State Street Corporation · NYSE:STT
State Street — Investor Presentation (May 2010)
43 slides from State Street's investor presentation, May 5, 2010
Slide 1: Agenda
Key Trends Competitive Positioning Financial Review Strategic Direction Agenda
Slide 2: State Street
TE STREET.
Slide 3: Worldwide Trends Support Our Strategy
Worldwide Trends Support Our Strategy Key Trends STRENGTH IN CORE BUSINESSES DRIVEN BY • Globalization • Retirement / Savings • Outsourcing • Consolidation • Increased Regulatory Oversight / Reform
Slide 4: European Market Forecast to Grow 5.9% over Next Years
European Market Forecast to Grow 5.9% over next 3 years 5 4% 31% 6% 27% Key Trends — Globalization Total assets include seven key European markets: UK, Netherlands, Germany, Ireland/Luxembourg offshore assets, Italy, Switzerland and France. ICI, 9/09 For Germany , France, UK, Netherlands, Switzerlan
Slide 5: State Street
STATE STREET.
Slide 6: Asia-Pacific Market Forecast to Grow 9.4% over Next 3 Years
21% 68% 41% 8% Asia-Pacific Market Forecast to Grow 9.4% over next 3 years 4 35% 23% 8% 2% 10% 1% Key Trends — Globalization Asia-Pacific Collective, Pension and Government-related Markets: $15.1 trillion Pensions: $4.5T Government Related: $7.4T Collectives: $3.2T Japan Australia Hong Kong South Ko
Slide 7: State Street
STATE STREET
Slide 8: Expect to Double Non-US Revenue over Years
Expect to Double Non-US Revenue over 5 Years 2 Key Trends — Globalization at State Street 23% 77% 41% 59% Revenue Pro Forma US Non-US Excludes impact of discount accretion ($621 million); reported 2009 non-US revenue for State Street was $2.878 billion (36%); pro forma 2009 is adjusted for estimated
Slide 9: State Street has Strong Presence in Non-US Locations
State Street has Strong Presence in Non-US Locations Key Trends — Globalization at State Street 39% of State Street’s employees worked outside of the US as of December 31, 2009; pro forma 2009 is adjusted for 1,425 employees from ISPSS and Mourant. Employees 12% 88% 44% 56% Pro Forma US Non-US
Slide 10: DC Plans are a Growing Segment for US Retirement Savings
CAGR Key Trends — Retirement Savings • DC Plans are a Growing Segment for US Retirement Savings US Defined Contribution Assets include 401(K), 403(b) and 457 plans; Source ICI, as of 9/30/09. 1,000 2,000 3,000 4,000 5,000 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 ’02–’07 ’08 vs. ‘09 12% 15% US Def
Slide 11: Key Trends — Outsourcing
Key Trends — Outsourcing Pension & Investment,/Watson Wyatt World 500, 12/28/09. As of 4/01/10 Preqin, 6/09 Hedge Fund Research, 3/31/10 McKinsey, 7/09 INVESTMENT MANAGER OPERATIONS OUTSOURCING • State Street is leading provider with more than $7 trillion of AUA in this market that is sized at appro
Slide 12: Key Trends — Outsourcing
Key Trends — Outsourcing INVESTMENT MANAGEMENT SOLUTIONS • Customized strategic and tactical asset allocation solutions through flexible and efficient portfolio implementation across and within global asset classes TRANSITION MANAGEMENT • Provide transparent, efficient transitions and allocation man
Slide 13: Industry Will Consolidate With Major Providers
11 of the Top 20 Custodians Each Have Less Than $3 Trillion in Assets Industry Will Consolidate With Major Providers 1 Key Trends — Consolidation GlobalCustody.net, adjusted for acquisition of ISPSS and BHF. FACTORS • Global footprint and scale essential • Ongoing need for investment in technology •
Slide 14: Excellent Track Record in Executing Accretive Acquisitions
Excellent Track Record in Executing Accretive Acquisitions Key Trends — Consolidation DEUTSCHE BANK’S GSS Established State Street’s leadership position in Europe IFS Added hedge fund servicing capability CURRENEX Expanded electronic high-speed trading capability PALMERI Accelerated State Street’s l
Slide 15: State Street
STATE STREET.
Slide 16: Competitive Positioning — Assets Under Custody/Administration
(USD $T) Source: Global Custody.net, 12/31/2009 Includes assets of approximately $670 billion in assets from ISPSS and Mourant AUC Only Source: Company filings, as of 12/31/09; globalcustody.net Competitive Positioning — Assets Under Custody/Administration 22.3 19.5 14.9 12.1 8.0 6.8 5.0 4.8 3.7 2.4
Slide 17: Competitive Positioning — US Mutual Funds
Data also includes UIT Accounting. Source: The NASDAQ Stock Market Inc., Data Products, as of 2/1/10 Competitive Positioning — US Mutual Funds Number of Funds Priced Daily 2,000 4,000 6,000 8,000 10,000 STT BK PFPC JPM First Trust Citi Fidelity US Bancorp Van Kampen Princor 41% 6% 5% 5% 4% 4% 4% 3%
Slide 18: Competitive Positioning — Investment Manager Operations Outsourcing
Competitive Positioning — Investment Manager Operations Outsourcing STT 62% BK 12% JPM 4% HSBC 2% NTRS 3% RBCD 11% BBH 6% Source: Scrip Issue Global Report, (3/10)
Slide 19: Competitive Positioning — Pension Fund Assets
3.7 2.9 1.6 1.4 0.4 0.2 0.1 0.1 0.1 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 STT BNY NTRS JPM RBCD Citi SocGen HSBC BBH (USD $T) Competitive Positioning — Pension Fund Assets Data is self reported to Scrip Issue Global Report (3/10)
Slide 20: Competitive Positioning — Alternative Assets Under Administration
Competitive Positioning — Alternative Assets Under Administration USD $B $0 $100 $200 $300 $400 $500 $600 STT Citco Citi HSBC BK Fortis SEI GS UBS JPM Real Estate Private Equity Assets Hedge Fund Assets Sources: HFM Week 13 th Biannual Assets Under Administration Survey, November 2009; STT AUA as of
Slide 21: Competitive Positioning — US ETF Assets Under Management
Competitive Positioning — US ETF Assets Under Management $0 $50 $100 $150 $200 $250 $300 $350 $400 BLK SSgA Vanguard Invesco ProShares Van Eck BK US Comm Funds Wisdom Tree Rydex USD $B Source: National Stock Exchange as of 12/31/09
Slide 22: Top Managers of US-Domiciled Indexed Equities and Fixed Income
(USD $B) 122. $0 $50 $100 $150 $200 $250 $300 $350 BLK SSgA Northern Trust Vanguard BNY Mellon Source: Pensions & Investments as of December 31, 2008 Includes US Institutional, tax-exempt assets managed internally (assets managed passively on behalf of non-US entities are not represented) Well Posit
Slide 23: Competitive Positioning — Recent Recognition
Competitive Positioning — Recent Recognition No. 1 Manager of Worldwide Institutional Assets Pensions & Investments , 2009 Money Managers Survey Custodian of the Year 2010 Global Pensions Awards Top Rated in Pre-Trade, Post-Trade, Organization and Support Plansponsor, 2009 Transition Management Surv
Slide 24: 70% Win Ratio on Competitive Bids in 2009
70% Win Ratio on Competitive Bids in 2009 Well Positioned for Growth Competitive Positioning — Strength in Winning New Business • $1.1 trillion in assets to be serviced won in 2009 • In 2009 top 100 clients used 13.8 products • $319 billion in assets to be serviced won YTD (4/15/10) • Strong pipelin
Slide 25: Long-Term Operating-Basis Financial Goals
Key Trends and Competitive Position Support Long-term Goals Operating-basis EPS Growth of 10% – 15% Operating-basis ROE of 14% – 17% Operating-basis Revenue Growth of 8% – 12% Long-Term Operating-Basis Financial Goals For a description of operating-basis presentation, see Appendix.
Slide 26: Long-Term Financial Goals — Operating-basis Revenue Growth Model
Long-Term Financial Goals — Operating-basis Revenue Growth Model For a description of operating-basis presentation, see Appendix. Assumes 7% average annual growth in global equities. Market growth 1% – 2% New clients 2% – 3% Additional sales to existing clients 4% – 5% Acquisitions 1% – 2% 8% – 12%
Slide 27: Financial Review
Balance Sheet and Capital Position: A Strong Foundation Market-driven Revenue: NIR/NIM, Securities Finance, Foreign Exchange Operating Performance in 2010: Growth in a Challenging Environment Financial Review
Slide 28: Slide 28
Slide 29: Currently Well Positioned
Currently Well Positioned Financial Review — Balance Sheet and Capital Position: A Strong Foundation BALANCE SHEET AS OF 3/31/10 • Total Balance Sheet: $154 billion – “Normalized” Balance Sheet: $135 billion – Duration gap: approximately 0.31 years • Investment Portfolio of $93 billion – Duration: a
Slide 30: Maintaining Flexibility Pending Regulatory Guidance
Maintaining Flexibility Pending Regulatory Guidance Financial Review — Balance Sheet and Capital Position: A Strong Foundation For a description of the capital ratios, including certain related reconciliations, please see Appendix. CAPITAL MANAGEMENT • Successfully executed TCE improvement plan in 2
Slide 31: Strong Capital Generation and Strategic Deployment
Strong Capital Generation and Strategic Deployment “Well State Street Corp. Capitalized” 1 Q2 ’10 E 2 Q1 ’10 Q4 ’09 Except as noted in note 4 below, minimum “Well Capitalized” as defined by Federal regulators. Estimated including acquisition of ISPSS; earnings based on First Call analyst consensus e
Slide 32: Slide 32
Slide 33: Flatter Curve Most Likely Higher Rates
Flatter Curve Most Likely Higher Rates Financial Review — Market-driven Revenue: NIR/NIM, Securities Finance, Foreign Exchange ASSUMPTIONS (INCLUDING ISPSS) • Balance sheet about $150 billion • Duration gap about 0.50 years MOST LIKELY ECONOMIC SCENARIO • Slow, steady recovery • House price stabiliz
Slide 34: Historical Trends in Yield Curve, FF Rate and STT's NIM
Historical Trends in Yield Curve, FF Rate and STT’s NIM Financial Review — Market-driven Revenue: NIR/NIM, Securities Finance, Foreign Exchange Excludes discount accretion Yield in % NIM in bps NIM ¹ Fed Funds FF to 5-Year Treasury Spread
Slide 35: Expect Normalized NIM to Settle in Range of 1.75% – 1.85%
Expect Normalized NIM to Settle in Range of 1.75% – 1.85% Financial Review — Market-driven Revenue: NIR/NIM, Securities Finance, Foreign Exchange MARKET FACTORS • Level of rates — FF to 3% • Shape of the curve — FF to 5-year is 100-125 bps • Asset spreads — Not to widen from current level • Pace of
Slide 36: April Volumes Increased Above Q1 Monthly Average
April Volumes Increased Above Q1 Monthly Average Financial Review — Market-driven Revenue: NIR, Securities Finance, Foreign Exchange REVENUE TRENDS IN FOREIGN EXCHANGE STT’s customer-weighted volatilities. REVENUE DRIVEN BY COMBINATION OF VOLUMES AND VOLATILITY VOLUMES • Q1 ’10 volumes annualized ($
Slide 37: Slide 37
Slide 38: Continuing to Perform in Challenging Times
Continuing to Perform in Challenging Times Results ¹ for 3 Months Ended Financial Review — Operating Performance in 2010: Growth in a Challenging Environment $ in millions, except per share data 3/31/10 12/31/09 % Change Operating-basis revenue $2,116 $2,082 1.6% Operating-basis expenses $1,566 $1,5
Slide 39: State Street
STATE STREET
Slide 40: Strategic Direction
Strategic Direction FOCUSED ON • Doubling non-US revenues over the next five years • Accelerating market share globally through organic growth and acquisition • Driving industry innovation for clients by maintaining technology investment at 20% – 25% of operating expenses • Strengthening industry-le
Slide 41: Expect Operating-Basis EPS to be Slightly Above 2009 Level of $3.32
Expect Operating-Basis EPS to be Slightly Above 2009 Level of $3.32 Summary — Expectations Fueling Confidence in 2010 Outlook • Strength in servicing fee revenue • Successful integration of acquisitions • Modest improvement in management fee revenue • NIM in range of 150–160 bps • Gradual improvemen
Slide 42: Committed to Delivering Shareholder Value
Committed to Delivering Shareholder Value Committed to Long-Term Financial Goals Summary • Well positioned against global growth trends • Excellent competitive position • Worldwide client relationships • Strong capital position • Expanding core business • Proven track record integrating acquisitions
Slide 43: Tangible Common Equity and Tier 1 Common Ratios
STATE STREET CORPORATION TANGIBLE COMMON EQUITY AND TIER 1 COMMON RATIOS As of Period End The ratio of tangible common equity to adjusted tangible assets, or TCE ratio, is calculated by dividing consolidated total common shareholders’ equity by consolidated total assets, after reducing both amounts