State Street Corporation · NYSE:STT
State Street — Investor Presentation (June 2003)
36 slides from State Street's investor presentation, Jun 24, 2003
Slide 1: Fueling State Street's Growth
Fueling State Street’s Growth Ronald E. Logue President and Chief Operating Officer [LOGO] S TATE S TREET . For Everything You Invest In TM
Slide 2: Reminder
Reminder This presentation includes discussion of State Street Corporation’s financial and business goals and strategies, which may be perceived as “forward-looking statements” as defined by Federal Securities Laws. Actual results could differ materially, and there can be no assurance that goals wil
Slide 3: Agenda
S TATE S TREET . Agenda Building on a Solid Foundation of Growth Continuing to Grow Core Business Integrating GSS Investing in Strategic Opportunities Fueling State Street’s Growth
Slide 4: We Are an Important Part of the Global Financial Services Infrastructure
We Are an Important Part of the Global Financial Services Infrastructure n We are the largest institutional investment manager in the world n We service – 47% of all US mutual funds (calculating five times the number of fund prices daily as our next largest competitor) – 29% of US pension funds – 18
Slide 5: Building on a Solid Foundation of Growth
Building on a Solid Foundation of Growth CAGR 1997-2002 Total funds serviced 9.7 % European funds serviced 16.4 % Global assets managed 14.4 % Electronic shares traded 46.0 %
Slide 6: Building on a Solid Foundation of Growth: Operating Earnings Per Share
Building on a Solid Foundation of Growth Operating Earnings Per Share* [Graphic] * Operating earnings as defined in State Street Corporation SEC filings.
Slide 7: Our Financial Goals
Our Financial Goals Primary Goal n Sustainable real growth in earnings per share Supporting Goals n Revenue: 12.5% real CAGR, 2000-2010 n Operating ROE: 13-15% in 2003 and 2004
Slide 8: Our Strategy for Continued Growth
Our Strategy for Continued Growth Continue to grow in core businesses Reduce expenses, leverage scale Integrate GSS Invest in strategic opportunities n Investment servicing n Reduce baseline expenses by $125 million by end of 2003 n Successfully convert clients n Equity Trading Services n Investment
Slide 9: Continuing to Grow Core Business
Continuing to Grow Core Business
Slide 10: Investment Management: New Relationships with Clients
Investment Management New Relationships with Clients 04/01/2002 – 03/31/2003 Assets ($US billions) $116.9 Key Wins Banco Central de Chile NSTAR BBC Pension Trust Limited PGGM Credit Suisse Private Banking Royal Liver Assurance Limited Missouri Public Schools Retirement Towers Perrin System UPS Norge
Slide 11: Investor Services: New Relationships with Clients
Investor Services New Relationships with Clients 04/01/2002 – 03/31/2003 Assets ($US billions) $355 Key Client Wins AXA Ohio Public Employee’s Retirement Clarington Funds Inc. System James Irvine Foundation Texas Municipal Texas Teachers Retirement System Key European Wins Allianz Dresdner AM, Luxem
Slide 12: Investor Services: Competitive Wins and Losses
Investor Services Competitive Wins and Losses 01/01/2001 – 03/31/2002 04/01/2002 – 03/31/2003 Assets Won From ($US billions) Assets Lost To ($US billions) Assets Won From ($US billions) Assets Lost To ($US billions) BoNY Citibank Deutsche JPMorgan Chase Northern Mellon PFPC All Others TOTAL
Slide 13: Investor Services: Accounting Wins
Investor Services Accounting Wins 04/01/2002 – 03/31/2003 Assets Related to Fund Accounting Servicing ($US billions) Previous Provider Scudder Investments $ Internal G.E. Asset Management $ Internal A Large Insurance Company $ Mellon Schroders UK $ Deutsche Dwight Asset Management $ Internal Phoenix
Slide 14: Investor Services: Transfer Agency New Relationships
Investor Services New Relationships with Clients Transfer Agency 04/01/2002 – 03/31/2003 # of Shareholder Accounts 4,068,527 Key Client Wins Alberta Treasury Logix Clarington SEI Calvert 529 Plan TIAA 529 Plan Mississippi Citigroup 529 Plans T. Rowe Price Lehman Van Kampen Funds Key European Wins Al
Slide 15: Reducing Expenses: Leveraging Scale
Reducing Expenses Leveraging Scale
Slide 16: Our Plan: Goal to Eliminate $125 Million in Cost This Year
Our Plan Goal: To Eliminate $125 Million in Cost This Year n We reduced rate of expense growth in ‘00, ‘01, and ‘02 n We are projecting expenses below $705 million of baseline expenses in Q1 – Down approximately $15 million in Q2 – Down approximately $55 million in Q3 & Q4 n Our program to reduce st
Slide 17: Integrating GSS
STATE STREET. Integrating GSS
Slide 18: Operating Goals Today
Operating Goals Today State Street Communications Current Outlook “…Pre-tax cost savings of approximately $125-150 million in the first full year after close…” – November 5, 2002 “State Street is ahead of schedule in reducing GSS expenses, and expects to meet or exceed its targets for cost savings.”
Slide 19: GSS Client Composition
GSS Client Composition % of Total Revenue As of March 31, 2003 1,320 Total Clients $1.9T Total AUC $575M Total Revenue [PIE CHART] n Top 100 clients plus DeAM represent 71% of total revenue n 10-year contract for DeAM business
Slide 20: Client Retention Outlook: DeAM
Client Retention Outlook DeAM As of June 1, 2003 Total Revenue Retention Status [GRAPHIC] [PIE CHART]
Slide 21: Client Retention Outlook: Out of Scope
Client Retention Outlook Out of Scope As of June 1, 2003 Total Revenue Retention Status [GRAPHIC] [PIE CHART]
Slide 22: Client Retention Outlook: Top Clients
Client Retention Outlook Top 25 As of June 1, 2003 Total Revenue Retention Status [GRAPHIC] [PIE CHART]
Slide 23: Client Retention Outlook: Top Clients (continued)
Client Retention Outlook Top 26 – 100 As of June 1, 2003 Total Revenue Retention Status [GRAPHIC] [PIE CHART]
Slide 24: Client Retention Outlook: Remaining Clients
Client Retention Outlook Remaining Clients As of June 1, 2003 Total Revenue Retention Status [GRAPHIC] [PIE CHART]
Slide 25: Loss Status
Loss Status As of June 1, 2003 Clients Lost Assets ($B) Revenue($M) % of Total Revenue Top 25 19.5 19.5 5.3 5.3 .92 % .92 % Top 26-100 83.0 85.7 3.4 4.0 .59 % .70 % Remaining 45.3 68.4 5.2 6.4 .90 % 1.11 % Partial Losses — — — — 3.5 3.5 .60 % .60 % TOTAL — 147.8 173.6 $ 17.4M $ 19.2 3.01 % 3.33 %
Slide 26: Projected Payment Schedule
Projected Payment Schedule 11/2002 01/31/2003 03/31/2003 01/31/2004 Assets $ 2.2T ** $ 2.2T ** $ 1.9T $ XXT Total Revenue* $ 700M $ 620M *** $ 575M *** $ XX PURCHASE PRICE $ 1.5B $ 1.5B Payment UPFRONT $ 1.1B HOLDBACK — $ 400M $ XX * Approximate total revenues are based on annualized projected resul
Slide 27: Investing in Strategic Opportunities
Investing in Strategic Opportunities Equity Trading Services Alternative Investment Servicing Investment Operations Services Wealth Manager Services
Slide 28: Investing in Strategic Opportunities: Equity Trading Services
Investing in Strategic Opportunities Equity Trading Services n Net Equity Trading Revenue up 41%* Business n Transition Management Revenue up 58%* Growth n Electronic Equity Trading Volumes (shares traded) up75%* n Our top 100 clients control over 50% of the world’s AUM** Client n 19 of the world’s
Slide 29: Equity Trading Services: Leader in Transition Management
Investing in Strategic Opportunities Equity Trading Services n Industry’s largest Public Pension Fund Transition – $30 Billion n Industry’s largest Endowment Transition – $23 Billion n A major transition for a large Public Fund in Japan Leader in n Ratings in Global Investor 2003 Transition Manageme
Slide 30: Alternative Investment Servicing: Market Overview
Investing in Strategic Opportunities Alternative Investment Servicing Market n Hedge Fund Market Today = $650.0 billion* Overview n Projection by 2010 = Over $2.0 trillion** n Leverages existing expertise Competitive n Serves existing client base Advantages n Opens opportunities for a new client bas
Slide 31: Alternative Investment Servicing: Business Update
Investing in Strategic Opportunities Alternative Investment Servicing Business Update n Purchased IFS in July 2002 n Installed $10 billion in new assets currently servicing $45 billion Key Client Wins n CALPERS n Wellington Hedge Management n AQR Capital Management LLC n Brevan Howard Asset Manageme
Slide 32: Investment Operations Services
Investing in Strategic Opportunities Investment Operations Services 04/01/2002 – 03/31/2003 Business Update n Largest investment operations outsourcer currently servicing over $530 billion in assets globally n The only investment operations provider supporting a global asset manager in six domiciles
Slide 33: Wealth Manager Services: Strategy
Investing in Strategic Opportunities Wealth Manager Services Strategy n Outsourcing internal operations of global HNW investment managers n Focused on two market segments Private Client Outsourcing n $27T held by high net worth individuals worldwide, estimated to grow 8-10% per year* n Wealth manage
Slide 34: Wealth Manager Services: Business Update
Investing in Strategic Opportunities Wealth Manager Services 04/01/2002 – 03/31/2003 Business Update n Grown assets serviced from $0 to $94 billion in 12 months Key Client Wins n 16 new clients, including J & W Seligman n Broad based success across all segments – 12 Private Clients n 8 US n 3 Europe
Slide 35: Summing Up
Fueling State Street’s Growth Summing Up Our core business is rock-solid. We’re continuing to win business worldwide. We are meeting our GSS revenue retention targets and cost reduction goals. Our new strategic businesses are growing rapidly.
Slide 36: Thank You
Thank You [LOGO] S TATE S TREET . For Everything You Invest In TM