State Street Corporation · NYSE:STT
State Street — Investor Day (February 2012)
55 slides from State Street's investor day presentation, Feb 9, 2012
Slide 1: Investor and Analyst Forum: Building from Strength
9 February 2012 Exhibit 99.1 Investor and Analyst Forum Building from Strength
Slide 2: Topics for Discussion
2 JOSEPH L. HOOLEY Chairman, President and Chief Executive Officer SCOTT POWERS Chief Executive Officer, State Street Global Advisors JOSEPH C. ANTONELLIS Vice Chairman PETER O’NEILL Executive Vice President, International JAMES S. PHALEN Executive Vice President CHRISTOPHER PERRETTA Chief Informati
Slide 3: Forward-looking statements
3 This presentation contains forward-looking statements as defined by United States securities laws, including statements relating to our goals and expectations our business, financial and capital condition, results of operations, investment portfolio performance and strategies, the financial and ma
Slide 4: Agenda
4 Building from Strength 2011 Performance Strategic Direction Globalization Business Operations and Information Technology Transformation Program Financial Update Summary Agenda
Slide 5: Agenda: 2011 Performance
5 Building from Strength Agenda 2011 Performance – Jay Hooley Strategic Direction Globalization Business Operations and Information Technology Transformation Program Financial Update Summary
Slide 6: 2011 Performance: Resilience in a Challenging Environment
6 $ in millions 12/31/11 1 12/31/10 1 % Change $9,502 $8,714 +9.0% $6,789 $6,176 + 9.9% $3.73 $3.40 +9.7% 9.9% 10.4% -50 bps Strengthened capital position; re-initiated common stock buyback and increased common stock dividend Deepened client relationships Continued market leadership Effectively mana
Slide 7: State Street Corporation Well Capitalized
7 2011 Performance State Street Corporation “Well Capitalized” ¹ 12/31/11 Actual under Basel I 12/31/11 Adjusted to Reflect Basel III Proposal ² 6.0% 18.9% 13.3% — 16.9% 12.1% 5.0% 4 7.3% 5.6% 10.0% 20.5% 14.9% — 7.3% 7.3% 1 Except as noted in note 4 below, minimum ratios for “Well Capitalized” are
Slide 8: Deepened Client Relationships
8 Average Number of Products Used Average Length of Relationship 14.2 Products 20.3 Years 8.5 Products 11.4 Years 2011 Performance Growing Momentum in Core Businesses Deepened client relationships: 80% of new revenue growth came from existing clients Differentiated solutions Flight to quality Improv
Slide 9: Deepened Client Relationships: New Wins
9 2011 Performance Business 2011 New Wins 1 ($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 US Asset Management $468.1 61.8% $455.1 $13.0 Non-US Asset Management $289.1 38.2% $282.1 $7.0 1 Assets
Slide 10: Continued Market Leadership
10 2011 Performance 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; a
Slide 11: Continued Market Leadership
11 AUM, $BN $BN 2011 Performance 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). Global Assets Managed as of 12/31/11 Global Securities Lending Q4 2011 Avera
Slide 12: Effectively Managed Expenses
12 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
Slide 13: Operating / Adjusted-Basis Results vs. Peers
13 2011 Performance Operating / Adjusted-Basis Results Full-Year 2011 vs. 2010 STT BK NTRS 6.3% 3.3% (7.0)% (9.1)% 25.0% 23.6% 8.6% 8.5% 1.36% 1.27% 13.4% 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) pre
Slide 14: Outperformed Peers: 1-Year Total Return
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 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: F
Slide 15: Outperformed Peers: 3-Year Total Return
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 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%
Slide 16: Agenda: Strategic Direction
16 Building from Strength Strategic Direction – Jay Hooley Agenda 2011 Performance Globalization Business Operations and Information Technology Transformation Program Financial Update Summary
Slide 17: Strategic Direction
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 flexib
Slide 18: Long-Term Trends Support Growth
18 Strategic Direction 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 Foste
Slide 19: STATE STREET.
STATE STREET.
Slide 20: Global Retirement Assets Expected to Grow
20 Strategic Direction 2005 2007 2008 2011E 2015E APAC Europe Latin America Other DB DC IRA $13.2T $16.0T $12.4T $16.0T $20.7T $6.6T $8.5T $7.4T $9.8T $13.6T Almost 50% of non-US retirement asset growth (2011 – 2015) expected to come from Europe Source: Cerulli Associates , Global Markets 2011. DC a
Slide 21: STATE STREET.
STATE STREET.
Slide 22: Slide 22
Slide 23: Complexity
21 Globalization Regulation Need for transparency around risk management Enhanced data reporting 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 No. 1 provider 4 in a market of about $65TN 5 Offer customized strategic and t
Slide 24: Consolidation: Top 20 Companies by AUC / AUA
22 Strategic Direction 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, No
Slide 25: Agenda: Globalization
23 Building from Strength Globalization – Scott Powers, Joseph C. Antonellis, Peter O’Neill Agenda 2011 Performance Strategic Direction Business Operations and Information Technology Transformation Program Financial Update Summary
Slide 26: Slide 26
Slide 27: Slide 27
Slide 28: Integrated Solutions Across Investment Spectrum
24 Globalization 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 Spec
Slide 29: ot a = Fea
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Slide 30: Slide 30
Slide 31: European Collectives, Pension, Insurance Markets
27 Globalization 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 Insuran
Slide 32: Growing Faster Than the Market: Europe
28 Globalization $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 Stati
Slide 33: Slide 33
Slide 34: Asia Pacific Overall Market Size and Market Share
30 Globalization 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
Slide 35: Growing Faster Than the Market: Asia Pacific
31 Globalization $7.3TN 2001 $21.6TN 2011 $34BN 2001 $210BN 2011 $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
Slide 36: Trends Fueling Growth and Growth Strategies
32 Globalization New Sources of Value Innovation Increased Business Complexity Regulation & Compliance Data Integration and Complexity Operational Efficiency Client Challenges Growth Priorities Expand Local Market Capabilities and Footprint Integrate Solutions across Investment Management Servicing
Slide 37: Agenda: Transformation Program
33 Building from Strength Business Operations and Information Technology Transformation Program – James S. Phalen, Christopher Perretta Agenda 2011 Performance Strategic Direction Globalization Financial Update Summary
Slide 38: Business Operations and IT Transformation Program Goals
34 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 mar
Slide 39: Estimated Annual Pre-tax Run-rate Expense Savings
35 Business Operations and Information Technology Transformation Program $MN 2011 2012 2013 2014 2015 $158 $260 $370 $430 $440 6 20 100 150 160 164 280 470 580 600 78 100 70 40 0 1 Compared to 2010, all else being equal. The full effect of the annual pre-tax, run-rate savings is not expected to be e
Slide 40: Operations Plan
36 Business Operations and Information Technology Transformation Program 14 Core Business Operations Processes are in Scope 2012 Milestones Four key operations transformation levers – Process transformation – Automation – Consolidation – Workforce optimization Operations transformation portfolio inc
Slide 41: IT Plan
37 Business Operations and Information Technology Transformation Program 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 Advance
Slide 42: Industry View
38 Business Operations and Information Technology Transformation Program 1 Relative position for “State Street” represents State Street estimates. Industry View
Slide 43: Competitive Advantage: Speed, Agility, Efficiency
39 Business Operations and Information Technology Transformation Program Cloud cuts new product development time by 30% Automated provisioning/compute on demand More client value, delivered faster – 20% onboarding improvement Powerful, proprietary real-time data analytics Any device, any time, any w
Slide 44: Agenda: Financial Update
40 Building from Strength Financial Update – Edward J. Resch Agenda 2011 Performance Strategic Direction Globalization Business Operations and Information Technology Transformation Program Summary
Slide 45: 2012 Environment
41 Financial Update Fourth-Quarter Drivers Environmental Factors in 2012 Expectations for 2012 Investment Portfolio Management Capital 2012 Environment
Slide 46: Fourth-Quarter Drivers
42 Financial Update 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 busines
Slide 47: Economic and Market Factors in 2012
43 Financial Update 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 MS
Slide 48: Expectations for 2012
44 Financial Update Execute effective cross-sell strategy Attract new business in fast-growing product areas Increase rigor in pricing Prudently manage the investment portfolio Execute Business Operations and Information Technology Transformation program Reduce compensation-to-revenue ratio by about
Slide 49: Expectations for 2012: Market-Driven Revenues
45 Financial Update 1 Based on data from Data Explorers Universe as of period end. 2 Based on STT’s customer-weighted volumes. Expectations for 2012: Market-Driven Revenues
Slide 50: Investment Portfolio and Interest-rate Assumptions for 2012
46 Worldwide administered rates on hold through 2012 Yield curves retain current shape 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 Expect about $20BN to mature or
Slide 51: Capital: Deployment
47 Financial Update Response expected by mid-March Payout ratio target: 20% – 25% Expect to return as much capital to shareholders as allowed Expect to be opportunistic and disciplined Criteria: – Aligned with our strategy – Expect accretion within the first full year of operation – Projected return
Slide 52: Capital: Return on Equity Target
48 Financial Update Successful execution of Business Operations and Information Technology Transformation program A more normalized rate environment (3% FF; 5% 10-year U.S. Treasury) Migrate from earnings-based to capital-ratio distribution model Manage to 10% ratio, assuming a 1% G-SIB buffer Reali
Slide 53: Agenda: Summary
49 Building from Strength Summary – Jay Hooley Agenda 2011 Performance Strategic Direction Globalization Business Operations and Information Technology Transformation Program Financial Update
Slide 54: Summary: Building from Strength
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
Slide 55: Appendix: Reconciliation of Operating-Basis Results
51 APPENDIX 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, re