State Street Corporation · NYSE:STT
State Street — Citi 2013 U.S. Financial Services Conference
27 slides from State Street's conference presentation, Mar 6, 2013
Slide 1: Positioned for Growth
Edward J. Resch Chief Financial Officer Citi 2013 U.S. Financial Services Conference March 6, 2013 Positioned for Growth
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements as defined by United States securities laws, including statements relating to our goals and expectations regarding our business, financial and capital condition (including without limitation, our capital ratios under Ba
Slide 3: Agenda
Positioned for Growth • Macro Trends and Business Strategy • Overview of 2012 Performance • Outlook for 2013 • Summary Agenda 3
Slide 4: We Have a Strong Foundation
We Have a Strong Foundation 4 Strong Global Footprint Long-Term Shareholder Value Among Highest Capital Ratios in Industry Focused Strategy Fueled by Macro Trends Strong Global Footprint No. 1 or No. 2 Position in High-Growth Markets
Slide 5: Our Actions Have Driven Positive Results
Our Actions Have Driven Positive Results 5 • Global economic pressures • Client de-risking behavior • Market-driven revenue weakness • Regulatory changes increase costs and capital pressures • Grew core businesses • Prudently controlled expenses • Continued to transform operating model • Managed cap
Slide 6: Macro Trends Fuel Our Confidence for Continued Growth
Macro Trends Fuel Our Confidence for Continued Growth Trend Driven by State Street Advantage Globalization • Ongoing globalization of investment and distribution channels • 40% of the growth in financial assets will come from emerging markets over the next decade1 • Strong global footprint operating
Slide 7: We're Pursuing Key Strategies for Success
We’re Pursuing Key Strategies for Success Priorities Strategy • Extending geographic reach – Deepen share in global asset management segment • Opening new vertical high-growth markets – Expand presence in alternative investment servicing market • Broadening our product set – Increase ETF offerings a
Slide 8: Why Clients Choose Us
Why Clients Choose Us Broad Set of Global Servicing Solutions Uniform Global Platform Leader in Middle Office Solutions-Based Asset Management Leader in Technology Transformation We Operate in More Than 100 Geographic Markets Worldwide Our Powerful Global Franchise Sets Us Apart in Meeting the Needs
Slide 9: Our Alternative Investment Solutions Business Has Grown at More Than Twice the Market Rate
Our Alternative Investment Solutions Business Has Grown at More Than Twice the Rate of the Market1 9 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 2005 2006 2007 2008 2009 2010 2011 2012 $4.7T Alternative Investments Market $4.4T $5.2T $5.7T $6.5T $6.7T $0 $200 $400 $600 $800 $1,000 $1,
Slide 10: Substantial Market Opportunity Exists with Large Percentage Still Untapped
Substantial Market Opportunity Exists with a Large Percentage of the Business Still Untapped Alternatives Industry Trends: Moving Toward Outsourcing Private Equity Hedge Fund Real Estate Source: HF Market – State Street Estimate; PE Market - Preqin, October 2012, Custody Risk Survey, May 2012; RE Ma
Slide 11: State Street Global Advisors is Well Positioned for Growth in 2013 and Beyond
State Street Global Advisors is Well Positioned for Growth in 2013 and Beyond $2.1TN AUM1 1 As of December 31, 2012. 2 Operating leverage is defined as the rate of growth of total investment management revenue less the rate of growth of total investment management expenses. Broad Capabilities Client
Slide 12: Leading Sponsor of ETFs
1 As of 12/31/12. 2 Source: Deutsche Bank Markets Research, January 11, 2013. Leading Sponsor of ETFs $TN Global Market Size ETFs / Other Exchange-Traded Products2 ETFs, $337BN, 16%1 0.41 0.59 0.80 0.78 1.13 1.44 1.49 1.91 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2005 2006 2007 2008 2009 2010 201
Slide 13: Business Operations and IT Transformation Program: 2012 Accomplishments and 2013 Milestones
2012 Accomplishments 2013 Milestones • Created new global Centers of Excellence • Achieved 20% targeted automation benefits • Targeted to achieve ~ 56% of automation benefits across the business • Established two new low-cost locations to balance our global footprint • Transitioned major IT servicin
Slide 14: Solid Performance in 2012: Business Operations and IT Transformation Program
Solid Performance in 2012: Business Operations and Information Technology Transformation Program1 $ in millions 2011 2012 2013E 2014E 2015E Business Operations Transformation $158 $280 $400 $440 $448 Information Technology Transformation 6 36 109 148 157 Net Benefits Before Non-Recurring Expenses 16
Slide 15: Summary of 2012 Operating-Basis Financial Results
Solid Performance in 2012: Summary of 2012 Operating- Basis (Non-GAAP) Financial Results1 $ in millions, except per share data 2012 2011 % Change Revenue $9,730 $9,564 1.74% Expenses 6,905 6,789 1.71% Earnings per share (EPS) $3.95 $3.73 5.9% Return on equity (ROE) 9.7% 9.9% (20) bps Operating lever
Slide 16: In 2012 We Performed Well
In 2012 We Performed Well1 … 1 Results presented on an operating basis, a non-GAAP presentation. See Appendix for explanations of our non-GAAP financial measures and for reconciliations of our operating- basis financial information. 9.7 6 8 10 STT (%) 1.46 0.5 1 1.5 STT (%) Net Interest Margin Retur
Slide 17: And Outperformed Our Primary Peers
… and Outperformed Our Primary Peers1 Well Positioned to Maintain Our Lead 9.7 8.8 9.3 6 8 10 STT BK NTRS (%) 1.46 1.21 1.22 0.5 1 1.5 STT BK NTRS (%) Net Interest Margin Return on Equity 29.1 22.9 26.2 20 25 30 STT BK NTRS (%) Pre-Tax Margin 1 As described in the appendix: (i) data for each of Stat
Slide 18: Outlook for 2013: Revenue Drivers
Outlook for 2013: Revenue Drivers Revenue • $551BN in 2012 wins scheduled to be installed in 2013 • Early signs of re-risking by investors, if continued, is expected to benefit servicing and asset management fee revenues • Decline expected in NIR, with an operating-basis1 NIM of 130-140 bps, assumin
Slide 19: Outlook for 2013: Expense Drivers
Outlook for 2013: Expense Drivers Expenses • Expect to achieve incremental pre-tax expense savings from Business Operations and IT program of $220MN1 • Expect information systems and communications expenses to increase modestly from Q4 run rate as Business Operations and IT Transformation program co
Slide 20: Outlook for 2013: Balance Sheet Strategy
Outlook for 2013: Balance Sheet Strategy Invest in High-Quality Assets • Invest through the cycle • Solid credit profile: ~90% AAA/AA-rated • Diversified by asset class and geography Manage Investment Portfolio Within Risk Appetite • Portfolio duration: ~1.5 years • Fixed-rate securities: ~45% of to
Slide 21: Outlook for 2013: Operating-Basis NIM
Outlook for 2013: Operating-Basis1 (Non-GAAP) NIM Interest-Rate Assumptions • Worldwide administered rates remain unchanged through 2013 • Yield curves retain current shapes Investment Portfolio • To be managed in line with our balance sheet strategy Reinvestment Strategy • Expect about $20BN to mat
Slide 22: Summary: 2013 Expectations
Summary: 2013 Expectations 22 1 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. • Grow servicing and management fee revenue • Assume continued softness in market-driven revenue • Work through lo
Slide 23: Heading in the Right Direction
Heading in the Right Direction Managing Through the Short Term Delivering Value Today and for the Future Well Positioned for the Long Term 23
Slide 24: State Street
STATE STREET iy ey, pe STATE STREET.
Slide 25: Appendix
Appendix The foregoing presentation includes financial information presented on a GAAP basis as well as on a non-GAAP, or “operating basis.” Management measures and compares certain financial information on an operating basis, as it believes that this presentation supports meaningful comparisons fro
Slide 26: Non-GAAP reconciliation: 2012 YTD vs. 2011 YTD
26 2012 YTD vs. (Dollars in millions, except per share amounts) 2011 YTD Total Revenue: Total revenue, GAAP basis $ 9,649 $ 9,594 0.57 % Tax-equivalent adjustment associated with tax-exempt investment securities 124 128 Tax-equivalent adjustment associated with tax-advantaged investments 126 62 Loss
Slide 27: Non-GAAP reconciliation: Diluted EPS and Return on Equity
27 2012 YTD vs. 2011 YTD Diluted Earnings per Common Share: Diluted earnings per common share, GAAP basis $ 4.20 $ 3.79 10.8 Loss from sale of Greek investment securities .06 - Provisions for litigation exposure and other costs .12 - Special one-time additional charitable contribution .04 - Acquisit
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