STATE STREET REPORTS FOURTH-QUARTER 2012 GAAP EPS STATE STREET REPORTS FOURTH-QUARTER 2012 GAAP EPS OF $1.00 ON REVENUE OF $2.45 BILLION; FULL-YEAR 2012 GAAP EPS OF $4.20, UP 10.8% COMPARED TO 2011 ON REVENUE OF $9.65 BILLION
FOURTH-QUARTER OPERATING-BASIS EPS OF $1.11; FULL-YEAR OPERATING-BASIS EPS OF $3.95
ACHIEVES POSITIVE OPERATING LEVERAGE(2)
Boston, MA ...January 18, 2013
In announcing today's financial results, Joseph L. Hooley, State Street's chairman, president and chief executive officer, said, "The fourth-quarter and full-year 2012 results reflect continued resilience across our asset servicing and asset management businesses. We achieved these results in a constrained revenue environment, generating positive operating leverage and continuing to invest in key markets that position us for further growth.
"While equity markets improved in the fourth quarter, our clients remained cautious for most of the quarter given the uncertainty surrounding the global economic environment and the U.S. fiscal cliff. We experienced strong demand for our solutions as evidenced by $649 billion in asset servicing wins and a continued strong pipeline.
"We remain focused on executing our Business Operations and Information Technology Transformation program. Additionally, to capture further efficiencies and cost savings, today we announced a separate reduction in force to align our expenses with our business outlook for 2013.
"We purchased approximately 11 million shares this quarter for $480 million under our $1.8 billion common stock purchase plan and declared a $0.24 per share common stock dividend. Earlier this month, we submitted our 2013 capital plan to the Federal Reserve Bank. We continue to prioritize the return of capital to our shareholders.
"As we look ahead, we are encouraged by the recent market strength and early signs of client re-risking. We remain confident in the long-term growth prospects of our business and are focused on servicing clients, growing revenues organically, managing expenses prudently, and returning capital to shareholders," Hooley concluded.
Fourth-Quarter 2012 GAAP Results
•Earnings per common share (EPS) of $1.00 decreased from $1.36 in the third quarter of 2012 and increased from $0.76 in the fourth quarter of 2011.
•Net income available to common shareholders of $468 million decreased from $654 million in the third quarter of 2012 and increased from $371 million in the fourth quarter of 2011.
•Revenue of $2.45 billion increased 4% from the third quarter of 2012 and increased 6% from the fourth quarter of 2011.
•Net interest revenue of $622 million increased slightly from $619 million in the third quarter of 2012 and increased 3% from the fourth quarter of 2011.
•Expenses of $1.86 billion increased from $1.42 billion in the third quarter of 2012, primarily the result of a non-recurring benefit in the third quarter, and increased 4% from the fourth quarter of 2011.
•Return on average common shareholders' equity (ROE) of 9.3% decreased from 13.3% in the third quarter of 2012 and increased from 7.8% in the fourth quarter of 2011.
•Recorded pre-tax acquisition and restructuring costs of $139 million, primarily related to severance and benefits costs for targeted staff reductions expected to be substantially completed during 2013. This additional expense control measure was taken to better align the Company's expenses to its business outlook for 2013 and will involve the reduction of approximately 630 positions worldwide.
Full-Year 2012 GAAP Results
•EPS of $4.20, increased 10.8% from $3.79 in 2011. Revenue increased 0.6% to $9.65 billion from $9.59 billion in 2011. Expenses decreased 2.4% to $6.89 billion from $7.06 billion in 2011. ROE rose to 10.3% in 2012 from 10.0% in 2011.
Fourth-Quarter 2012 Operating-Basis (Non-GAAP) Results(1)
•EPS of $1.11 increased 12% from $0.99 in the third quarter of 2012 and increased 19% from $0.93 in the fourth quarter of 2011.
•Net income available to common shareholders of $521 million increased 10% from $473 million in the third quarter of 2012 and increased 15% from $454 million in the fourth quarter of 2011.
•Revenue of $2.46 billion increased 3.2% from the third quarter of 2012 and increased 7.0% from the fourth quarter of 2011.
•Net interest revenue on a fully taxable-equivalent basis, and excluding conduit-related discount accretion of $52 million, was $600 million, a slight decrease from $611 million in the third quarter of 2012, and a 4% percent increase from $577 million in the fourth quarter of 2011
•Expenses of $1.71 billion increased 3.0% from the third quarter of 2012 and increased 4.8% from the fourth quarter of 2011.
•ROE of 10.3% increased from 9.6% in the third quarter of 2012 and increased from 9.5% in the fourth quarter of 2011.
Full-Year 2012 Operating-Basis (Non-GAAP) Results(1)
•EPS increased 5.9% to $3.95 from $3.73 in 2011. Revenue of $9.73 billion increased 1.74% from $9.56 billion in 2011, and expenses of $6.91 billion increased 1.71% from $6.79 billion in 2011. ROE decreased to 9.7% in 2012 from 9.9% in 2011.
Fourth-Quarter 2012 and Full-Year 2012 Operating-Basis (Non-GAAP) Highlights(1)
•New Business: Awarded $649 billion in asset servicing mandates and $24 billion in net new assets to be managed at SSgA, excluding net outflows in the securities lending cash collateral pools.
•Operating Leverage(2): Achieved positive operating leverage of 20 basis points and 220 basis points compared to the third quarter of 2012 and the fourth quarter of 2011, respectively. For full-year 2012, the Company achieved 3 basis points of positive operating leverage.
•Business Operations and Information Technology Transformation program(3): Achieved incremental pre-tax expense savings of $112 million in 2012, resulting in cumulative pre-tax expense savings of $198 million since the program's inception in 2010 through the end of 2012. The incremental pre-tax expense savings in 2013 are forecasted to be approximately $220 million.
•Capital(4): Estimated pro forma tier 1 common ratio under the June 2012 U.S. Basel III Notices of Proposed Rulemaking (NPRs) was 10.8% as of December 31, 2012.
•Dividend and stock purchases: Purchased $480 million of our common stock at an average price of $43.99 and declared a quarterly common stock dividend of $0.24 per share.
•The acquired Goldman Sachs Administration Services (GSAS) business contributed $24 million to revenues and $13 million to expenses subsequent to October 15, 2012, when the acquisition was completed.
(1) Operating basis is a non-GAAP presentation. For an explanation of operating-basis information and related reconciliations, refer to the addendum included with this news release.
(2) Operating leverage is defined as the rate of growth of total revenue less the rate of growth of total expenses, each as determined on an operating basis.
(3) Estimated pre-tax expense savings relate only to the Business Operations and Information Technology Transformation program and are based on projected improvement from total 2010 operating-basis expenses of $6.18 billion; actual total expenses of the Company have increased since 2010, and may in the future increase or decrease, due to other factors.
(4) Unless otherwise specified, all capital ratios referenced in this news release refer to State Street Corporation and not State Street Bank and Trust Company. Refer to the addendum included with this news release for a further discussion of these ratios and for reconciliations applicable to the tier 1 common ratio. Also, see "Capital" below.
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