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Fourth-Quarter And Full-Year 2013 Financial Highlights

In announcing today's financial results, Joseph L. Hooley, State Street's chairman, president and chief executive officer, said, "Our fourth quarter and full-year results reflect the strength of the core business and our continued focus on our key priorities to deliver value for our clients and shareholders. 2013 was a very good year for State Street despite both the ongoing headwinds created by the low rate environment and the increasing regulatory cost and complexity. Importantly, for the full year, we grew our core asset servicing and asset management fees by almost 10% compared to 2012."

Hooley added, "Our results for 2013 also demonstrated our commitment to controlling expenses which enabled us to achieve 171 basis points of positive operating leverage for full-year 2013 compared to full-year 2012. Our Business Operations and IT Transformation program continues to deliver expected improved efficiencies and enhanced client solutions."

Hooley concluded, "We purchased approximately 8.0 million shares of our common stock during the fourth quarter, and 24.7 million shares since April 1, 2013, under our current $2.1 billion common stock purchase program effective through March 2014. We recently submitted our 2014 capital plan to the Federal Reserve, and the return of capital through dividends and common stock repurchases remains a key priority."

Fourth-Quarter 2013 GAAP Results

  • Earnings per common share (EPS) of $1.22 increased from $1.17 in the third quarter of 2013 and from $1.00 in the fourth quarter of 2012. EPS for the fourth quarter of 2013 reflected the impact of an out-of-period income tax benefit of $71 million, or $0.16 per share, associated with the completion of a multi-year data enhancement process related to our deferred income tax accounts. EPS for the fourth quarter of 2013 also reflected the impact of pre-tax provisions of $45 million, or $0.06 per share, associated with previously disclosed litigation and non-U.S. regulatory matters. Net income available to common shareholders of $545 million increased from $531 million in the third quarter of 2013 and from $468 million in the fourth quarter of 2012.
  • Revenue of $2.46 billion increased from $2.43 billion in the third quarter of 2013 and from $2.45 billion in the fourth quarter of 2012.
  • Net interest revenue of $585 million increased from $546 million in the third quarter of 2013 and decreased from $622 million in the fourth quarter of 2012.
  • Expenses of $1.85 billion increased from $1.72 billion in the third quarter of 2013 and decreased from $1.86 billion in the fourth quarter of 2012.
  • Return on average common shareholders' equity (ROE) of 10.9% increased from 10.8% in the third quarter of 2013 and from 9.3% in the fourth quarter of 2012.

Full-Year 2013 GAAP Results

  • EPS of $4.62 increased 10.0% from $4.20 in 2012. Revenue increased 2.4% to $9.88 billion from $9.65 billion in 2012. Expenses increased 4.4% to $7.19 billion from $6.89 billion in 2012. ROE increased to 10.5% in 2013 from 10.3% in 2012.

Fourth-Quarter 2013 Operating-Basis (Non-GAAP) Results (1)

  • EPS of $1.15 decreased from $1.19 in the third quarter of 2013 and increased 3.6% from $1.11 in the fourth quarter of 2012.
  • Net income available to common shareholders of $514 million decreased from $537 million in the third quarter of 2013 and from $521 million in the fourth quarter of 2012.
  • Revenue of $2.53 billion increased from $2.47 billion in the third quarter of 2013 and from $2.46 billion in the fourth quarter of 2012.
  • Net interest revenue of $596 million increased from $553 million in the third quarter of 2013 and decreased from $600 million in the fourth quarter of 2012. Operating-basis net interest revenue excluded discount accretion on former conduit assets of $31 million, $28 million and $52 million for the respective quarters and is presented on a fully taxable-equivalent basis.
  • Expenses of $1.76 billion increased from $1.69 billion in the third quarter of 2013 and from $1.71 billion in the fourth quarter of 2012.
  • ROE of 10.3% decreased from 11.0% in the third quarter of 2013 and was flat with the fourth quarter of 2012.

Full-Year 2013 Operating-Basis (Non-GAAP) Results (1)

  • EPS of $4.54 increased 14.9% from $3.95 in 2012. Revenue increased 3.3% to $10.05 billion from $9.73 billion in 2012. Expenses increased 1.5% to $7.01 billion from $6.91 billion in 2012. ROE increased to 10.3% in 2013 from 9.7% in 2012.

Fourth-Quarter 2013 and Full-Year 2013 Highlights (1)

  • Achieved positive operating leverage (1)(2) of 171 basis points for full-year 2013 compared to full-year 2012. The fourth quarter of 2013 compared to the third quarter of 2013 reflected negative operating leverage of 194 basis points, partially driven by a decrease in trading services revenue. The fourth quarter of 2013 compared to the fourth quarter of 2012 reflected negative operating leverage of 4 basis points.
  • New Business (3) New asset servicing mandates during the fourth quarter of 2013 totaled $392 billion and net new assets to be managed were $5 billion.
  • Business Operations and Information Technology Transformation program (4) Achieved incremental pre-tax expense savings of approximately $220 million in 2013, resulting in total pre-tax expense savings of approximately $420 million since the program's inception in 2010 through the end of 2013.
  • Capital (5) Tier 1 common ratio as of December 31, 2013, calculated using currently applicable regulatory requirements, was 15.5%. Provisions of the Basel III final rule become effective under a transition timetable which began on January 1, 2014. The timing of the provisions of the final rule related to the calculation of risk-weighted assets will depend on State Street's completion of a required qualification period. Estimated pro forma Basel III tier 1 common ratio as of December 31, 2013 was 10.1% (standardized approach) and 11.8% (advanced approach), each calculated in conformity with the July 2013 final rule. Under the final rule, the lower of the Basel III tier 1 common ratios calculated by us under the standardized and advanced approaches will apply in the assessment of our capital adequacy for regulatory purposes.
  • Return of capital to shareholders Purchased approximately $560 million of our common stock at an average price of $69.98 per share during the fourth quarter of 2013. During full-year 2013, we purchased approximately 31.2 million shares of our common stock at a total cost of approximately $2.04 billion and an average price of $65.30 per share. Since April 1, 2013, we purchased approximately 24.7 million shares of our common stock at a total cost of approximately $1.68 billion and an average price of $68.05 per share, under our current $2.1 billion common stock purchase program effective through March 2014. We have approximately $420 million remaining at year end under the March 2013 program, which extends through March 31, 2014. In addition, as previously announced, we declared a quarterly common stock dividend of $0.26 per share during the fourth quarter of 2013.

(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. Operating leverage comparing the fourth quarter of 2013 to each of the third quarter of 2013 and the fourth quarter of 2012, as well as comparing full-year 2013 to full-year 2012, is presented in the addendum included with this news release.

(3) New business in assets to be serviced is reflected in our assets under custody and administration after we begin servicing the assets. As such, only a portion of these new asset servicing mandates is reflected in our assets under custody and administration as of December 31, 2013. Distribution fees from the SPDR ® Gold Exchange-Traded Fund, or ETF, are recorded in brokerage and other fee revenue and not in management fee revenue.

(4) 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. Actual total expenses of the Company have increased since 2010, and may increase or decrease in the future, due to other factors.

(5) Estimated pro forma Basel III tier 1 common ratios reflect tier 1 common equity calculated under the July 2013 final rule as applicable on its January 1, 2014 effective date and are based upon State Street's interpretation of the final rule. Refer to the “Capital” section of this news release for important information about the July 2013 final rule, State Street's calculations of its tier 1 common ratios thereunder, factors that could influence State Street's calculations of its tier 1 common ratios and other information about our capital ratios. Unless otherwise specified, all capital ratios referenced in this news release refer to State Street and not State Street Bank and Trust Company. Refer to the addendum included with this news release for a further description of these ratios, and for reconciliations applicable to State Street's tier 1 common ratio.

Non-GAAP Financial Measures

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, in order to highlight comparable financial trends with respect to State Street's business operations from period to period. Summary results presented on a GAAP basis, descriptions of our non-GAAP, or operating-basis, financial measures, and reconciliations of operating-basis information to GAAP-basis information are provided in the addendum included with this news release.

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