State Street Corporation · NYSE:STT
State Street — Investor Day (February 2011)
59 slides from State Street's investor day presentation, Feb 10, 2011
Slide 1: Investor & Analyst Forum
10 February 2011 Exhibit 99.1 Investor & Analyst Forum
Slide 2: Agenda
AGENDA Joseph L. Hooley Chairman, President and Chief Executive Officer Scott F. Powers Chief Executive Officer State Street Global Advisors James S. Phalen Executive Vice President Operations & Technology Edward J. Resch Executive Vice President and Chief Financial Officer Extending Our Leadership
Slide 3: Reminder
Reminder This presentation contains “forward-looking statements” within the meaning of U.S. securities laws, including statements about industry trends, management’s expectations about our financial performance, market growth, acquisitions and divestitures, new technologies, services and opportuniti
Slide 4: Agenda: Extending Our Leadership
Extending Our Leadership Forward Focus Financial Update Summary Solutions Innovation Operations & IT Transformation Risk and Capital Management Global Expansion Agenda
Slide 5: Forward Focus: Leadership Today
Forward Focus 1 The NASDAQ Stock Market Inc., Data Products, as of 12/31/10. 2 Scrip Issue Global Report, 9/10. 3 ICFA Annual Fund Administration Survey, 2010; HFN Biannual Fund Administration Survey, 6/10. 4 Pension and Investments 6/28/10. 5 Pension and Investments 5/31/10. LEADERSHIP TODAY No. 1:
Slide 6: Forward Focus: Global Services
Forward Focus Solutions Innovation Investment Manager Operations Outsourcing – No.1 provider in market 1 with $7.9TN in AUA 2 Leading suite of Alternative Asset servicing capabilities – No.1 provider in market 3 with $660BN in AUA 2 Services augmented by comprehensive array of data, risk and analyti
Slide 7: Forward Focus: Global Markets
Forward Focus Advisory relationships informing portfolio strategies, including trading and securities finance, integrated with transition management – Relationships with 89 of the top 100 global investment managers Robust e-exchange platform Leader in research with unique partnership with academia (
Slide 8: Forward Focus: Global Advisors
Forward Focus Multi-asset class, multi- strategy approach meeting needs of global investors Core strength in passive and quantitative investment management Strategy to grow business in Defined Contribution plans, cash management, and Exchange-Traded Funds Solutions Innovation Solutions Innovation GL
Slide 9: Forward Focus: Operations & IT Transformation
Forward Focus Market expansion Mergers and acquisitions Geographic expansion Business process excellence Flexible global workforce Global shared services New product development Technology leadership Global solutions Service excellence Time to market New products and services Operations & IT Transfo
Slide 10: Forward Focus: Risk and Capital Management
Forward Focus Adjusting to evolving regulatory requirements Developing best-in-class capabilities Capital strength as a competitive differentiator Well positioned to meet Basel III requirements Restoring dividend a priority Evaluate share repurchase and potential acquisitions Risk and Capital Manage
Slide 11: Forward Focus: Global Expansion
Forward Focus Global Expansion Solutions Innovation Operations & IT Transformation Risk and Capital Management
Slide 12: Global Expansion: Revenue and Employees 2000-2010
Year ended 12/31/00 ² Year ended 12/31/10 % Change Operating-basis revenue $3.45BN $8.71BN +152% Operating-basis non-US revenue $0.94BN $3.18BN +238% Employees ³ 17,281 28,670 +66% Non-US employees ³ 3,463 12,518 +261% Forward Focus 1 Financial data presented on an operating-basis (which is adjusted
Slide 13: European Collective, Pension, Insurance Markets
Forward Focus European market forecast to grow 5.5% per year over next 3 years 5 1 Total assets include seven key European markets: UK, Netherlands, Germany, Ireland / Luxembourg offshore assets, Italy, Switzerland and France. 2 EFAMA, 9/30/10. 3 Towers Watson Global Pension Study 2010, STT estimate
Slide 14: Global Expansion: Europe
Forward Focus 1 Total assets include seven key European markets: UK, Netherlands, Germany, Ireland / Luxembourg offshore assets, Italy, Switzerland and France. 2 AUA represents all European assets under custody / administration. 3 Sources: Collectives: ICI (12/05); Pensions: Watson Wyatt Global Pens
Slide 15: Forward Focus: Global Expansion
Forward Focus Global Expansion
Slide 16: Global Expansion: Asia/Pacific
Forward Focus 1 Total assets include seven key markets: Japan, Australia, Hong Kong, South Korea, Taiwan, China and Singapore. 2 AUA represents all Asia / Pacific assets under custody / administration. 3 Sources: Collectives: ICI (12/05); Pensions: Watson Wyatt Global Pension Asset Study (01/06); Si
Slide 17: Global Expansion: Contribution of Acquisitions
Forward Focus Established State Street’s leadership position in Europe Established State Street as No. 1 servicer of private equity and hedge funds worldwide Expanded State Street’s footprint in Europe and established leadership position in Italy Added fundamental capabilities to SSgA’s suite of sol
Slide 18: Forward Focus: Global Expansion
Forward Focus Global Expansion
Slide 19: Summary
Forward Focus Aligned against strong secular growth trends Comprehensive global footprint and infrastructure Well positioned in fast-growing markets with significant market share Deep client relationships fueling strong organic growth Opportunistic about acquisitions to expand market share or capabi
Slide 20: Extending Our Leadership Agenda
Extending Our Leadership Agenda
Slide 21: Investment Management Solutions: Leadership Today
Solutions Innovation 1 Pension & Investments 6/28/10. 2 Pensions & Investments 5/31/10. 3 eVestment Alliance 9/30/10. 4 Pensions & Investments 9/20/2010. 5 Pensions & Investments 10/4/2010. LEADERSHIP TODAY No. 2 in worldwide institutional asset management ¹ No. 2 passive manager of domestic equitie
Slide 22: Leading Global Asset Manager
Solutions Innovation Atlanta Boston Chicago Montreal New York Rye Brook, NY San Francisco Wilton, CT Toronto Investment Center Management Office Global Alliance Amsterdam Brussels London Paris Geneva Frankfurt Munich Milan Dubai Bangalore Hong Kong Melbourne Seoul Singapore Shanghai Tokyo Sydney Dub
Slide 23: Investment Management Solutions: $2.0TN AUM
Solutions Innovation * As of December 31, 2010. Note: Assets in Asset Allocation are not counted in the underlying asset class. BROAD CAPABILITIES CLIENTS 3,000 global clients – 37% non-US domiciled – 24 Central Bank relationships – 24 Sovereign Wealth Fund clients 65% of clients use two or more str
Slide 24: Investment Management Value Proposition
Solutions Innovation Includes active, enhanced, passive, fixed-income, cash, pure alpha and multi-asset class solutions More than 120 ETFs Dedicated asset class and credit research teams Advanced Research Center (ARC), with 32 experienced professionals More than 70% of all active strategies outperfo
Slide 25: Defined Contribution Plans
AUM in Defined Contribution plans is projected to grow at a CAGR of 10% over the next 5 years as Defined Benefit plans decelerate * This trend is expected to accelerate as sponsors shift the burden of retirement risk onto participants Solutions Innovation * Source: McKinsey Retirement Practice, 1/11
Slide 26: Defined Contribution Plans: Global Growth Rates
Solutions Innovation 1 Using 2008 – 2013 projected DC AUM growth rate (CAGR) from Cerulli. 2 Using 2008 – 2013 projected total pension growth rate (CAGR) from Cerulli. 3 Using 2004 – 2008 historic DC AUM growth rate (CAGR) from Cerulli. 4 Using 1998 – 2008 historic total pension growth rate (CAGR) f
Slide 27: Defined Contribution Plans: $200BN AUM
International Equities $30BN 15% Solutions Innovation Company Stock Management $49BN 24% Cash $4BN 2% Alternative Indices* $1BN 1% Balanced $12BN 6% Target Date $10BN 5% Stable Value $2BN 1% Fixed Income $20BN 10% US Equities $72BN 36% BROAD CAPABILITIES VALUE PROPOSITION Trends favoring transparenc
Slide 28: Cash Management: Projected Growth in Cash
Solutions Innovation GLOBAL MARKET SIZE 5-Year CAGR = 3% $TN * Source: Cerulli, 6/10. 7.4 7.7 8.0 8.2 8.4 8.5 $6 $7 $8 $9 2009 2010E 2011E 2012E 2013E 2014E Cash Management Cash AUM Projected Growth in Cash *
Slide 29: Cash Management: $426BN AUM
Separate Accounts 45% Solutions Innovation BROAD CAPABILITIES VALUE PROPOSITION Broad global experience managing cash in six locations and seven currencies worldwide Full range of global risk-controlled cash options Significant credit research and portfolio management resources Opportunities to cros
Slide 30: Exchange-Traded Funds: Global AUM Growth Forecast
$0 $1 $2 $3 $4 $5 2010 2011 2012 2013 2014 2015 Solutions Innovation $TN 1.5 1.8 2.3 2.9 3.7 4.7 1 The global forecast includes estimates for Americas, Europe, Asia (ex-Japan) plus all other regions ( e.g . Japan, Mideast , etc .). 2 Includes all exchange-traded products (e.g., ETF, ETN, ETC) and ba
Slide 31: Exchange-Traded Funds: Continued Growth and Innovation
Solutions Innovation Sector $51BN Size ( e.g . Large, Mid, Small Cap) $115BN Fixed Income $16BN Commodity $58BN Dividend / Fundamental / Other $7BN 1 As of 12/31/10. 2 Annual ETF Global Awards, 4/10. BROAD CAPABILITIES VALUE PROPOSITION Pioneered market in 1993 by launching the first US-listed ETF S
Slide 32: Summary
Solutions Innovation Well positioned against large fast-growing market segments Leveraging core competencies Extensive global footprint Deep, long-standing relationships with world’s leading institutions Ability to cross-sell to existing State Street clients • • • • • Summary
Slide 33: Extending Our Leadership Agenda
Extending Our Leadership Agenda
Slide 34: Operations & IT Transformation: Leadership Today
Operations & IT Transformation LEADERSHIP TODAY Global footprint Global platform Secure, reliable infrastructure World-class Lean skills Shared service / COE operating model FORWARD FOCUS Enabling Productivity Accelerating Innovation Supporting Growth Benefiting Clients • • • • •
Slide 35: Supporting Growth: Program Profile
Operations & IT Transformation Deploy leading-edge technologies to fuel innovation Shift to new, private cloud computing paradigm Leverage Lean to standardize processes and platforms Improve speed to market and enhance service delivery Deliver real-time analytics and data • • • • • Supporting Growth
Slide 36: Cloud Computing: The Next Frontier
STATE STREET. “Technology 15 ear cycle: Waves whos is imminent a Waves roll in 16 to S and two rising full global impact re cloud Computing and analytics “Cloud Computing represents the next frontier” Steve Ballmer,
Slide 37: Technology Waves
“Technology Waves roll in 19 to 15 year cycles and two rising Sam Palmisano Chairman ang CEO, IR
Slide 38: Technology Waves
“Technology Waves roll in 19 to 15 year cycles and two rising Sam Palmisano Chairman ang CEO, IR
Slide 39: Enabling Productivity
Operations & IT Transformation Service Excellence Client-backed model World class engineering Follow the sun model Resource Optimization Functional centers of excellence (COEs) Capacity on demand Right-shore talent by location Process Standardization Global processes for the core More efficient orga
Slide 40: Accelerating Innovation
Operations & IT Transformation Automation / capacity on demand Accelerated time to market Integrated security environment Real-time data infrastructure Advanced platform for product innovation Strengthened client service KEY BENEFITS Custom analytics and data Risk and control Services Performance, c
Slide 41: Benefiting Clients
Operations & IT Transformation Leading Multi-Asset Global Investment Manager Benefits Today Future Plan New test systems and applications take 3 to 6 weeks to deploy New test systems and applications take minutes to deploy Aggregate data views available end of day Aggregate data view real time Manag
Slide 42: Progress to Date
Operations & IT Transformation Global pilot conducted in 2010 Multiple independent reviews Security parameters successfully tested 700 Lean professionals trained 33 projects completed in ’09 and ’10 Key processing centers established in China, India and Poland Core functions aligned against client n
Slide 43: Financial Profile of Transformation Program
Operations & IT Transformation Expect to achieve annual pre-tax run rate of $575MN to $625MN by the end of 2014 2011: slight benefit 2012: about 1/3 of the total expected 2013: about 2/3 of the total expected 2014: 100% of total expected Incremental costs to range between $15MN to $20MN per quarter
Slide 44: Summary
Operations & IT Transformation Strengthens service excellence Heightens introduction of new products and services Accelerates time to market Enables flexible global workforce Enhances data security • • • • • Summary
Slide 45: Forward Focus Agenda
STATE STREET. Forward Focus Global Expansion Solutions Innovation Operations & IT Transformation ®™ Risk and Capital Management Financial Update Summary
Slide 46: Risk and Capital Management: Capital
Risk and Capital Management Adjusting to new global evolving capital requirements Developing best-in-class capabilities Strong organic capital generator Reinstating dividend a priority Evaluating share repurchase program and potential acquisitions Strategically repositioned portfolio in 2010 90% of
Slide 47: Capital Ratios
Risk and Capital Management State Street Corporation “Well Capitalized” ¹ 12/31/10 Actual under Basel I 12/31/10 Adjusted to reflect Basel III proposal 5 Tier 1 Leverage 5.0% ² 8.2% 5.9% Tier 1 Capital 6.0% 20.5% 10.6% Tier 1 Common Ratio ³ ---- 18.1% 9.4% Total Capital 10.0% 22.0% 11.6% Tangible Co
Slide 48: Transition from Basel I to Basel III Regulations
Risk and Capital Management FAS 115 (unrealized loss) and FAS 158 (pension funding) no longer added back Trust preferred and subordinated debt phased out Deferred tax assets treated less restrictively Revised methodology for expected credit losses Model for operational risk internally driven Changes
Slide 49: Forward Focus Agenda
STATE STREET. Forward Focus Global Expansion Solutions Innovation Operations & IT Transformation Risk and Capital Management Financial Update Summary
Slide 50: Revenue Drivers: Winning New Business
Financial Update Business 2010 New Wins * ($BN) Installed through Q4 ($BN) To be Installed ($BN) US Asset Servicing $911.4 $640.2 $271.2 Non-US Asset Servicing $454.8 $335.5 $119.3 US Asset Management $88.7 $63.8 $24.9 Non-US Asset Management $70.5 $55.4 $15.1 * Assets as of 12/31/10. Total Asset Se
Slide 51: Market-Driven Revenues
Average assets on loan over the past six quarters were $397BN per quarter, with NYSE short interest below historic levels 2011 outlook is cautious: – Volumes declined from Q3 2010 level to $368B in Q4 2010 – Rate environment (FF to 3-month LIBOR) remains compressed From Q1 ’07 to Q4 ’10 our global m
Slide 52: Balance Sheet Management
Financial Update * - Duration gap: 0.53 years - Duration: 1.7 years - Unrealized after-tax loss of $504MN, down 78% from 12/31/09 - Re-invested $7BN of the $11BN from the securities sold in December, 2010 - Expect about $15BN to mature or pay down in 2011 - Expect to purchase primarily Treasuries an
Slide 53: Net Interest Revenue / Net Interest Margin
Worldwide administered rates remain unchanged Steepness of yield curve remains at its current level Average earning assets expected to increase modestly from the 2010 level Ratio of Fixed / Floating assets in the investment portfolio = about 45% / 55% Financial Update ASSUMPTIONS FOR 2011 • • • • Ne
Slide 54: Disciplined Expense Control
Financial Update Achieve positive operating leverage on an annual basis Focused on expense discipline – Streamlined levels of management – Implemented Lean processes throughout the organization – Ran technology expenses at lower end of 20% to 25% range Implement operations/IT transformational progra
Slide 55: Expectations Driving 2011 Outlook
Financial Update Continued strength in servicing fee revenue Modest improvement in management fee revenue as investors begin to re-risk Conservative approach to addressing market-driven revenue Balance sheet to generate 155 to 165 BPS of NIM Increased capital flexibility Disciplined expense control
Slide 56: Extending our Leadership Agenda
Extending our Leadership Agenda
Slide 57: Summary
Summary Global Services – Leader in servicing solutions for asset managers and asset owners Global Markets – Pioneer in electronic trading and portfolio solutions Global Advisors – Well positioned in high-growth markets Secular Trends Support Growth Global Scale Deep Client Relationships Strong Mome
Slide 58: State Street
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Slide 59: State Street
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