charges, net (1) - (3) (1) (97) (13) (9) (21) (17) (62)
Total expenses, operating-basis 1,942$ 1,881$ 1,877$ 1,820$ 1,943$ 1,828$ 1,909$ 2,143$ 2,057$ 1,960$ 0 % 7 %
1H15 1H16
1H16
vs.
1H15 2H15 2H16
2H16
vs.
2H15 1H16 1H17
1H17
vs.
1H16
Expenses ( 3 ) :
Total expenses, GAAP-basis 4,231$ 3,910$ (8)% 3,819$ 4,167$ 9 % 3,910$ 4,117$ 5 %
Severance costs associated with staffing realignment 1 - (74) 11 - -
Provisions for legal contingencies (400) - (15) (41) - -
Expense billing matter, net - (15) (17) - (15) -
Acquisition costs (8) (14) (12) (55) (14) (21)
Restructuring charges, net (1) (110) (4) (30) (110) (79)
Total expenses, operating-basis 3,823$ 3,771$ (1)% 3,697$ 4,052$ 10 % 3,771$ 4,017$ 7 %
4Q15 4Q16
4Q16
vs.
4Q15 2H15 2H16
2H16
vs.
2H15
Expenses ( 3 ) ( 6 ) :
Total expenses, operating-basis 1,820$ 2,143$ 18% 3,697$ 4,052$ 10 %
Impact o f accelerated compensation expense - (249) - (249)
Total expenses, operating-basis excluding accelerated compensation expense 1,820$ 1,894$ 4% 3,697$ 3,803$ 3 %
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17
1H17
vs.
1H16
P re-tax o perat ing margin ( 5 ) :
Pre-tax operating margin, GAAP-basis 17.3 % 27.6 % 24.3 % 13.6 % 21.9 % 27.6 % 22.5 % 24.8 % 230 bps
Net effect o f non-operating adjustments 7.1% 3.9 % 6.4 % 8.4 % 4.2 % 5.7 % 5.5 % 5.0 %
Pre-tax operating margin, operating-basis 24.4 % 31.5 % 30.7 % 22.0 % 26.1% 33.3 % 28.0 % 29.8 % 180 bps
Quarters % Change
Quarters
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
28
Reconciliation of operating-basis (non-GAAP) financial
information
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1Q16
vs.
1Q15
2Q17
vs.
2Q16
D iluted Earnings per C o mmo n Share ( 1 ) ( 2 ) :
Diluted earnings per common share, GAAP-basis 0.89$ 0.93$ 1.31$ 1.34$ 0.79$ 1.47$ 1.29$ 1.43$ 1.15$ 1.53$ (11.2)% 4.1%
Severance costs associated with staffing realignment - - 0.11 - 0.01 (0.01) (0.01) - - -
Provisions for legal contingencies 0.36 0.37 - 0.02 - - 0.11 0.02 - -
Expense billing matter, net - - - 0.03 - 0.10 - - - -
Acquisition costs 0.01 - 0.01 0.01 0.01 0.01 0.05 0.03 0.02 0.02
Restructuring charges, net - - - - 0.15 0.02 0.01 0.02 0.03 0.11
Effect on income tax of non-operating adjustments (0.06) 0.08 0.02 (0.04) 0.04 (0.01) (0.03) (0.01) 0.01 0.01
Discount accretion associated with former conduit securities (0.04) (0.02) (0.04) (0.03) (0.02) (0.02) (0.07) (0.01) - -
Gain on sale of CRE and CRE loan extinguishment / paydown - - (0.12) (0.12) - - - - - -
Italian deferred tax liability - - (0.14) - - - - - - -
Gain on sale of WM /Reuters Business - - - - - (0.10) - - - -
Diluted earnings per common share, operating-basis 1.16$ 1.36$ 1.15$ 1.21$ 0.98$ 1.46$ 1.35$ 1.48$ 1.21$ 1.67$ (16)% 14 %
1H15 1H16
1H16
vs.
1H15 2H15 2H16
2H16
vs.
2H15 1H16 1H17
1H17
vs.
1H16
D iluted Earnings per C o mmo n Share ( 1 ) ( 2 ) :
Diluted earnings per common share, GAAP-basis 1.83$ 2.25$ 23 % 2.65$ 2.72$ 3 % 2.25$ 2.69$ 20 %
Severance costs associated with staffing realignment - - .11 (.01) - -
Provisions for legal contingencies .73 - .02 .13 - -
Expense billing matter, net - .10 .03 - .10 -
Acquisition costs .01 .02 .02 .09 .02 .03
Restructuring charges, net - .17 .01 .03 .17 .14
Effect on income tax of non-operating adjustments .02 .04 (.02) (.04) .04 .02
Discount accretion associated with former conduit securities (.07) (.04) (.07) (.08) (.04) -
Gain on sale of CRE and CRE loan extinguishment / paydown - - (.24) - - -
Italian deferred tax liability - - (.14) - (.10) -
Gain on sale of WM /Reuters Business 0 -0.10 - - - -
Diluted earnings per common share, operating-basis 2.52$ 2.44$ (3)% 2.37$ 2.84$ 20 % 2.44$ 2.88$ 18 %
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
Quarters % Change
29
Reconciliation of operating-basis (non-GAAP) financial
information
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Return on Average Common E quity ( 1) ( 2 ) :
Return on average common equity, GAAP-basis 7.9 % 8.2 % 11.3 % 11.6 % 6.8 % 12.4 % 10.6 % 12.1 % 9.9 % 12.6 % (110) bps 20 bps
Severance costs associated with staff ing realignment —% —% 1.0 % —% —% (.1)% (.1)% —% —% —%
Provisions for legal contingencies 3.2 % 3.3 % —% .2 % —% —% .9 % .2 % —% —%
Expense billing matter, net —% —% —% .3 % —% .8 % —% —% —% —%
Acquisition costs .1 % —% .1 % .1 % .1 % .1 % .3 % .3 % .2 % .1 %
Restructuring charges, net —% —% —% —% 1.3 % .2 % .1 % .1 % .2 % .9 %
Effect on income tax of non-operating adjustments (.5)% .7 % .1 % (.3)% .4 % (.1)% (.2)% (.1)% .1 % .1 %
Discount accretion associated with former conduit securities (.3)% (.3)% (.3)% (.3)% (.2)% (.2)% (.5)% (.1)% —% —%
Gain on sale of CRE and CRE loan extinguishment / paydown —% —% (1.0)% (1.1)% —% —% —% —% —% —%
Italian deferred tax liability —% —% (1.2)% —% —% —% —% —% —% —%
Gain on sale of W M/Reuters Business —% —% —% —% —% (.8)% —% —% —% —%
Return on average common equity, operating-basis 10.4 % 11.9 % 10.0 % 10.5 % 8.4 % 12.3 % 11.1 % 12.5 % 10.4 % 13.7 % (200) bps 140 bps
1H15 1H16
1H16
vs.
1H15 2H15 2H16
2H16
vs.
2H15 1H16 1H17
1H17
vs.
1H16
Return on Average Common E quity ( 1) ( 2 ) :
Return on average common equity, GAAP-basis 8.0 % 9.6 % 160 bps 11.5 % 11.3 % (13) bps 9.6 % 11.3 % 170 bps
Severance costs associated with staff ing realignment —% —% .5 % (.1)% —% —%
Provisions for legal contingencies 3.2 % —% .1 % .5 % —% —%
Expense billing matter, net —% .4 % .1 % —% .4 % —%
Acquisition costs .1 % .1 % .1 % .4 % .1 % .1 %
Restructuring charges, net —% .7 % .0 % .1 % .7 % .5 %
Effect on income tax of non-operating adjustments .1 % .2 % (.1)% (.2)% .2 % .1 %
Discount accretion associated with former conduit securities (.3)% (.2)% (.3)% (.3)% (.2)% —%
Gain on sale of CRE and CRE loan extinguishment / paydown —% —% (1.0)% —% —% —%
Italian deferred tax liability —% —% (.6)% —% —% —%
Gain on sale of W M/Reuters Business —% (0.4)% —% —% (.4)% —%
Return on average common equity, operating-basis 11.1 % 10.4 % (70) bps 10.2 % 11.8 % 157 bps 10.4 % 12.0 % 160 bps
Quarters
Reconciliation of Operating-Basis (Non-GAAP ) Financial Information
S tate S treet Corporation
2Q17
vs.
2Q16
1Q16
vs.
1Q15
% Change
30
Reconciliation of operating-basis (non-GAAP) financial
information
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
F ee Operat ing Leverage, GA A P -B asis:
Total fee revenue, GAAP-basis (as reconciled above) 2,055$ 2,076$ 2,103$ 2,044$ 1,970$ 2,053$ 2,079$ 2,014$ 2,198$ 2,235$
Total expenses, GAAP-basis (as reconciled above) 2,097$ 2,134$ 1,962$ 1,857$ 2,050$ 1,860$ 1,984$ 2,183$ 2,086$ 2,031$
Year over year % change, fee revenue, GAAP-basis -4.14% -1.11% -1.14% -1.47% 11.57% 8.87%
Year over year % change, expenses, GAAP-basis -2.24% -12.84% 1.12% 17.56% 1.76% 9.19%
Fee operating leverage, GAAP-basis (189) bps 1,173 bps (226) bps (1,902) bps 982 bps (33) bps
F ee Operat ing Leverage, Operat ing-B asis ( 1 ) :
Total fee revenue, operating-basis (as reconciled above) 2,108$ 2,174$ 2,115$ 2,075$ 2,033$ 2,130$ 2,213$ 2,200$ 2,268$ 2,324$
Total expenses, operating-basis (as reconciled above) 1,942$ 1,881$ 1,877$ 1,820$ 1,943$ 1,828$ 1,909$ 2,143$ 2,057$ 1,960$
Year over year % change, fee revenue, operating basis -3.56% -2.02% 4.63% 6.02% 11.56% 9.11%
Year over year % change, expenses, operating-basis 0.05% -2.82% 1.70% 17.75% 5.87% 7.22%
Fee operating leverage, operating-basis (361) bps 79 bps 293 bps (1,173) bps 569 bps 189 bps
Operat ing Leverage, GA A P -B asis:
Total revenue, GAAP-basis (as reconciled above) 2,600$ 2,608$ 2,614$ 2,538$ 2,484$ 2,573$ 2,620$ 2,530$ 2,668$ 2,810$
Total expenses, GAAP-basis (as reconciled above) 2,097$ 2,134$ 1,962$ 1,857$ 2,050$ 1,860$ 1,984$ 2,183$ 2,086$ 2,031$
Year over year % change, to tal revenue, GAAP-basis -4.46% -1.34% 0.23% -0.32% 7.41% 9.21%
Year over year % change, expenses, GAAP-basis -2.24% -12.84% 1.12% 17.56% 1.76% 9.19%
Operating leverage, GAAP-basis (222) bps 1,150 bps (89) bps (1,787) bps 565 bps 2 bps
Operat ing Leverage, Operat ing-B asis ( 1 ) ( 2 ) :
Total revenue, operating-basis (as reconciled above) 2,672$ 2,727$ 2,642$ 2,588$ 2,574$ 2,675$ 2,754$ 2,749$ 2,781$ 2,941$
Total expenses, operating-basis (as reconciled above) 1,942$ 1,881$ 1,877$ 1,820$ 1,943$ 1,828$ 1,909$ 2,143$ 2,057$ 1,960$
Year over year % change, to tal revenue, operating basis -3.67% -1.91% 4.24% 6.22% 8.04% 9.94%
Year over year % change, expenses, operating-basis 0.05% -2.82% 1.70% 17.75% 5.87% 7.22%
Operating leverage, operating-basis (372) bps 91 bps 253 bps (1,153) bps 217 bps 272 bps
1H16 1H17
F ee Operat ing Leverage, GA A P -B asis:
Total fee revenue, GAAP-basis (as reconciled above) 4,023$ 4,433$
Total expenses, GAAP-basis (as reconciled above) 3,910$ 4,117$
Year over year % change, fee revenue, GAAP-basis 10%
Year over year % change, expenses, GAAP-basis 5%
Fee operating leverage, GAAP-basis 490 bps
F ee Operat ing Leverage, Operat ing-B asis ( 1 ) :
Total fee revenue, operating-basis (as reconciled above) 4,163$ 4,592$
Total expenses, operating-basis (as reconciled above) 3,771$ 4,017$
Year over year % change, fee revenue, operating basis 10%
Year over year % change, expenses, operating-basis 7%
Fee operating leverage, operating-basis 379 bps
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
31
Reconciliation of operating-basis (non-GAAP) financial
information
4Q15 4Q16
F ee Operat ing Leverage, Operat ing-B asis ( 1 ) :
Total fee revenue, operating-basis (as reconciled above) 2,075$ 2,200$
Total expenses, operating-basis (as reconciled above) 1,820 2,143
Impact o f accelerated compensation expense - (249)
Total expenses, operating-basis, excluding accelerated compensation expense 1,820$ 1,894$
Year over year % change, fee revenue, operating basis 6.02%
Year over year % change, expenses, operating-basis 4.07%
Fee operating leverage, operating-basis 196 bps
4Q15 4Q16
Operat ing Leverage, Operat ing-B asis ( 1 ) ( 2 ) :
Total revenue, operating-basis (as reconciled above) 2,588$ 2,749$
Total expenses, operating-basis (as reconciled above) 1,820 2,143
Impact o f accelerated compensation expense - (249)
Total expenses, operating-basis, excluding accelerated compensation expense 1,820$ 1,894$
Year over year % change, to tal revenue, operating basis 6.22%
Year over year % change, expenses, operating-basis 4.07%
Operating leverage, operating-basis 216 bps
(5) Pre-tax operating margin was calculated by dividing income before income tax expense by to tal revenue.
(3) The impact o f acquired operations on to tal revenue and fee revenue contributed approximately $65 million, $64 million, $71 million and $72 million for the third and fourth quarters of 2016 and first and
second quarters of 2017, respectively. The impact o f acquired operations on expenses contributed approximately $57 million, $58 million, $51 million and $51 million for the third and fourth quarters of
2016 and first and second quarters of 2017, respectively, excluding merger and integration charges and financing costs.
(4) Fully taxable-equivalent net interest margin for the periods presented above represented fully taxable-equivalent net interest income composed of GAAP-basis net interest income plus tax-equivalent
adjustments, on an annualized basis, as a percentage of average to tal interest-earning assets for the quarters presented.
(6) Compensation and employee benefits includes $249 million of accelerated compensation expense for the fourth quarter and year to date December 31, 2016.
State Street C o rpo rat io n
R eco nciliat io n o f Operat ing-B asis (N o n-GA A P ) F inancial Info rmatio n
(1) The first quarter o f 2017 GAAP and operating-basis results included a pre-tax gain o f approximately $30 million on the sale of State Street's interest in Boston Financial Data Services, Inc. (BFDS) and
International Financial Data Services Limited (IFDS Ltd), reflecting a change in our operating-basis presentation effective the first quarter o f 2017 to include gains/losses on sales of businesses. In the
second quarter o f 2016, under our historical presentation, operating-basis results excluded a $53 million pre-tax gain on the sale of WM /Reuters business, and such results have not been revised.
(2) Beginning in the first quarter o f 2017, management no longer presents discount accretion associated with former conduit securities as an operating-basis adjustment. Therefore, first and second
quarter 2017 GAAP and operating-basis results included $5 million and $6 million, respectively, o f discount accretion. In the first, second, third and fourth quarters of 2016, operating-basis net interest
income excluded $15 million, $15 million, $42 million and $10 million of discount accretion, respectively, and such results have not been revised.
32
AIFMD Alternative Investment Fund Managers Directive
AUCA Assets under custody and administration
AUM Assets under management
Beacon
Multi-year transformational effort with an objective to deliver best-in-class service and solutions, end-to-end service delivery, agile
methodologies, client-centric design and execution, one view of the client, and next generation technology platform
Bps Basis points
CD Certificate deposits
Client NIBT Margin Client net income before taxes margin represents client NIBT relative to revenue
Client ROC Client return on capital measures client after-tax earnings generated relative to optimal capital consumed
DB
Defined Benefits – A retirement plan in which as employer pays out a fixed amount to a retiree. When a plan pays fixed benefits, the amount
the employer puts into the plan can change each year depending on the number of retirees expected to receive pensions, the amounts
employees are paid or expect to receive, and how much the employer expects to earn on the plans investments
DC
Defined Contributions – A plan where the employee and that employer contribute to his/her pension before retirement. Under this plan
benefits received by retirees will vary based on investment returns
Diluted earnings per share
(EPS)
Net income available to common shareholders divided by diluted average common shares outstanding
DOL Department of Labor
EMEA Europe, Middle East, and Africa
ETF Exchange-trade fund
Fee operating leverage Rate of growth of total fee revenue less the rate of growth of expenses, relative to the respective prior year period
Form PF SEC rule requiring private fund advisers to report regulatory assets under management to the Financial Stability Oversight Council
FX Foreign Exchange
Definitions
33
GAAP Generally Accepted Accounting Principles
GE Asset Management (GEAM) The acquired GE Asset Management operations
GLD SPDR gold shares is part of the SPDR family of ETFs, where SSGA act as the marketing agent
IRA Individual retirement account
M&A Mergers & acquisition
MiFID II Markets in Financial Instruments Directive 2004
Net interest income (NII)
Income earned on interest bearing assets less interest paid on interest bearing liabilities; Net interest income was disclosed as net interest
revenue prior to 1Q17
Net asset value (NAV) The value per share of a mutual fund or an ETF on a specific date or time
Net interest margin (NIM) Net interest income divided by average interest-earning assets
Operating leverage Rate of growth of total revenue less the rate of growth of total expenses, relative to the respective prior year period
Pre-tax operating margin Income before income tax expense divided by total revenue
Return on equity (ROE) (Net income less dividends on preferred stock) divided by average common equity
SEC Securities & Exchange Commission
SSGA State Street Global Advisors
SSGM State Street Global Markets
SSGS State Street Global Services
SSGX State Street Global Exchange
YoY Year-over-year
Year to date (YTD)
The cumulative amount of time within a fiscal year up to the end of the quarter indicated (i.e., YTD2Q17 is equivalent to the six months
ended June 30, 2017)
Definitions