Slide 1: Financial Update and Outlook
Slide 2: Today's Discussion
TODAY’S DISCUSSION Year-to-date Financial Review Achieving Our Goals Balance Sheet/Capital Management Summary
Slide 3: Year-to-Date Financial Review
Slide 4: Comparative Performance
COMPARATIVE PERFORMANCE* > Three Months Ended $ In millions (except per share) 9130104 6/30/04 % Servicing and management fees 724 723 0 Securities lending 48 89 (46) Foreign exchange 7 116 (35) Brokerage 31 36 (14) Processing and other 83 81 2 Net interest revenue 223-238 (6) Gainsflosses from sale
Slide 5: Operating Revenue
OPERATING REVENUE Millions $5,000) CAGR ' 10-year: 13.7% 4,393" | 5-year: 9.7% H H5% $4,000] H eae 3,713 $3,000) | $2,000) ' $1,000) ' 0 93 94 95 96 97 98 99 00 01 02 03 — 9mos. 9mos. ‘0304 Operating revenue as defined in State Street Corporation SEC flings. *Bxcludes Coporate Trust and Private Asse
Slide 6: Operating Earnings Per Share
OPERATING EARNINGS PER SHARE EPS $2.60 $2.00 $1.60 $1.00 $0.50 $0.00 Delivering Consistent Growth or 208 | 420% 10-year: 14.9% ee H S-year: 11.1% ! 1.90 1.64" H a ile 1.52 H 1.35 H " , , 93 94 95 96 97 98 99 Of O01 02 08 9mos. 9mos ‘0304 Operating earnings as defined in State Street Corporation SEC
Slide 7: Achieving Our Financial Goals
Slide 8: Financial Goals
FINANCIAL GOALS Operating EPS Growth 10%-15% + Operating Revenue Growth 8%-12% ¢ Operating ROE 14%-17%
Slide 9: Achieving Our Goals
ACHIEVING OUR GOALS > Operating EPS Growth: 10%-15% 5-year historic operating EPS Growth (CAGR): 11.1% Impact on operating EPS growth — Revenue growth: 8%-12% — Positive operating leverage — Capital management: ~ 1% Operating earnings as defined in State Street Corporation SEC flings. STATE STREET.
Slide 10: Achieving Our Goals: Positive Operating Leverage
ACHIEVING OUR GOALS > Positive Operating Leverage * Continue re-organization of large operations groups « Modify incentive compensation program « Direct IT spending to create operating efficiencies « Reduce real estate portfolio + Pursue offshoring opportunities STATE STREET.
Slide 11: Achieving Our Goals: Operating Revenue Growth
ACHIEVING OUR GOALS > Operating Revenue Growth: 8%-12% Historic Operating Revenue Growth Rate 2000-2003 (3-year CAGR) Investment Servicing/Management fee revenue” 14.0% Market-driven fee revenue 4.0% Total fee revenue 11.5% NIR* (.1)% Total 84% + S&P declined (15.8)% + Depressed equity environment i
Slide 12: Achieving Our Goals: Operating ROE
ACHIEVING OUR GOALS > Operating ROE: 14%-17% Five-year historic average ROE: 18.3% Grow NIAT faster than equity Continue share purchase program — Offset dilution from employee benefit plans — Buyback stock opportunistically Continue to re-evaluate capital structure Maintain consistent dividend polic
Slide 13: Capital and Balance Sheet Management
Slide 14: Managing Risk
MANAGING RISK > Lower Yield With Lower Risk Asset* Classes Peer Average State Street 8% 12% ee 29% 11% 32% 0% I Placements fas Repos 34% Treasuries & Agency 2% ABS Mortgage Securities Loans BH Other Earning Assets At 12/31/03; peers include BK, MEL, IF IN, and NTRS. “Total earring assets STATE STREE
Slide 15: Balance Sheet Adjustments
BALANCE SHEET ADJUSTMENTS « Beginning to re-position investment securities to enhance yield while controlling risk — Replace treasuries & agencies with MBS & CMO investments — Replace some fixed investments with floating- rate investments — Adjust mix of durations within portfolio * Control balance
Slide 16: Ratio Target Ranges
RATIO TARGET RANGES Leverage Ratio Range | 9.25%-5. 75% Tangible Ratio Range | 4.25%-4.75% * Goal: Remain well-capitalized & comply with requirements of Basel II * Share buyback: to offset dilution from employee stock issuance and make opportunistic purchases « Develop disclosure on economic capital
Slide 17: Searchable text section of graphics
Searchable text section of graphics shown above FIN ANCIAL UPDATE AND OUTLOOK EDWARD J. RESCH EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER [LOGO] TOD AY’S DISCUSSION Year-to-date Financial Review Achieving Our Goals Balance Sheet/Capital Management Summary YEA R-TO-DATE FINANCIAL REVIEW COM