UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
______________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 18, 2019
______________________
State Street Corporation
(Exact name of registrant as specified in its charter)
______________________
Massachusetts
 
001-07511
 
04-2456637
(State or other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification Number)
 
 
 
 
 
One Lincoln Street
Boston, Massachusetts
 
02111
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (617) 786-3000
______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
 




Item 2.02.    Results of Operations and Financial Condition.
On January 18, 2019, State Street Corporation issued a news release announcing its results of operations for the fourth-quarter of 2018 and full-year 2018. Copies of that news release and accompanying fourth-quarter 2018 and full-year 2018 financial information addendum are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
Item 7.01.    Regulation FD.
On January 18, 2019, State Street Corporation made available a slide presentation providing highlights of its fourth-quarter 2018 and full-year 2018 results of operations and related information as of December 31, 2018, which is being made available in connection with a January 18, 2019 investor conference call. A copy of that slide presentation is furnished herewith as Exhibit 99.3 and is incorporated herein by reference.
Item 9.01.    Financial Statements and Exhibits.
(d)    Exhibits.
State Street Corporation's news release dated January 18, 2019, announcing its fourth-quarter 2018 and full-year 2018 results of operations and accompanying fourth-quarter 2018 and full-year 2018 financial information addendum are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference in Item 2.02 hereof; and a slide presentation providing highlights of State Street's fourth-quarter 2018 and full-year 2018 results of operations and related information as of December 31, 2018, which is being made available in connection with a January 18, 2019 investor conference call, is furnished herewith as Exhibit 99.3 and is incorporated by reference in Item 7.01 hereof.

Exhibit No.
Description





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
STATE STREET CORPORATION
 
 
 
 
 
 
 
 
 
By:
 
/s/ IAN W. APPLEYARD
 
 
 
Name:
 
Ian W. Appleyard,
 
 
 
Title:
 
Executive Vice President, Global Controller and Chief Accounting Officer
Date:
January 18, 2019
 
 
 
 



Exhibit



Exhibit 99.1
One Lincoln Street
Boston, MA 02111
graphiclogo.jpg
News Release
Investor Contact: Ilene Fiszel Bieler
Media Contact: Marc Hazelton
+1 617/664-3477
+1 617/513-9439




STATE STREET REPORTS FOURTH-QUARTER 2018 EPS OF $1.04; EPS $1.68
EXCLUDING NOTABLE ITEMS(a) 

NET INTEREST INCOME UP 13% WITH NIM EXPANSION YEAR-ON-YEAR

INITIATED NEW $350 MILLION EXPENSE SAVINGS PROGRAM

BETTER POSITIONED FOR CCAR 2019 DUE TO BALANCE SHEET OPTIMIZATION

FULL-YEAR 2018 ROE OF 12.2%, UP 1.6% POINTS FROM FULL-YEAR 2017

 
Boston, MA ...January 18, 2019

In announcing today's financial results, Ronald O'Hanley, President and Chief Executive Officer, said "Over the course of 2018, I have engaged with State Street’s stakeholders including our investors, clients, employees and regulators. I have also led a reexamination of our Investment Servicing and Investment Management strategies. State Street has strong client relationships, unique assets and is well-positioned in attractive, high-growth markets. While we have made progress on our technology transformation, much remains to be done and we are not satisfied with our recent performance. Structural costs are still too high and our automation efforts have not moved fast enough."
O'Hanley continued, "New business wins remained strong, with a record $1.9 trillion of new asset servicing commitments in 2018, including $140 billion of new mandates in the fourth quarter. Net interest income increased significantly and foreign exchange trading performed well, while weaker equity markets and challenging industry conditions drove underperformance in servicing fees. Amidst challenging market and industry headwinds, we have launched a new expense program designed to reduce costs. As part of that program, we recorded a $223 million pre-tax repositioning charge, the benefits of which we expect to fully realize within 12-15 months. Our newly acquired Charles River Development business performed consistent with our expectations. Charles River Development is driving new activity with existing and new clients and we are making progress towards creating the industry's first fully integrated front-to-back offering."    
(a)Results excluding notable items are a non-GAAP presentation. Please refer to the addendum for an explanation and reconciliation of non-GAAP measures.

1



O'Hanley concluded, "The changes we are making will position us well to realize our three-year strategic vision to be the leading asset servicer, asset manager, and data insight provider to the owners and managers of the world's capital, which I outlined last month. We have already initiated a series of actions and as a result we are highly focused on increasing capital return, revenue growth and margin expansion. I am confident that our strategy represents a significant opportunity to deliver growth, drive innovation and enhance shareholder value."

4Q18 Highlights
AUCA/AUM
•
Client Assets: Asset servicing AUCA as of quarter-end decreased 5% from 4Q17 primarily reflecting lower equity market levels. Asset management AUM as of quarter-end decreased 10% compared to 4Q17, primarily driven by weaker equity markets as well as institutional and cash outflows, partially offset by ETF inflows
New Business
•
Asset servicing mandates announced in 4Q18 totaled approximately $140 billion and total new mandates in 2018 were $1.9 trillion. Year-end servicing assets remaining to be installed in future periods totaled approximately $385 billion
•
Charles River Development (CRD): Mandates in 4Q18 include annual contract value bookings(b) of $14 million
Revenue
•
Total Revenue: 4Q18 revenue increased 5% compared to 4Q17
•
Fee Revenue: Increased 3%, or $59 million, relative to 4Q17, reflecting the acquisition of CRD and higher FX trading services revenue, partially offset by lower servicing fees and securities finance revenue
◦
CRD contributed $121 million to fee revenue
◦
The impact of the new revenue recognition standard contributed $67 million to fee revenue relative to 4Q17
•
Net Interest Income: Increased 13% relative to 4Q17, driven by higher market interest rates in the U.S. and disciplined liability pricing
Expenses
•
Expenses: Increased 16%, or $343 million, compared to 4Q17, reflecting the repositioning charge and other notable items, and the contribution of CRD, partially offset by net Beacon savings. The impact of the new revenue recognition standard contributed $67 million to expenses relative to 4Q17
◦
Total expenses, including notable items and CRD-related expenses, in the second half and first half of 2018 were $4.55 billion and $4.42 billion, respectively. Second-half 2018 underlying expenses were flat to the first-half of 2018(c) 


(b) Annual contract value bookings represent signed annual recurring revenue contract value.
(c)Underlying expenses exclude notable items, CRD operating expenses and CRD-related intangible asset amortization. Underlying expenses are non-GAAP measures. 1Q18 GAAP and underlying expenses of $2,256 million included seasonal deferred incentive compensation for retirement-eligible employees of $148 million. 1Q18 underlying expenses excluding these effects were $2,108 million. 2Q18 GAAP expenses of $2,159 million included $77 million of notable items related to repositioning charges. Excluding these items, 2Q18 underlying expenses were $2,082 million. 3Q18 GAAP and underlying expenses were $2,079 million. 4Q18 GAAP expenses of $2,474 million included notable items of $313 million (consisting of $223M of repositioning charges, $24 million of acquisition and restructuring charges, $24 million of expenses related to a business exit, and $42 million of legal and related expenses) and CRD-related expense of $57 million (consisting of $39 million of operating expenses and $18 million of intangible asset amortization). Excluding these items, 4Q18 underlying expenses were $2,104 million. 1H18 underlying expenses further excluding for the seasonal effects noted above were therefore $4,190 million, relative to 2H18 underlying expenses of $4,183 million.


2




•
New Expense Program Initiated: State Street has initiated a new expense program to accelerate efforts to become a higher-performing organization and help navigate challenging market and industry conditions. Through increased resource discipline, process re-engineering and automation, State Street expects to realize $350 million in underlying expense savings in 2019. As part of the expense program's initiation, 4Q18 expenses included a repositioning charge of $223 million, including $198 million of compensation and employee benefits and $25 million of occupancy costs. The expense program includes:
◦
Resource Discipline:
▪
Reduction of senior managers by 15% through management delayering and aligning global organizations
▪
Introduction of a more rigorous performance management system
▪
Increased vendor management in subcustody and professional services
▪
Optimization of real estate footprint
◦
Process Re-engineering and Automation:
▪
Workforce reduction of 6%, or approximately 1,500 employees, in high cost locations as the Company realizes benefits of automation and standardized global processes
▪
Rationalization and streamlining of 3 operational hubs and 2 joint ventures
▪
Retirement of legacy applications and accelerated move to common platforms
▪
Limiting regional and client operating differences and reducing the number of manual, bespoke activities
 
Notable Items
(Dollars in millions, except EPS amounts)
Pre-tax
 
EPS Impact
 
 
 
 
 
Diluted EPS as reported


 
$
1.04


 
 
 
 
Compensation and employee benefits
$
198

 
 
 
Occupancy
25

 
 
Total repositioning charges
223

 
0.43

 
 
 
 
Acquisition and restructuring costs
24

 
0.04

Business exit: Channel Islands
24

 
0.05

Legal and related
50

 
0.12

Total notable items
$
321

 
$
0.64

 
 
 
 
Diluted EPS, excluding notable items


 
$
1.68



















3







Capital
•
Ratios: Capital ratios were relatively flat as compared to 4Q17
•
Investment Portfolio Repositioning: Completed investment portfolio re-balancing during 4Q18 to better position the balance sheet for 2019 CCAR process, increasing the percentage of high-quality liquid assets
•
Capital Return: Declared 4Q18 quarterly common stock dividend of $0.47 per share, an increase of 12% from the 4Q17 dividend. The Company intends to resume common stock repurchases in January and intends to repurchase up to $600 million through June 30, 2019 under its previously announced program


Financial Results
(Table presents summary results, dollars in millions, except per share amounts, or where otherwise noted)
 
4Q18
 
3Q18
 
Increase (Decrease)
 
4Q17
 
Increase (Decrease)
 
Total fee revenue(1)
 
$
2,289

 
$
2,280

 
0.4
 %

 
$
2,230

 
2.6
 %
 
 
Net interest income
 
697

 
672

 
3.7

 
 
616

 
13.1

 
 
Total revenue
 
2,986

 
2,951

 
1.2

 
 
2,846

 
4.9

 
 
Provision for loan losses
 
8

 
5

 
60.0

 
 
(2
)
 
(500.0
)
 
 
Total expenses(1)
 
2,474

 
2,079

 
19.0

 
 
2,131

 
16.1

 
 
Net income available to common shareholders
 
398

 
709

 
(43.9
)
 
 
334

 
19.2

 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
1.04

 
1.87

 
(44.4
)
 
 
.89

 
16.9

 
 
Financial ratios and other metrics:
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate
 
12.7

 
11.8

 
90

bps
 
48.4

 
(3,570
)
bps
 
Average total assets
 
221,350

 
221,313

 
—

 
 
216,348

 
2.3

 
 
Fee operating leverage(2)
 
 
 
 
 
(18.61
)%
 
 
 
 
(13.45
)%
 
 
Operating leverage(2)
 
 
 
 
 
(17.81
)
 
 
 
 
(11.18
)
 
 
Return on average common equity
 
7.5
%
 
14.0
%
 
(650
)
bps
 
6.9
%
 
60

bps
 
Return on tangible common equity(3)
 
20.5

 
19.4

 
110

 
 
16.7

 
380

 
 
Pre-tax margin (GAAP-basis)
 
16.9

 
29.4

 
(1,250
)
 
 
25.2

 
(830
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Effects of the new revenue recognition standard (ASU 2014-09): The newly effective revenue recognition standard increased 4Q18 total fee revenue and total expenses by $67 million each relative to 4Q17. In 4Q18 relative to 4Q17, the revenue impact was $50 million in management fees, $11 million in trading services revenue, and $6 million in other line items. The expense impact was $11 million in transaction processing, $48 million in other expenses, and $8 million across other expense line items.
(2) The financial ratio represents the rate of growth of total revenue (or fee revenue) less the rate of growth of expenses relative to the preceding or prior year period, as applicable.
(3) Return on tangible common equity is calculated by dividing year-to-date annualized net income available to common shareholders (GAAP-basis) by tangible common equity. For additional information on the Reconciliation of Tangible Common Equity Ratio refer to the addendum included with this News Release.


4



Selected Financial Information and Metrics
The tables below provide a summary of selected financial information and key ratios for the indicated periods.
The following table presents AUCA, AUM, market indices and foreign exchange rates for the periods indicated.
(Dollars in billions, except market indices and foreign exchange rates)
 
4Q18
 
3Q18
 
Increase (Decrease)
 
4Q17
 
Increase (Decrease)
Assets under custody and administration(1)(2)
 
$
31,620

 
$
33,996

 
(7.0
)%
 
$
33,119

 
(4.5
)%
Assets under management(2)
 
2,511

 
2,810

 
(10.6
)
 
2,782

 
(9.7
)
Market Indices(3):
 
 
 
 
 
 
 
 
 
 
S&P 500® daily average
 
2,699

 
2,850

 
(5.3
)
 
2,603

 
3.7

MSCI EAFE® daily average
 
1,809

 
1,964

 
(7.9
)
 
2,005

 
(9.8
)
MSCI® Emerging Markets daily average
 
978

 
1,054

 
(7.2
)
 
1,125

 
(13.1
)
HFRI Asset Weighted Composite® monthly average
 
1,389

 
1,413

 
(1.7
)
 
1,387

 
0.1

Barclays Capital Global Aggregate Bond Index® period-end
 
479

 
473

 
1.3

 
485

 
(1.2
)
Average Foreign Exchange Rate (Euro vs. USD)
 
1.141

 
1.163

 
(1.9
)
 
1.178

 
(3.1
)
Average Foreign Exchange Rate (GBP vs. USD)
 
1.286

 
1.303

 
(1.3
)
 
1.328

 
(3.2
)
 
 
 
 
 
 
 
 
 
 
 
(1) Includes assets under custody of $23,248 billion, $25,300 billion, and $25,020 billion, as of 4Q18, 3Q18, and 4Q17, respectively.
(2) As of period-end.
(3) The index names listed in the table are service marks of their respective owners.

Industry Flow Data
(Dollars in billions)
 
Quarters
 
 
 
 
 
 
1Q18
 
2Q18
 
3Q18
 
Three Months Ended November 30, 2018(4)
 
 
YTD 2017
 
YTD 2018(4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America - ICI Market Data(1)(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long Term Funds(5)
 
$
38.0

 
$
(28.3
)
 
$
(50.4
)
 
$
(148.6
)
 
 
$
66.8

 
$
(195.3
)
 
Money Market
 
(52.2
)
 
(51.7
)
 
35.8

 
50.2

 
 
81.2

 
20.5

 
ETF
 
62.8

 
55.8

 
87.2

 
89.2

 
 
470.8

 
314.3

 
 
Total ICI Flows
 
$
48.6

 
$
(24.2
)
 
$
72.6

 
$
(9.2
)
 
 
$
618.8

 
$
139.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Europe - Broadridge Market Data(1)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long Term Funds(5)
 
$
160.5

 
$
(24.9
)
 
$
(16.2
)
 
$
(126.9
)
 
 
$
713.5

 
$
57.6

 
Money Market
 
(10.3
)
 
(17.8
)
 
(21.9
)
 
2.0

 
 
75.7

 
(39.5
)
 
 
Total Broadridge Flows
$
150.2

 
$
(42.7
)
 
$
(38.1
)
 
$
(124.9
)
 
 
$
789.2

 
$
18.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Industry data is provided for illustrative purposes only and is not intended to reflect the Company's or its clients' activity.
(2) Source: Investment Company Institute.
Investment Company Institute (ICI) data includes funds not registered under the Investment Company Act of 1940. Mutual fund data represents estimates of net new cash flow, which is new sales minus redemptions combined with net exchanges, while exchange-traded fund (ETF) data represents net issuance, which is gross issuance less gross redemptions. Data for mutual funds that invest primarily in other mutual funds and ETFs that invest primarily in other ETFs were excluded from the series. ICI classifies mutual funds and ETFs based on language in the fund prospectus.
(3) Source: © Copyright 2018, Broadridge Financial Solutions, Inc.
Funds of funds have been excluded from Broadridge data (to avoid double counting). Therefore, a market total is the sum of all the investment categories excluding the three funds of funds categories (in-house, ex-house and hedge). ETFs are included in Broadridge’s database on mutual funds, but this excludes exchange-traded commodity products that are not mutual funds.
(4) 4Q18 data is through November 30, 2018 on a rolling 3 month basis and includes September, October and November 2018 market data. FY 2018 represents the rolling twelve month period from December 2017 through November 2018, the last date for which information is available. Flows for FY 2018 will not equal the sum of the four quarters.
(5) The long term fund flows reported by ICI are composed of North America Market flows mainly in Equities, Hybrids and Fixed Income Asset Classes. The long term fund flows reported by Broadridge are composed of EMEA Market flows mainly in Equities, Fixed Income, and Multi Asset Classes.


5



Assets Under Management
The following table presents 4Q18 activity in AUM by product category.
(Dollars in billions)
 
Equity
 
Fixed-Income
 
Cash(2)
 
Multi-Asset-Class Solutions
 
Alternative Investments(3)
 
Total
Balance as of September 30, 2018
 
$
1,789

 
$
423

 
$
317

 
$
145

 
$
136

 
$
2,810

Long-term institutional inflows(1)
 
94

 
37

 
—

 
29

 
2

 
162

Long-term institutional outflows(1)
 
(100
)
 
(41
)
 
—

 
(31
)
 
(3
)
 
(175
)
Long-term institutional flows, net
 
(6
)
 
(4
)
 
—

 
(2
)
 
(1
)
 
(13
)
ETF flows, net
 
(5
)
 
(1
)
 
5

 
—

 
2

 
1

Cash fund flows, net
 
—

 
—

 
(35
)
 
—

 
—

 
(35
)
Total flows, net
 
(11
)
 
(5
)
 
(30
)
 
(2
)
 
1

 
(47
)
Market appreciation / (depreciation)
 
(234
)
 
4

 
1

 
(10
)
 
(9
)
 
(248
)
Foreign exchange impact
 
—

 
—

 
(1
)
 
(1
)
 
(2
)
 
(4
)
Total market/foreign exchange impact
 
(234
)
 
4

 
—

 
(11
)
 
(11
)
 
(252
)
Balance as of December 31, 2018
 
$
1,544

 
$
422

 
$
287

 
$
132

 
$
126

 
$
2,511

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Amounts represent long-term portfolios, excluding ETFs.
(2) Includes both floating and constant-net-asset-value portfolios held in commingled structures or separate accounts.
(3) Includes real estate investment trusts, currency and commodities, including SPDR® Gold Shares ETF and SPDR® Long Dollar Gold Trust ETF. State Street is not the investment manager for the SPDR® Gold Shares ETF and the SPDR® Long Dollar Gold Trust ETF, but acts as the marketing agent.

Revenue
(Dollars in millions)
 
4Q18
 
3Q18
 
Increase (Decrease)
 
4Q17
 
Increase (Decrease)
Servicing fees
 
$
1,286

 
$
1,333

 
(3.5
)%
 
 
$
1,379

 
(6.7
)%
 
Management fees
 
440

 
474

 
(7.2
)
 
 
418

 
5.3

 
Foreign exchange trading services
 
294

 
288

 
2.1

 
 
248

 
18.5

 
Securities finance revenue
 
120

 
128

 
(6.3
)
 
 
147

 
(18.4
)
 
Processing fees and other revenue
 
149

 
57

 
161.4

 
 
38

 
292.1

 
     Total fee revenue(1)
 
2,289

 
2,280

 
0.4

 
 
2,230

 
2.6

 
Net interest income
 
697

 
672

 
3.7

 
 
616

 
13.1

 
Gains (losses) related to investment securities, net
 
—

 
(1
)
 
nm

 
 
—

 
nm

 
Total Revenue
 
$
2,986

 
$
2,951

 
1.2

 
 
$
2,846

 
4.9

 
Net interest margin
 
1.55
%
 
1.48
%
 
7

bps
 
1.38
%
 
17

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The newly effective revenue recognition standard increased 4Q18 total fee revenue by $67 million relative to 4Q17. For 4Q18 relative to 4Q17, the fee revenue impact was $50 million in management fees, $11 million in trading services revenue, and $6 million in other line items.
nm Not meaningful

Servicing fees decreased from 4Q17, reflecting weaker equity markets and challenging industry conditions, a previously announced client transition, and the unfavorable impact of currency translation, partially offset by new business wins. Compared to 3Q18, servicing fees decreased, primarily due to lower equity market levels and challenging industry conditions, as well as the unfavorable impact of currency translation, partially offset by higher client activity.
Management fees increased from 4Q17, due to $50 million related to the new revenue recognition standard, partially offset by lower equity market levels. Management fees decreased from 3Q18, primarily due to lower equity market levels and net outflows.
FX Trading Services revenue(2) increased from 4Q17, reflecting higher FX client volumes and volatility. The new revenue recognition standard contributed $11 million to 4Q18 trading services relative to 4Q17. Compared to 3Q18, trading services revenue increased, reflecting higher FX volatility.

6



Securities finance revenue decreased from 4Q17, reflecting balance sheet optimization efforts. Compared to 3Q18, securities finance revenue decreased due to lower assets on loan and lower spreads.
Processing fees and other revenue increased from 4Q17 and 3Q18. The increase over both periods is primarily due to the contribution of the recently acquired CRD.
Net interest income increased from 4Q17, driven by higher market interest rates in the U.S. and disciplined liability pricing, partially offset by a mix shift to HQLA. Compared to 3Q18, net interest income increased primarily due to higher U.S. interest rates and disciplined liability pricing. Net interest margin on a fully taxable-equivalent basis increased 17 and 7 basis points, respectively, compared to 4Q17 and 3Q18, driven by higher U.S. interest rates, disciplined liability pricing and a smaller interest earning balance sheet.
(2) FX trading services includes brokerage and other.

Expenses
(Dollars in millions)
 
4Q18
 
3Q18
 
Increase (Decrease)
 
4Q17
 
Increase (Decrease)
Compensation and employee benefits
 
$
1,303

 
$
1,103

 
18.1
 %
 
$
1,067

 
22.1
 %
Information systems and communications
 
356

 
332

 
7.2

 
301

 
18.3

Transaction processing services
 
214

 
236

 
(9.3
)
 
219

 
(2.3
)
Occupancy
 
146

 
110

 
32.7

 
117

 
24.8

Acquisition and restructuring costs
 
24

 
—

 
—

 
133

 
(82.0
)
Amortization of other intangible assets
 
81

 
47

 
72.3

 
54

 
50.0

Other
 
350

 
251

 
39.4

 
240

 
45.8

Total Expenses(1)
 
$
2,474

 
$
2,079

 
19.0

 
$
2,131

 
16.1

 
 
 
 
 
 
 
 
 
 
 
(1) The newly effective revenue recognition standard increased 4Q18 total expenses by $67 million relative to 4Q17. For 4Q18 relative to 4Q17, the expense impact was $11 million in transaction processing, $48 million in other expenses, and $8 million across other expense line items.
nm Not meaningful

Compensation and employee benefits expenses increased from 4Q17, primarily reflecting a repositioning charge of $198 million, CRD related compensation and employee benefit expenses of $28 million, higher investments to support new business and annual merit increases, partially offset by net Beacon savings and lower performance based incentive compensation. Compared to 3Q18, compensation and employee benefits expenses increased primarily due to the repositioning charge, the contribution from CRD, and one additional payroll day in 4Q18, partially offset by net Beacon savings and lower performance based incentive compensation.
Information systems and communications expenses increased from 4Q17 and 3Q18. The increase from both periods reflects technology infrastructure enhancements.
Transaction processing services expenses decreased from both 4Q17 and 3Q18, reflecting lower market data and sub-custody costs. The 4Q18 transaction processing services expenses includes $11 million related to the new revenue recognition standard.
Occupancy expenses increased from 4Q17, primarily due to $25 million related to the 4Q18 repositioning charge. Compared to 3Q18, occupancy expenses increased, primarily due to the 4Q18 repositioning charge and the optimization of our global footprint strategy.
Other expenses and intangible asset amortization increased from 4Q17, primarily due to $48 million related to the new revenue recognition standard, higher legal and related expenses of $42 million, CRD related intangible asset amortization of $18 million, and business exit costs. Compared to 3Q18, other expenses increased primarily due to higher legal and related expenses, higher professional fees, CRD related intangible asset amortization, and business exit costs.


7



The 4Q18 effective tax rate was 12.7% compared to 48.4% in 4Q17 and 11.8% in 3Q18. The 4Q18 tax rate includes the impact of the notable adjustments referenced earlier in this announcement. The 4Q17 tax rate included a one-time estimated net tax cost of $270 million as a result of the enactment of the Tax Cuts and Jobs Act ("TCJA"), while the 3Q18 tax rate included a reduction related to the 2017 tax legislation changes.

Capital
The following table presents regulatory capital ratios for State Street Corporation. The lower of capital ratios calculated under the Basel III advanced approaches and under the Basel III standardized approach are applied in the assessment of our capital adequacy for regulatory purposes. Lower quarter-end capital ratios versus 3Q18 reflect the closing of the Charles River Development acquisition on October 1, 2018, partially offset by lower balance sheet levels and a reduction of risk weighted assets.


December 31, 2018(1)
 
Basel III Advanced Approaches (Estimated) Pro-Forma(2)(3)
 
Basel III Standardized Approach (Estimated) Pro-Forma(3)
Fully Phased in SLR
Common equity tier 1 ratio
 
12.1
%
 
11.5
%
 
Tier 1 capital ratio
 
16.0

 
15.1

 
Total capital ratio
 
16.8

 
16.0

 
Tier 1 leverage ratio
 
7.2

 
7.2

 
Supplementary Leverage Ratio
 
 
 
 
6.3
%
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
Common equity tier 1 ratio
 
14.1
%
 
13.0
%
 
Tier 1 capital ratio
 
17.9

 
16.4

 
Total capital ratio
 
18.7

 
17.2

 
Tier 1 leverage ratio
 
8.1

 
8.1

 
Supplementary Leverage Ratio
 
 
 
 
7.1
%
(1) December 31, 2018 capital ratios are preliminary estimates.
(2) The advanced approaches-based ratios (actual and estimated) included in this presentation reflect calculations and determinations with respect to our capital and related matters, based on State Street and external data, quantitative formulae, statistical models, historical correlations and assumptions, collectively referred to as “advanced systems.” Refer to the addendum included with this News Release for a description of the advanced approaches and a discussion of related risks. Effective January 1, 2018, the applicable final rules are in effect and the ratios presented are calculated based on fully phased-in CET1, tier 1 and total capital numbers.
(3) Estimated pro-forma fully phased-in ratios as of December 31, 2018 reflect capital and total risk-weighted assets calculated under the Basel III final rule. Refer to the addendum included with this News Release for reconciliations of these estimated pro-forma fully phased-in ratios to our capital ratios calculated under the then applicable regulatory requirements. Effective January 1, 2018, the applicable final rules are in effect and the ratios presented are calculated based on fully phased-in CET1, tier 1 and total capital numbers.


8



Investor Conference Call and Quarterly Website Disclosures
State Street will webcast an investor conference call today, Friday, January 18, 2019, at 10:00 a.m. EST, available at http://investors.statestreet.com/. The conference call will also be available via telephone, at +1 877-423-4013 inside the U.S. or at +1 706-679-5594 outside of the U.S. The Conference ID is # 9476965.
Recorded replays of the conference call will be available on the website, and by telephone at +1 855-859-2056 inside the U.S. or at +1 404-537-3406 outside the U.S. beginning approximately two hours after the call's completion. The Conference ID is # 9476965.
The telephone replay will be available for approximately two weeks following the conference call. This News Release, presentation materials referred to on the conference call and additional financial information are available on State Street's website, at http://investors.statestreet.com/ under “Investor Relations--Investor News & Events" and under the title “Events and Presentations.”
State Street intends to publish updates to its public disclosure regarding regulatory capital, as required by the Basel III final rule, and the liquidity coverage ratio, on a quarterly basis on its website at http://investors.statestreet.com/, under "Filings & Reports." Those updates will be published each quarter, during the period beginning after State Street's public announcement of its quarterly results of operations and ending on or prior to the due date under applicable bank regulatory requirements (i.e., ordinarily, ending no later than 60 days following year-end or 45 days following each other quarter-end, as applicable). For 4Q18, State Street expects to publish its updates during the period beginning today and ending on or about February 14, 2019.
State Street Corporation (NYSE: STT) is the world's leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $31,620 billion in assets under custody and administration and $2,511 billion* in assets under management as of December 31, 2018, State Street operates globally in more than 100 geographic markets and employs over 40,000 worldwide. For more information, visit State Street's website at www.statestreet.com.
* Assets under management include the assets of the SPDR® Gold ETF and the SPDR® Long Dollar Gold Trust ETF (approximately $32 billion as of December 31, 2018), for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) serves as marketing agent; SSGA FD and State Street Global Advisors are affiliated.

In this News Release:
•
All earnings per share amounts represent fully diluted earnings per common share.
•
Return on average common shareholders' equity is determined by dividing annualized net income available to common equity by average common shareholders' equity for the period.
•
New asset servicing mandates and servicing assets remaining to be installed in future periods exclude new business which has been contracted, but for which the client has not yet provided permission to publicly disclose and is not yet installed. These excluded assets, which from time to time may be significant, will be included in new asset servicing mandates and reflected in servicing assets remaining to be installed in the period in which the client provides its permission. Newly announced servicing asset mandates for the first quarter for 2018 include a significant amount of assets contracted for in the fourth quarter of 2017 for which we received client consent to disclose in the first quarter of 2018. Servicing mandates and servicing assets remaining to be installed in future periods are presented on a gross basis and therefore also do not include the impact of clients who have notified us during the period of their intent to terminate or reduce their relationship with State Street, which from time to time may be significant.
•
New business in assets to be serviced is reflected in our AUCA after we begin servicing the assets, and new business in assets to be managed is reflected in our AUM after we begin managing the assets. As such, only a portion of any new asset servicing and asset management mandates may be reflected in our AUCA and AUM as of December 31, 2018. Distribution fees from the SPDR® Gold ETF and the SPDR® Long Dollar Gold Trust ETF are recorded in brokerage and other fee revenue and not in management fee revenue.
•
Operating leverage is defined as the rate of growth of total revenue less the rate of growth of expenses, relative to the successive prior year period, as applicable. Fee operating leverage is defined as the rate of growth of total fee revenue less the rate of growth of expenses, relative to the successive prior year period, as applicable. Year-over-year or YoY, refers to the current year period compared to the same period a year ago.


9



Forward-Looking Statements
This News Release (and the conference call referenced herein) contains forward-looking statements within the meaning of United States securities laws, including statements about our goals and expectations regarding our business, financial and capital condition, results of operations, strategies, the financial and market outlook, dividend and stock purchase programs, governmental and regulatory initiatives and developments, and the business environment. Forward-looking statements are often, but not always, identified by such forward-looking terminology as “outlook,” “expect,” "priority," “objective,” “intend,” “plan,” “forecast,” “believe,” “anticipate,” “estimate,” “seek,” “may,” “will,” “trend,” “target,” “strategy” and “goal,” or similar statements or variations of such terms. These statements are not guarantees of future performance, are inherently uncertain, are based on current assumptions that are difficult to predict and involve a number of risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed in those statements, and those statements should not be relied upon as representing our expectations or beliefs as of any date subsequent to January 18, 2019.
Important factors that may affect future results and outcomes include, but are not limited to:
•
the financial strength of the counterparties with which we or our clients do business and to which we have investment, credit or financial exposures or to which our clients have such exposures as a result of our acting as agent for our clients, including as asset manager;
•
increases in the volatility of, or declines in the level of, our NII, changes in the composition or valuation of the assets recorded in our consolidated statement of condition (and our ability to measure the fair value of investment securities) and changes in the manner in which we fund those assets;
•
the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities and inter-bank credits; the liquidity of the assets on our balance sheet and changes or volatility in the sources of such funding, particularly the deposits of our clients; and demands upon our liquidity, including the liquidity demands and requirements of our clients;
•
the level and volatility of interest rates, the valuation of the U.S. dollar relative to other currencies in which we record revenue or accrue expenses and the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally; and the impact of monetary and fiscal policy in the U.S. and internationally on prevailing rates of interest and currency exchange rates in the markets in which we provide services to our clients;
•
the credit quality, credit-agency ratings and fair values of the securities in our investment securities portfolio, a deterioration or downgrade of which could lead to other-than-temporary impairment of such securities and the recognition of an impairment loss in our consolidated statement of income;
•
our ability to attract deposits and other low-cost, short-term funding; our ability to manage the level and pricing of such deposits and the relative portion of our deposits that are determined to be operational under regulatory guidelines; and our ability to deploy deposits in a profitable manner consistent with our liquidity needs, regulatory requirements and risk profile;
•
the manner and timing with which the Federal Reserve and other U.S. and foreign regulators implement or reevaluate the regulatory framework applicable to our operations (as well as changes to that framework), including implementation or modification of the Dodd-Frank Act and related stress testing and resolution planning requirements, implementation of international standards applicable to financial institutions, such as those proposed by the Basel Committee and European legislation (such as UCITS, the Money Market Fund Regulation and MiFID II / MiFIR); among other consequences, these regulatory changes impact the levels of regulatory capital, long term debt and liquidity we must maintain, acceptable levels of credit exposure to third parties, margin requirements applicable to derivatives, restrictions on banking and financial activities and the manner in which we structure and implement our global operations and servicing relationships. In addition, our regulatory posture and related expenses have been and will continue to be affected by heightened standards and changes in regulatory expectations for global systemically important financial institutions applicable to, among other things, risk management, liquidity and capital planning, resolution planning, compliance programs, and changes in governmental enforcement approaches to perceived failures to comply with regulatory or legal obligations;
•
adverse changes in the regulatory ratios that we are, or will be, required to meet, whether arising under the Dodd-Frank Act or implementation of international standards applicable to financial institutions, such as those proposed by the Basel Committee, or due to changes in regulatory positions, practices or regulations in jurisdictions in which we engage in banking activities, including changes in internal or external data, formulae, models, assumptions or other advanced systems used in the calculation of our capital or liquidity ratios that cause changes in those ratios as they are measured from period to period;
•
requirements or expectations to obtain the prior approval or non-objection of the Federal Reserve or other U.S. and non-U.S. regulators for the use, allocation or distribution of our capital or other specific capital actions or corporate activities, including, without limitation, acquisitions, investments in subsidiaries, dividends and stock purchases, without which our growth plans, distributions to shareholders, share repurchase programs or other capital or corporate initiatives may be restricted;
•
changes in law or regulation, or the enforcement of law or regulation, that may adversely affect our business activities or those of our clients or our counterparties, and the products or services that we sell, including additional or increased taxes

10



or assessments thereon, capital adequacy requirements, margin requirements, and changes that expose us to risks related to the adequacy of our controls or compliance programs;
•
economic or financial market disruptions in the U.S. or internationally, including those which may result from recessions or political instability; for example, the U.K.'s decision to exit from the European Union or actual or potential changes in trade policy, such as tariffs or bi-lateral and multi-lateral trade agreements proposed by the U.S.;
•
our ability to create cost efficiencies through changes in our operational processes and to further digitize our processes and interfaces with our clients, any failure of which, in whole or in part, may among other things, reduce our competitive position, diminish the cost-effectiveness of our systems and processes or provide an insufficient return on our associated investment;
•
our ability to promote a strong culture of risk management, operating controls, compliance oversight, ethical behavior and governance that meets our expectations and those of our clients and our regulators, and the financial, regulatory, reputation and other consequences of our failure to meet such expectations;
•
the impact on our compliance and controls enhancement programs associated with the appointment of a monitor under the deferred prosecution agreement with the DOJ and compliance consultant appointed under a settlement with the SEC, including the potential for such monitor and compliance consultant to require changes to our programs or to identify other issues that require substantial expenditures, changes in our operations, payments to clients or reporting to U.S. authorities;
•
the results of our review of our billing practices, including additional findings or amounts we may be required to reimburse clients, as well as potential consequences of such review, including damage to our client relationships or our reputation and adverse actions by governmental authorities;
•
the results of, and costs associated with, governmental or regulatory inquiries and investigations, litigation and similar claims, disputes, or civil or criminal proceedings;
•
changes or potential changes in the amount of compensation we receive from clients for our services, and the mix of services provided by us that clients choose;
•
the large institutional clients on which we focus are often able to exert considerable market influence and have diverse investment activities, and this, combined with strong competitive market forces, subjects us to significant pressure to reduce the fees we charge, to potentially significant changes in our AUCA or our AUM in the event of the acquisition or loss of a client, in whole or in part, and to potentially significant changes in our fee revenue in the event a client re-balances or changes its investment approach or otherwise re-directs assets to lower- or higher-fee asset classes;
•
the potential for losses arising from our investments in sponsored investment funds;
•
the possibility that our clients will incur substantial losses in investment pools for which we act as agent, the possibility of significant reductions in the liquidity or valuation of assets underlying those pools and the potential that clients will seek to hold us liable for such losses; and the possibility that our clients or regulators will assert claims that our fees, with respect to such investment products, are not appropriate or consistent with our fiduciary duties;
•
our ability to anticipate and manage the level and timing of redemptions and withdrawals from our collateral pools and other collective investment products;
•
the credit agency ratings of our debt and depositary obligations and investor and client perceptions of our financial strength;
•
adverse publicity, whether specific to State Street or regarding other industry participants or industry-wide factors, or other reputational harm;
•
our ability to control operational risks, data security breach risks and outsourcing risks, our ability to protect our intellectual property rights, the possibility of errors in the quantitative models we use to manage our business, and the possibility that our controls will prove insufficient, fail or be circumvented;
•
our ability to expand our use of technology to enhance the efficiency, accuracy and reliability of our operations and our dependencies on information technology and our ability to control related risks, including cyber-crime, inadvertent data disclosures and other threats to our information technology infrastructure and systems (including those of our third-party service providers) and their effective operation both independently and with external systems, and complexities and costs of protecting the security of such systems and data;
•
changes or potential changes to the competitive environment, including due to regulatory and technological changes, the effects of industry consolidation and perceptions of State Street as a suitable service provider or counterparty;
•
our ability to complete acquisitions, joint ventures and divestitures, our ability to obtain regulatory approvals, the ability to arrange financing as required and the ability to satisfy closing conditions;
•
the risks that our acquired businesses, including our acquisition of Charles River Development, and joint ventures will not achieve their anticipated financial, operational and product innovation benefits or will not be integrated successfully, or that the integration will take longer than anticipated; that expected synergies will not be achieved or unexpected negative

11



synergies or liabilities will be experienced; that client and deposit retention goals will not be met; that other regulatory or operational challenges will be experienced; and that disruptions from the transaction will harm our relationships with our clients, our employees or regulators;
•
our ability to integrate Charles River Development's front office software solutions with our middle and back office capabilities to develop a front-to-middle-to-back office platform that is competitive and meets our clients requirements;
•
our ability to recognize evolving needs of our clients and to develop products that are responsive to such trends and profitable to us; the performance of and demand for the products and services we offer; and the potential for new products and services to impose additional costs on us and expose us to increased operational risk;
•
our ability to grow revenue, manage expenses, attract and retain highly skilled people and raise the capital necessary to achieve our business goals and comply with regulatory requirements and expectations;
•
changes in accounting standards and practices; and
•
the impact of the U.S. tax legislation enacted in 2017, and changes in tax legislation and in the interpretation of existing tax laws by U.S. and non-U.S. tax authorities that affect the amount of taxes due.
Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in our 2017 Annual Report on Form 10-K and our subsequent SEC filings. We encourage investors to read these filings, particularly the sections on risk factors, for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this News Release should not by relied on as representing our expectations or beliefs as of any time subsequent to the time this News Release is first issued, and we do not undertake efforts to revise those forward-looking statements to reflect events after that time.

12
Exhibit
Exhibit 99.2
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
 
December 31, 2018
 
Table of Contents
 
 
GAAP-Basis Financial Information:
Page
5-Year Summary of Results
Consolidated Financial Highlights
Consolidated Results of Operations
Consolidated Statement of Condition
Average Statement of Condition - Rates Earned and Paid - Fully Taxable-Equivalent Basis
7
Average Statement of Condition - Rates Earned and Paid - Fully Taxable-Equivalent Basis - Year to Date
8
Assets Under Custody and/or Administration
9
Assets Under Management
10
Industry Flow Data
11
 
 
Investment Portfolio:
 
Investment Portfolio Holdings by Asset Class
Investment Portfolio Non-U.S. Investments
 
 
Non-GAAP Financial Information:
 
Reconciliations of Non-GAAP Financial Information
Reconciliations of Constant Currency FX Impacts
 
 
Capital:
 
Reconciliation of Tangible Common Equity Ratio
Regulatory Capital
Reconciliations of Fully Phased-In Capital Ratios
Reconciliations of Supplementary Leverage Ratios
 
 
 
 
This financial information should be read in conjunction with State Street's news release dated January 18, 2019.


STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
5-YEAR SUMMARY OF RESULTS
 
 
 
(Dollars in millions, except per share amounts, or where otherwise noted)
 
2014
 
2015
 
2016
 
2017
 
2018
Year ended December 31:
 
 
 
 
 
 
 
 
 
 
Total fee revenue
 
$
8,010

 
$
8,278

 
$
8,116

 
$
8,905

 
$
9,305

Net interest income
 
2,260

 
2,088

 
2,084

 
2,304

 
2,671

Gains (losses) related to investment securities, net
 
4

 
(6
)
 
7

 
(39
)
 
6

Total revenue
 
10,274

 
10,360

 
10,207

 
11,170

 
11,982

Provision for loan losses
 
10

 
12

 
10

 
2

 
15

Total expenses
 
7,827

 
8,050

 
8,077

 
8,269

 
8,968

Income before income tax expense
 
2,437

 
2,298

 
2,120

 
2,899

 
2,999

Income tax expense (benefit)
 
415

 
318

 
(22
)
 
722

 
400

Net income from non-controlling interest
 
—

 
—

 
1

 
—

 
—

Net income
 
2,022

 
1,980

 
2,143

 
2,177

 
2,599

Net income available to common shareholders
 
$
1,958

 
$
1,848

 
$
1,968

 
$
1,993

 
$
2,410

Per Common Share:
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share
 
$
4.53

 
$
4.47

 
$
4.97

 
$
5.24

 
$
6.40

Average diluted common shares outstanding (in thousands)
 
432,007

 
413,638

 
396,090

 
380,213

 
376,476

Cash dividends declared per common share
 
$
1.16

 
$
1.32

 
$
1.44

 
$
1.60

 
$
1.78

Closing price per share of common stock (at year end)
 
78.50

 
66.36

 
77.72

 
97.61

 
63.07

Balance Sheet, as of December 31:
 
 
 
 
 
 
 
 
 
 
Investment securities
 
$
112,636

 
$
100,022

 
$
97,167

 
$
97,579

 
$
87,062

Average total interest-earning assets
 
209,054

 
220,456

 
199,184

 
191,235

 
185,637

Total assets
 
274,089

 
245,155

 
242,698

 
238,425

 
244,626

Deposits
 
209,040

 
191,627

 
187,163

 
184,896

 
180,360

Long-term debt
 
10,012

 
11,497

 
11,430

 
11,620

 
11,093

Total shareholders' equity
 
21,328

 
21,103

 
21,219

 
22,317

 
24,790

Ratios and Other Metrics:
 
 
 
 
 
 
 
 
 
 
Return on average common equity
 
9.8
%
 
9.8
%
 
10.5
%
 
10.6
%
 
12.2
%
Pre-tax margin (GAAP-basis)
 
23.7

 
22.2

 
20.8

 
26.0

 
25.0

Net interest margin, fully taxable-equivalent basis
 
1.16

 
1.03

 
1.13

 
1.29

 
1.47

Common equity tier 1 ratio(1)
 
12.4

 
12.5

 
11.7

 
12.3

 
12.1

Tier 1 capital ratio(1)
 
14.5

 
15.3

 
14.8

 
15.5

 
16.0

Total capital ratio(1)
 
16.4

 
17.4

 
16.0

 
16.5

 
16.8

Tier 1 leverage ratio(1)
 
6.3

 
6.9

 
6.5

 
7.3

 
7.2

Supplementary leverage ratio(1)
 
5.6

 
6.2

 
5.9

 
6.5

 
6.3

Assets under custody and/or administration (in trillions)
 
$
28.19

 
$
27.51

 
$
28.77

 
$
33.12

 
$
31.62

Assets under management (in trillions)
 
2.45

 
2.25

 
2.47

 
2.78

 
2.51

 
 
 
 
 
 
 
 
 
 
 

 
 
(1) The capital ratios presented are calculated in conformity with the applicable regulatory guidance in effect as of each period end. See Reconciliation of Fully Phased-In Capital Ratios and Supplementary Leverage Ratios for details of reconciliations between these ratios and our fully phased-in ratios. Effective January 1, 2018, the applicable final rules are in effect and the ratios are calculated based on fully phased-in CET1, tier 1, total capital and supplementary leverage numbers.


2

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED FINANCIAL HIGHLIGHTS
 
 
 
Quarters
 
% Change
(Dollars in millions, except per share amounts,
or where otherwise noted)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
Income Statement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee revenue(1)(2)
 
$
2,198

 
$
2,235

 
$
2,242

 
$
2,230

 
$
2,378

 
$
2,358

 
$
2,280

 
$
2,289

 
2.6
 %
 
 
0.4
 %
 
Net interest income(1)
 
510

 
575

 
603

 
616

 
643

 
659

 
672

 
697

 
13.1

 
 
3.7

 
Gains (losses) related to investment securities, net
 
(40
)
 
—

 
1

 
—

 
(2
)
 
9

 
(1
)
 
—

 
nm

 
 
nm

 
Total revenue
 
2,668

 
2,810

 
2,846

 
2,846

 
3,019

 
3,026

 
2,951

 
2,986

 
4.9

 
 
1.2

 
Provision for loan losses
 
(2
)
 
3

 
3

 
(2
)
 
—

 
2

 
5

 
8

 
nm

 
 
60.0

 
Total expenses(3)(4)(5)
 
2,086

 
2,031

 
2,021

 
2,131

 
2,256

 
2,159

 
2,079

 
2,474

 
16.1

 
 
19.0

 
Income before income tax expense
 
584

 
776

 
822

 
717

 
763

 
865

 
867

 
504

 
(29.7
)
 
 
(41.9
)
 
Income tax expense
 
82

 
156

 
137

 
347

 
102

 
131

 
102

 
65

 
(81.3
)
 
 
(36.3
)
 
Net income
 
502

 
620

 
685

 
370

 
661

 
734

 
765

 
439

 
18.6

 
 
(42.6
)
 
Net income available to common shareholders
 
$
446

 
$
584

 
$
629

 
$
334

 
$
605

 
$
698

 
$
709

 
$
398

 
19.2

 
 
(43.9
)
 
Per Common Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share
 
$
1.15

 
$
1.53

 
$
1.66

 
$
.89

 
$
1.62

 
$
1.88

 
$
1.87

 
$
1.04

 
16.9

 
 
(44.4
)
 
Average diluted common shares outstanding (in thousands)
 
386,417

 
380,915

 
378,518

 
375,477

 
372,619

 
370,410

 
379,383

 
383,651

 
2.2

 
 
1.1

 
Cash dividends declared per common share
 
$
.38

 
$
.38

 
$
.42

 
$
.42

 
$
.42

 
$
.42

 
$
.47

 
$
.47

 
11.9

 
 
—

 
Closing price per share of common stock (as of quarter end)
 
79.61

 
89.73

 
95.54

 
97.61

 
99.73

 
93.09

 
83.78

 
63.07

 
(35.4
)
 
 
(24.7
)
 
At quarter-end:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
236,802

 
$
238,274

 
$
235,986

 
$
238,425

 
$
250,286

 
$
248,308

 
$
234,007

 
$
244,626

 
2.6

 
 
4.5

 
Investment securities
 
94,639

 
95,255

 
93,088

 
97,579

 
85,462

 
86,942

 
86,669

 
87,062

 
(10.8
)
 
 
0.5

 
Deposits
 
183,465

 
181,416

 
179,263

 
184,896

 
191,517

 
186,663

 
168,198

 
180,360

 
(2.5
)
 
 
7.2

 
Long-term debt
 
11,394

 
11,737

 
11,716

 
11,620

 
10,944

 
10,387

 
10,335

 
11,093

 
(4.5
)
 
 
7.3

 
Total shareholders' equity
 
21,294

 
22,068

 
22,497

 
22,317

 
22,399

 
22,571

 
24,553

 
24,790

 
11.1

 
 
1.0

 
Securities On Loan (dollars in billions):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average securities on loan
 
$
368

 
$
384

 
$
383

 
$
397

 
$
397

 
$
406

 
$
386

 
$
362

 
(8.8
)
 
 
(6.2
)
 
End-of-period securities on loan
 
378

 
376

 
385

 
389

 
405

 
404

 
386

 
351

 
(9.8
)
 
 
(9.1
)
 
Ratios and Other Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average common equity
 
9.9
%
 
12.6
%
 
13.0
%
 
6.9
%
 
12.8
%
 
14.7
%
 
14.0
%
 
7.5
%
 
60

bps
 
(650
)
bps
Pre-tax margin (GAAP-basis)
 
21.9

 
27.6

 
28.9

 
25.2

 
25.3

 
28.6

 
29.4

 
16.9

 
(830
)
 
 
(1,250
)
 
Pre-tax margin (excluding notable items)(6)
 
21.9

 
30.1

 
29.2

 
30.4

 
25.3

 
31.1

 
29.4

 
27.6

 
(280
)
 
 
(180
)
 
Net interest margin, fully taxable-equivalent basis
 
1.17

 
1.27

 
1.35

 
1.38

 
1.40

 
1.46

 
1.48

 
1.55

 
17

 
 
7

 
Common equity tier 1 ratio(7)
 
11.2

 
12.0

 
12.6

 
12.3

 
12.1

 
12.4

 
14.1

 
12.1

 
(20
)
 
 
(200
)
 
Tier 1 capital ratio(7)
 
14.4

 
15.1

 
15.8

 
15.5

 
15.4

 
15.7

 
17.9

 
16.0

 
50

 
 
(190
)
 
Total capital ratio(7)
 
15.4

 
16.2

 
16.9

 
16.5

 
16.4

 
16.4

 
18.7

 
16.8

 
30

 
 
(190
)
 
Tier 1 leverage ratio(7)
 
6.8

 
7.0

 
7.4

 
7.3

 
6.9

 
7.1

 
8.1

 
7.2

 
(10
)
 
 
(90
)
 
Supplementary leverage ratio(7)
 
6.1

 
6.2

 
6.5

 
6.5

 
6.0

 
6.2

 
7.1

 
6.3

 
(20
)
 
 
(80
)
 
Assets under custody and/or administration (in billions)
 
$
29,833

 
$
31,037

 
$
32,110

 
$
33,119

 
$
33,284

 
$
33,867

 
$
33,996

 
$
31,620

 
(4.5
)%
 
 
(7.0
)%
 
Assets under management (in billions)
 
2,561

 
2,606

 
2,673

 
2,782

 
2,729

 
2,723

 
2,810

 
2,511

 
(9.7
)
 
 
(10.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Approximately $15 million of swap costs in 1Q18 were reclassified from processing fees and other revenue within fee revenue to net interest income to conform to current presentation. No other prior periods were revised.
(2) Revenues associated with the acquired CRD business and included within fee revenue were $121 million for 4Q18.
 
 
 
 
(3) 2Q18 includes repositioning charges of approximately $77 million, including approximately $61 million within compensation and employee benefits expense and $16 million within occupancy expense. 4Q18 expenses include repositioning charges of approximately $223 million, including approximately $198 million within compensation and employee benefits expense and $25 million within occupancy expense.
(4) Expenses associated with the acquired CRD business include approximately $39 million for 4Q18 across multiple expense lines, and $18 million intangible asset amortization.
 
 
 
 
(5) Excluding the 4Q17 acquisition and restructuring costs of $133 million and the 4Q18 notable expense items, CRD expenses and CRD intangible assets amortization of $313 million, $39 million and $18 million, respectively, total expenses increased 5% from 4Q17, and 1% from 3Q18, respectively. Refer to Reconciliations of Non-GAAP Financial Information pages for details on notable items.
(6) Refer to Reconciliations of Non-GAAP Financial Information pages for details on non-GAAP metrics.
(7) The capital ratios presented are calculated in conformity with the applicable regulatory guidance in effect as of each period end. See Reconciliation of Fully Phased-In Capital Ratios and Supplementary Leverage Ratios for details of reconciliations between these ratios and our fully phased-in ratios. Effective January 1, 2018, the applicable final rules are in effect and the ratios are calculated based on fully phased-in CET1, tier 1,total capital and supplementary leverage numbers.
nm Not meaningful

3

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters
 
% Change
 
Year-to-Date
 
% Change
(Dollars in millions, except per share amounts,
or where otherwise noted)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
 
2017
 
2018
 
YTD 2018
vs.
YTD 2017
Reported Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicing fees
 
$
1,296

 
$
1,339

 
$
1,351

 
$
1,379

 
$
1,421

 
$
1,381

 
$
1,333

 
$
1,286

 
(6.7
)%
 
 
(3.5
)%
 
 
$
5,365

 
$
5,421

 
1.0
 %
Management fees
 
382

 
397

 
419

 
418

 
472

 
465

 
474

 
440

 
5.3

 
 
(7.2
)
 
 
1,616

 
1,851

 
14.5

Foreign exchange trading services
 
275

 
289

 
259

 
248

 
304

 
315

 
288

 
294

 
18.5

 
 
2.1

 
 
1,071

 
1,201

 
12.1

Securities finance
 
133

 
179

 
147

 
147

 
141

 
154

 
128

 
120

 
(18.4
)
 
 
(6.3
)
 
 
606

 
543

 
(10.4
)
Processing fees and other
 
112

 
31

 
66

 
38

 
40

 
43

 
57

 
149

 
292.1

 
 
161.4

 
 
247

 
289

 
17.0

Total fee revenue(1)(2)
 
2,198

 
2,235

 
2,242

 
2,230

 
2,378

 
2,358

 
2,280

 
2,289

 
2.6

 
 
0.4

 
 
8,905

 
9,305

 
4.5

Net interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
650

 
700

 
761

 
797

 
857

 
907

 
916

 
982

 
23.2

 
 
7.2

 
 
2,908

 
3,662

 
25.9

Interest expense(1)
 
140

 
125

 
158

 
181

 
214

 
248

 
244

 
285

 
57.5

 
 
16.8

 
 
604

 
991

 
64.1

Net interest income(1)
 
510

 
575

 
603

 
616

 
643

 
659

 
672

 
697

 
13.1

 
 
3.7

 
 
2,304

 
2,671

 
15.9

Gains (losses) related to investment securities, net
 
(40
)
 
—

 
1

 
—

 
(2
)
 
9

 
(1
)
 
—

 
nm

 
 
nm

 
 
(39
)
 
6

 
nm

Total revenue
 
2,668

 
2,810

 
2,846

 
2,846

 
3,019

 
3,026

 
2,951

 
2,986

 
4.9

 
 
1.2

 
 
11,170

 
11,982

 
7.3

Provision for loan losses
 
(2
)
 
3

 
3

 
(2
)
 
—

 
2

 
5

 
8

 
nm

 
 
60.0

 
 
2

 
15

 
nm

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits(3)
 
1,166

 
1,071

 
1,090

 
1,067

 
1,249

 
1,125

 
1,103

 
1,303

 
22.1

 
 
18.1

 
 
4,394

 
4,780

 
8.8

Information systems and communications(4)
 
287

 
283

 
296

 
301

 
315

 
321

 
332

 
356

 
18.3

 
 
7.2

 
 
1,167

 
1,324

 
13.5

Transaction processing services
 
197

 
207

 
215

 
219

 
242

 
246

 
236

 
214

 
(2.3
)
 
 
(9.3
)
 
 
838

 
938

 
11.9

Occupancy(5)
 
110

 
116

 
118

 
117

 
120

 
124

 
110

 
146

 
24.8

 
 
32.7

 
 
461

 
500

 
8.5

Acquisition and restructuring costs
 
29

 
71

 
33

 
133

 
—

 
—

 
—

 
24

 
(82.0
)
 
 
100.0

 
 
266

 
24

 
(91.0
)
Amortization of other intangible assets(2)(6)
 
52

 
54

 
54

 
54

 
50

 
48

 
47

 
81

 
50.0

 
 
72.3

 
 
214

 
226

 
5.6

Other(7)
 
245

 
229

 
215

 
240

 
280

 
295

 
251

 
350

 
45.8

 
 
39.4

 
 
929

 
1,176

 
26.6

Total expenses(2)(8)
 
2,086

 
2,031

 
2,021

 
2,131

 
2,256

 
2,159

 
2,079

 
2,474

 
16.1

 
 
19.0

 
 
8,269

 
8,968

 
8.5

Income before income tax expense
 
584

 
776

 
822

 
717

 
763

 
865

 
867

 
504

 
(29.7
)
 
 
(41.9
)
 
 
2,899

 
2,999

 
3.4

Income tax expense
 
82

 
156

 
137

 
347

 
102

 
131

 
102

 
65

 
(81.3
)
 
 
(36.3
)
 
 
722

 
400

 
(44.6
)
Net income
 
$
502

 
$
620

 
$
685

 
$
370

 
$
661

 
$
734

 
$
765

 
$
439

 
18.6

 
 
(42.6
)
 
 
$
2,177

 
$
2,599

 
19.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 














4

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED RESULTS OF OPERATIONS (Continued)
 
 
 
 
Quarters
 
% Change
 
Year-to-Date
 
% Change
(Dollars in millions, except per share amounts, or where otherwise noted)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
 
2017
 
2018
 
YTD 2018
vs.
YTD 2017
Adjustments to net income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends on preferred stock
 
$
(55
)
 
$
(36
)
 
$
(55
)
 
$
(36
)
 
$
(55
)
 
$
(36
)
 
$
(55
)
 
$
(41
)
 
13.9
 %
 
 
(25.5
)%
 
 
$
(182
)
 
$
(188
)
 
3.3
 %
 
Earnings allocated to participating securities
 
(1
)
 
—

 
(1
)
 
—

 
(1
)
 
—

 
(1
)
 
—

 
—

 
 
nm

 
 
(2
)
 
(1
)
 
(50.0
)
 
Net income available to common shareholders
 
$
446

 
$
584

 
$
629

 
$
334

 
$
605

 
$
698

 
$
709

 
$
398

 
19.2

 
 
(43.9
)
 
 
$
1,993

 
$
2,410

 
20.9

 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.17

 
$
1.56

 
$
1.69

 
$
.91

 
$
1.65

 
$
1.91

 
$
1.89

 
$
1.05

 
15.4

 
 
(44.4
)
 
 
$
5.32

 
$
6.48

 
21.8

 
Diluted
 
1.15

 
1.53

 
1.66

 
.89

 
1.62

 
1.88

 
1.87

 
1.04

 
16.9

 
 
(44.4
)
 
 
5.24

 
6.40

 
22.1

 
Average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
381,224

 
375,395

 
372,765

 
369,934

 
367,439

 
365,619

 
374,963

 
379,741

 
2.7

 
 
1.3

 
 
374,793

 
371,983

 
(0.7
)
 
Diluted
 
386,417

 
380,915

 
378,518

 
375,477

 
372,619

 
370,410

 
379,383

 
383,651

 
2.2

 
 
1.1

 
 
380,213

 
376,476

 
(1.0
)
 
Cash dividends declared per common share
 
$
.38

 
$
.38

 
$
.42

 
$
.42

 
$
.42

 
$
.42

 
$
.47

 
$
.47

 
11.9

 
 
—

 
 
$
1.60

 
$
1.78

 
11.3

 
Closing price per share of common stock (as of quarter end)
 
79.61

 
89.73

 
95.54

 
97.61

 
99.73

 
93.09

 
83.78

 
63.07

 
(35.4
)
 
 
(24.7
)
 
 
97.61

 
63.07

 
(35.4
)
 
Financial ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate(9)
14.0
%
 
20.1
%
 
16.7
%
 
48.4
%
 
13.5
%
 
15.1
%
 
11.8
%
 
12.7
%
 
(3,570
)
bps
 
90

bps
 
24.9
%
 
13.3
%
 
(1,160
)
bps
Return on average common equity
 
9.9

 
12.6

 
13.0

 
6.9

 
12.8

 
14.7

 
14.0

 
7.5

 
60


 
(650
)

 
10.6

 
12.2

 
160


Return on tangible common equity(10)
 
16.0

 
17.3

 
18.0

 
16.7

 
20.1

 
21.1

 
19.4

 
20.5

 
380

 
 
110

 
 
16.7

 
20.5

 
380

 
Pre-tax margin (GAAP-basis)
 
21.9

 
27.6

 
28.9

 
25.2

 
25.3

 
28.6

 
29.4

 
16.9

 
(830
)
 
 
(1,250
)
 
 
26.0

 
25.0

 
(100
)
 
Pre-tax margin (excluding notable items)(11)
 
21.9

 
30.1

 
29.2

 
30.4

 
25.3

 
31.1

 
29.4

 
27.6

 
(280
)
 
 
(180
)
 
 
28.1

 
28.3

 
20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Approximately $15 million of swap costs in 1Q18 were reclassified from processing fees and other revenue within fee revenue to net interest income to conform to current presentation. No other prior periods were revised.
(2) The acquired CRD business contributed $121 million of fee revenue, $39 million across multiple expense lines and $18 million of intangible asset amortization in 4Q18.
(3) 4Q18 compensation and employee benefits includes approximately $198 million of repositioning charges and $28 million of CRD compensation and employee benefits. Excluding these items, compensation and employee benefits totaled approximately $1,077 million in 4Q18.
(4) 4Q18 Information systems and communications includes CRD expenses of approximately $7 million. Excluding the impact of $7 million CRD expenses in 4Q18, informations systems and communication expenses totaled $349 million in 4Q18.
(5) 4Q18 Occupancy expenses include approximately $25 million of repositioning charges, $2 million of CRD Occupancy expenses and $5 million of Occupancy expense related to the divestiture of a business. Excluding these items, 4Q18 Occupancy expenses totaled $114 million.
(6) 4Q18 amortization of other intangible assets includes approximately $18 million CRD intangible asset amortization and $16 million intangible asset amortization related to the divestiture of a business. Excluding these items, 4Q18 amortization of other intangible assets totaled $47 million.
(7) 4Q18 other expenses include approximately $42 million of legal and related costs, $3 million related to the divestiture of a business and $2 million other expenses related to CRD. Excluding these items, 4Q18 other expenses totaled approximately $303 million.
(8) Excluding the 4Q17 acquisition and restructuring costs of $133 million and the 4Q18 notable expense items, CRD expenses and CRD intangible assets amortization of $313 million, $39 million and $18 million, respectively, total expenses increased 5% from 4Q17, and 1% from 3Q18, respectively. Refer to Reconciliations of Non-GAAP Financial Information pages for details on notable items.
(9) As a result of the enactment of the Tax Cuts and Jobs Act, the 4Q17 included a one-time estimated net cost of $250 million. The GAAP-basis effective tax rate for 4Q17 excluding this one-time cost was 13.2%.
(10) Return on tangible common equity is calculated by dividing year-to-date annualized net income available to common shareholders (GAAP-basis) by tangible common equity.
(11) Refer to Reconciliations of Non-GAAP Financial Information pages for details on non-GAAP basis metrics.
nm  Not meaningful


5

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
CONSOLIDATED STATEMENT OF CONDITION
 
 
 
 
 
 
 
 
 
 
 
Quarters
 
% Change
(Dollars in millions, except per share amounts)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
2,909

 
$
3,156

 
$
3,939

 
$
2,107

 
$
2,546

 
$
3,886

 
$
4,145

 
$
3,597

 
70.7
 %
 
(13.2
)%
Interest-bearing deposits with banks
 
66,789

 
63,617

 
60,956

 
67,227

 
79,418

 
76,366

 
63,618

 
73,040

 
8.6

 
14.8

Securities purchased under resale agreements
 
2,181

 
3,172

 
3,465

 
3,241

 
5,136

 
3,583

 
4,195

 
4,679

 
44.4

 
11.5

Trading account assets
 
945

 
896

 
1,135

 
1,093

 
1,178

 
1,160

 
1,001

 
860

 
(21.3
)
 
(14.1
)
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale
 
58,810

 
59,025

 
56,238

 
57,121

 
44,304

 
47,348

 
46,102

 
45,148

 
(21.0
)
 
(2.1
)
Investment securities held-to-maturity(1)
 
35,829

 
36,230

 
36,850

 
40,458

 
41,158

 
39,594

 
40,567

 
41,914

 
3.6

 
3.3

Total investment securities
 
94,639

 
95,255

 
93,088

 
97,579

 
85,462

 
86,942

 
86,669

 
87,062

 
(10.8
)
 
0.5

Loans and leases, net(2)
 
22,486

 
24,307

 
23,581

 
23,240

 
29,528

 
24,069

 
23,312

 
25,722

 
10.7

 
10.3

Premises and equipment, net(3)
 
2,101

 
2,137

 
2,167

 
2,186

 
2,194

 
2,189

 
2,193

 
2,214

 
1.3

 
1.0

Accrued interest and fees receivable
 
2,690

 
2,805

 
3,043

 
3,099

 
3,183

 
3,086

 
3,196

 
3,203

 
3.4

 
0.2

Goodwill
 
5,855

 
5,945

 
5,997

 
6,022

 
6,068

 
5,973

 
6,016

 
7,446

 
23.6

 
23.8

Other intangible assets
 
1,710

 
1,693

 
1,658

 
1,613

 
1,578

 
1,500

 
1,461

 
2,369

 
46.9

 
62.1

Other assets
 
34,497

 
35,291

 
36,957

 
31,018

 
33,995

 
39,554

 
38,201

 
34,434

 
11.0

 
(9.9
)
Total assets
 
$
236,802

 
$
238,274

 
$
235,986

 
$
238,425

 
$
250,286

 
$
248,308

 
$
234,007

 
$
244,626

 
2.6

 
4.5

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Non-interest-bearing
 
$
56,786

 
$
50,957

 
$
49,850

 
$
47,175

 
$
57,025

 
$
52,316

 
$
41,893

 
$
44,804

 
(5.0
)
 
6.9

   Interest-bearing -- U.S.
 
26,746

 
24,438

 
49,394

 
50,139

 
55,094

 
57,407

 
63,661

 
66,235

 
32.1

 
4.0

   Interest-bearing -- Non-U.S.
 
99,933

 
106,021

 
80,019

 
87,582

 
79,398

 
76,940

 
62,644

 
69,321

 
(20.9
)
 
10.7

Total deposits(4)
 
183,465

 
181,416

 
179,263

 
184,896

 
191,517

 
186,663

 
168,198

 
180,360

 
(2.5
)
 
7.2

Securities sold under repurchase agreements
 
4,003

 
3,856

 
3,867

 
2,842

 
2,020

 
3,088

 
1,690

 
1,082

 
(61.9
)
 
(36.0
)
Other short-term borrowings
 
1,177

 
1,465

 
1,253

 
1,144

 
1,066

 
1,103

 
1,009

 
3,092

 
170.3

 
206.4

Accrued expenses and other liabilities
 
15,469

 
17,732

 
17,390

 
15,606

 
22,340

 
24,496

 
28,222

 
24,209

 
55.1

 
(14.2
)
Long-term debt
 
11,394

 
11,737

 
11,716

 
11,620

 
10,944

 
10,387

 
10,335

 
11,093

 
(4.5
)
 
7.3

Total liabilities
 
215,508

 
216,206

 
213,489

 
216,108

 
227,887

 
225,737

 
209,454

 
219,836

 
1.7

 
5.0

Shareholders' equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, no par, 3,500,000 shares authorized:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Series C, 5,000 shares issued and outstanding
 
491

 
491

 
491

 
491

 
491

 
491

 
491

 
491

 
—

 
—

Series D, 7,500 shares issued and outstanding
 
742

 
742

 
742

 
742

 
742

 
742

 
742

 
742

 
—

 
—

Series E, 7,500 shares issued and outstanding
 
728

 
728

 
728

 
728

 
728

 
728

 
728

 
728

 
—

 
—

Series F, 7,500 shares issued and outstanding
 
742

 
742

 
742

 
742

 
742

 
742

 
742

 
742

 
—

 
—

Series G, 5,000 shares issued and outstanding
 
493

 
493

 
493

 
493

 
493

 
493

 
493

 
493

 
—

 
—

Series H, 5,000 shares issued and outstanding
 
—

 
—

 
—

 
—

 
—

 
—

 
494

 
494

 
100.0

 
—

Common stock, $1 par, 750,000,000 shares authorized(5)
 
504

 
504

 
504

 
504

 
504

 
504

 
504

 
504

 
—

 
—

Surplus
 
9,796

 
9,803

 
9,803

 
9,799

 
9,796

 
9,820

 
10,418

 
10,061

 
2.7

 
(3.4
)
Retained earnings
 
17,762

 
18,202

 
18,675

 
18,856

 
19,311

 
19,856

 
20,387

 
20,606

 
9.3

 
1.1

Accumulated other comprehensive income (loss)
 
(1,805
)
 
(1,270
)
 
(984
)
 
(1,009
)
 
(1,074
)
 
(1,488
)
 
(1,711
)
 
(1,356
)
 
34.4

 
(20.7
)
Treasury stock, at cost(6)
 
(8,159
)
 
(8,367
)
 
(8,697
)
 
(9,029
)
 
(9,334
)
 
(9,317
)
 
(8,735
)
 
(8,715
)
 
(3.5
)
 
(0.2
)
Total shareholders' equity
 
21,294

 
22,068

 
22,497

 
22,317

 
22,399

 
22,571

 
24,553

 
24,790

 
11.1

 
1.0

Total liabilities and equity
 
$
236,802

 
$
238,274

 
$
235,986

 
$
238,425

 
$
250,286

 
$
248,308

 
$
234,007

 
$
244,626

 
2.6

 
4.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
 
 
 
(1) Fair value of investment securities held-to-maturity
 
$
35,694

 
$
36,169

 
$
36,836

 
$
40,255

 
$
40,483

 
$
38,805

 
$
39,591

 
$
41,351

 
 
 
 
(2) Allowance for loan losses
 
51

 
54

 
58

 
54

 
54

 
55

 
60

 
67

 
 
 
 
(3) Accumulated depreciation for premises and equipment
 
3,463

 
3,611

 
3,750

 
3,881

 
4,005

 
3,999

 
4,110

 
4,152

 
 
 
 
(4) Average total deposits
 
165,167

 
167,403

 
161,641

 
161,089

 
165,010

 
162,795

 
159,578

 
158,345

 
 
 
 
(5) Common stock shares issued
 
503,879,642

 
503,879,642

 
503,879,642

 
503,879,642

 
503,879,642

 
503,879,642

 
503,879,642

 
503,879,642

 
 
 
 
(6) Treasury stock shares
 
127,520,264

 
129,773,003

 
133,038,955

 
136,229,784

 
138,472,445

 
138,052,038

 
124,390,135

 
123,932,918

 
 
 
 

6

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
AVERAGE STATEMENT OF CONDITION - RATES EARNED AND PAID - FULLY TAXABLE-EQUIVALENT BASIS(1)
     The following table presents average rates earned and paid, on a fully taxable-equivalent basis, on consolidated average interest-earning assets and average interest-bearing liabilities for the quarters indicated. Tax-equivalent adjustments were calculated using a federal income tax rate of 35% for periods ending in 2017 and a tax rate of 21% for periods ending in 2018, adjusted for applicable state income taxes, net of related federal benefit.
 
 
Quarters
 
% Change
 
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
(Dollars in millions; fully-taxable equivalent basis)
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
Average balance
 
Average balance
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits with banks
 
$
48,893

 
0.28
%
 
$
53,146

 
0.31
 %
 
$
45,513

 
0.40
%
 
$
42,597

 
0.55
%
 
$
51,492

 
0.64
%
 
$
55,180

 
0.66
%
 
$
56,513

 
0.67
%
 
$
54,073

 
0.88
%
 
26.9
 %
 
(4.3
)%
Securities purchased under resale agreements(2)
 
2,056

 
9.07

 
2,352

 
11.77

 
2,167

 
13.53

 
1,950

 
15.25

 
2,872

 
10.89

 
2,474

 
13.20

 
2,932

 
11.77

 
3,320

 
10.69

 
70.3

 
13.2

Trading account assets
 
914

 
—

 
941

 
—

 
991

 
—

 
1,194

 
—

 
1,138

 
—

 
1,139

 
—

 
1,019

 
—

 
912

 
—

 
(23.6
)
 
(10.5
)
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct obligations
 
21,705

 
1.53

 
19,421

 
1.60

 
18,091

 
1.66

 
17,586

 
1.68

 
17,183

 
1.67

 
16,627

 
1.69

 
15,834

 
1.71

 
15,284

 
1.75

 
(13.1
)
 
(3.5
)
Mortgage-and asset-backed securities
 
23,710

 
2.18

 
23,013

 
2.27

 
23,160

 
2.27

 
26,441

 
2.31

 
28,307

 
2.59

 
31,064

 
2.70

 
32,962

 
2.82

 
36,462

 
3.03

 
37.9

 
10.6

State and political subdivisions
 
10,314

 
3.83

 
9,914

 
3.77

 
9,976

 
3.79

 
9,515

 
3.82

 
8,622

 
3.23

 
6,739

 
3.48

 
4,107

 
3.68

 
2,537

 
3.63

 
(73.3
)
 
(38.2
)
Other investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
 
22,609

 
1.49

 
23,367

 
1.56

 
23,866

 
1.64

 
21,727

 
1.65

 
19,543

 
1.78

 
12,471

 
2.24

 
11,259

 
2.30

 
10,144

 
2.48

 
(53.3
)
 
(9.9
)
Collateralized mortgage-backed securities and obligations
 
3,939

 
2.71

 
3,780

 
2.72

 
3,394

 
2.78

 
2,608

 
2.75

 
2,088

 
2.07

 
1,492

 
2.95

 
1,415

 
3.05

 
1,212

 
3.35

 
(53.5
)
 
(14.3
)
Money market mutual funds
 
360

 
0.37

 
322

 
—

 
385

 
0.64

 
416

 
0.72

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(100.0
)
 
—

Other debt investments and equity securities
 
14,582

 
1.34

 
14,820

 
1.27

 
16,439

 
1.24

 
17,672

 
1.25

 
19,619

 
1.25

 
17,967

 
1.31

 
20,046

 
1.20

 
19,435

 
1.08

 
10.0

 
(3.0
)
Total investment securities
 
97,219

 
1.94

 
94,637

 
1.97

 
95,311

 
1.99

 
95,965

 
2.01

 
95,362

 
2.03

 
86,360

 
2.21

 
85,623

 
2.21

 
85,074

 
2.31

 
(11.3
)
 
(0.6
)
Loans and leases
 
20,139

 
2.17

 
21,070

 
2.31

 
22,843

 
2.49

 
23,566

 
2.46

 
23,959

 
2.68

 
23,622

 
2.93

 
22,511

 
3.11

 
24,207

 
3.12

 
2.7

 
7.5

Other interest-earning assets
 
22,619

 
0.62

 
23,141

 
0.76

 
23,091

 
1.18

 
22,681

 
1.32

 
17,733

 
1.78

 
17,397

 
2.36

 
14,702

 
2.59

 
13,088

 
2.90

 
(42.3
)
 
(11.0
)
Total interest-earning assets
 
191,840

 
1.47

 
195,287

 
1.52

 
189,916

 
1.68

 
187,953

 
1.77

 
192,556

 
1.85

 
186,172

 
1.99

 
183,300

 
2.01

 
180,674

 
2.17

 
(3.9
)
 
(1.4
)
Cash and due from banks
 
2,608

 
 
 
3,833

 
 
 
3,098

 
 
 
2,848

 
 
 
3,081

 
 
 
3,978

 
 
 
3,067

 
 
 
2,591

 
 
 
(9.0
)
 
(15.5
)
Other assets
 
24,761

 
 
 
24,797

 
 
 
25,355

 
 
 
25,547

 
 
 
31,233

 
 
 
33,939

 
 
 
34,946

 
 
 
38,085

 
 
 
49.1

 
9.0

Total assets
 
$
219,209

 
 
 
$
223,917

 
 
 
$
218,369

 
 
 
$
216,348

 
 
 
$
226,870

 
 
 
$
224,089

 
 
 
$
221,313

 
 
 
$
221,350

 
 
 
2.3

 
—

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
25,928

 
0.50
%
 
$
25,770

 
0.38
 %
 
$
25,767

 
0.32
%
 
$
44,873

 
0.17
%
 
$
48,638

 
0.28
%
 
$
50,276

 
0.37
%
 
$
57,558

 
0.51
%
 
$
63,153

 
0.64
%
 
40.7

 
9.7

Non-U.S.(3)
 
94,990

 
0.05

 
99,389

 
(0.04
)
 
96,189

 
0.07

 
77,327

 
0.24

 
78,582

 
0.15

 
76,307

 
0.23

 
67,741

 
0.06

 
60,097

 
0.16

 
(22.3
)
 
(11.3
)
Total interest-bearing deposits(3)
 
120,918

 
0.15

 
125,159

 
0.05

 
121,956

 
0.13

 
122,200

 
0.22

 
127,220

 
0.15

 
126,583

 
0.28

 
125,299

 
0.27

 
123,250

 
0.41

 
0.9

 
(1.6
)
Securities sold under repurchase agreements(4)
 
3,894

 
—

 
4,028

 
—

 
3,974

 
0.07

 
2,843

 
—

 
2,617

 
0.16

 
2,641

 
0.92

 
1,835

 
0.79

 
1,117

 
0.67

 
(60.7
)
 
(39.1
)
Federal funds purchased
 
—

 
—

 
2

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
nm

 
nm

Other short-term borrowings
 
1,341

 
0.63

 
1,322

 
0.80

 
1,277

 
0.81

 
1,311

 
0.96

 
1,255

 
1.09

 
1,320

 
1.25

 
1,248

 
1.38

 
1,485

 
1.38

 
13.3

 
19.0

Long-term debt
 
11,421

 
2.56

 
11,515

 
2.61

 
11,766

 
2.67

 
11,674

 
2.79

 
11,412

 
3.37

 
10,649

 
3.66

 
10,375

 
3.84

 
10,323

 
3.72

 
(11.6
)
 
(0.5
)
Other interest-bearing liabilities
 
5,240

 
1.63

 
5,355

 
2.44

 
4,063

 
3.70

 
3,791

 
3.10

 
5,260

 
3.87

 
4,994

 
4.17

 
5,306

 
3.88

 
4,271

 
5.05

 
12.7

 
(19.5
)
Total interest-bearing liabilities
 
142,814

 
0.40

 
147,381

 
0.34

 
143,036

 
0.44

 
141,819

 
0.51

 
147,764

 
0.59

 
146,187

 
0.68

 
144,064

 
0.67

 
140,446

 
0.80

 
(1.0
)
 
(2.5
)
Non-interest bearing deposits
 
44,249

 
 
 
42,244

 
 
 
39,685

 
 
 
38,889

 
 
 
37,790

 
 
 
36,212

 
 
 
34,279

 
 
 
35,095

 
 
 
(9.8
)
 
2.4

Other liabilities
 
10,626

 
 
 
12,441

 
 
 
13,294

 
 
 
13,117

 
 
 
18,942

 
 
 
19,454

 
 
 
19,585

 
 
 
21,208

 
 
 
61.7

 
8.3

Preferred shareholders' equity
 
3,197

 
 
 
3,197

 
 
 
3,197

 
 
 
3,197

 
 
 
3,197

 
 
 
3,197

 
 
 
3,218

 
 
 
3,691

 
 
 
15.5

 
14.7

Common shareholders' equity
 
18,323

 
 
 
18,654

 
 
 
19,157

 
 
 
19,326

 
 
 
19,177

 
 
 
19,039

 
 
 
20,167

 
 
 
20,910

 
 
 
8.2

 
3.7

Total liabilities and shareholders' equity
 
$
219,209

 
 
 
$
223,917

 
 
 
$
218,369

 
 
 
$
216,348

 
 
 
$
226,870

 
 
 
$
224,089

 
 
 
$
221,313

 
 
 
$
221,350

 
 
 
2.3

 
—

Excess of rate earned over rate paid
 
 
 
1.07
%
 
 
 
1.18
 %
 
 
 
1.24
%
 
 
 
1.26
%
 
 
 
1.26
%
 
 
 
1.31
%
 
 
 
1.34
%
 
 
 
1.37
%
 
 
 
 
Net interest margin
 
 
 
1.17
%
 
 
 
1.27
 %
 
 
 
1.35
%
 
 
 
1.38
%
 
 
 
1.40
%
 
 
 
1.46
%
 
 
 
1.48
%
 
 
 
1.55
%
 
 
 
 
Net interest income, fully taxable-equivalent basis
 
 
 
$
553

 
 
 
$
617

 
 
 
$
645

 
 
 
$
656

 
 
 
$
664

 
 
 
$
677

 
 
 
$
684

 
 
 
$
704

 
 
 
 
Tax-equivalent adjustment
 
 
 
(43
)
 
 
 
(42
)
 
 
 
(42
)
 
 
 
(40
)
 
 
 
(21
)
 
 
 
(18
)
 
 
 
(12
)
 
 
 
(7
)
 
 
 
 
Net interest income, GAAP-basis(3)
 
 
 
$
510

 
 
 
$
575

 
 
 
$
603

 
 
 
$
616

 
 
 
$
643

 
 
 
$
659

 
 
 
$
672

 
 
 
$
697

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Rates earned/paid on interest-earning assets and interest-bearing liabilities include the impact of hedge activities associated with our asset and liability management activities where applicable.
(2) Reflects the impact of balance sheet netting under enforceable netting agreements of approximately $31 billion, $33 billion, $30 billion and $31 billion for the first, second, third and fourth quarters of 2017, respectively, and approximately $32 billion, $31 billion,$35 billion and $45 billion in the first, second, third and fourth quarters of 2018, respectively. Excluding the impact of netting, the average interest rates would be approximately 0.56%, 0.79%, 0.92%, and 0.90% for the first, second, third and fourth quarters of 2017 and approximately 0.89%, 0.98%, 0.91% and 0.74% for the first, second, third and fourth quarters of 2018, respectively.
(3) Average rate includes the impact of FX swap expense of approximately $32 million, $13 million, $39 million and $57 million for the first, second, third and fourth quarters of 2017 and $34 million, $42 million, $6 million and $24 million for the first, second, third and fourth quarters of 2018, respectively. The first quarter of 2018 includes approximately $15 million of swap costs that were reclassified from processing fees and other revenue within fee revenue to net interest income to conform to current presentation. Average rates for total interest-bearing deposits excluding the impact of FX swap expense were 0.04%, 0.00%, 0.00% and 0.03% for the first, second, third, and fourth quarters of 2017 and 0.09%, 0.15%, 0.25% and 0.33% for the first, second, third and fourth quarters of 2018, respectively.
(4) Interest for each period shown was less than $1 million representing average interest rates of 0.03%, 0.04% and 0.06% for the first, second and fourth quarters of 2017, respectively.

7

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
AVERAGE STATEMENT OF CONDITION - RATES EARNED AND PAID - FULLY TAXABLE-EQUIVALENT BASIS - YEAR TO DATE(1)
     The following table presents consolidated average interest-earning assets, average interest-bearing liabilities and related average rates earned and paid, respectively, for the years indicated, on a fully taxable-equivalent basis, which is a non-GAAP measure. Tax-equivalent adjustments were calculated using a federal income tax rate of 35% for periods ending in 2017 and a tax rate of 21% for periods ending in 2018, adjusted for applicable state income taxes, net of related federal benefit.
 
 
Year-to-Date
 
 
 
 
2017
 
2018
 
% Change
(Dollars in millions; fully-taxable equivalent basis)
 
Average balance
 
Average rates
 
Average balance
 
Average rates
 
2018 vs. 2017
Assets:
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits with banks
 
$
47,514

 
0.38
 %
 
$
54,328

 
0.71
%
 
14.3
 %
Securities purchased under resale agreements(2)
 
2,131

 
12.38

 
2,901

 
11.55

 
36.1

Trading account assets
 
1,011

 
(0.12
)
 
1,051

 
—

 
4.0

Investment securities:
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies:
 
 
 
 
 
 
 
 
 
 
Direct obligations
 
19,187

 
1.61

 
16,226

 
1.70

 
(15.4
)
Mortgage-and asset-backed securities
 
24,086

 
2.26

 
32,223

 
2.80

 
33.8

State and political subdivisions
 
9,928

 
3.80

 
5,481

 
3.45

 
(44.8
)
Other investments:
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
 
22,892

 
1.58

 
13,323

 
2.14

 
(41.8
)
Collateralized mortgage-backed securities and obligations
 
3,427

 
2.74

 
1,549

 
2.76

 
(54.8
)
Money market mutual funds
 
371

 
0.56

 
—

 
—

 
(100.0
)
Other debt investments and equity securities
 
15,888

 
1.27

 
19,268

 
1.21

 
21.3

Total investment securities
 
95,779

 
1.97

 
88,070

 
2.19

 
(8.0
)
Loans and leases
 
21,916

 
2.37

 
23,573

 
2.96

 
7.6

Other interest-earning assets
 
22,884

 
0.97

 
15,714

 
2.37

 
(31.3
)
Total interest-earning assets
 
191,235

 
1.61

 
185,637

 
2.00

 
(2.9
)
Cash and due from banks
 
3,097

 
 
 
3,178

 
 
 
2.6

Other assets
 
25,118

 
 
 
34,570

 
 
 
37.6

Total assets
 
$
219,450

 
 
 
$
223,385

 
 
 
1.8

Liabilities:
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
30,623

 
0.31

 
$
54,953

 
0.47

 
79.5

Non-U.S.(3)
 
91,937

 
0.07

 
70,623

 
0.15

 
(23.2
)
Total interest-bearing deposits(3)
 
122,560

 
0.13

 
125,576

 
0.29

 
2.5

Securities sold under repurchase agreements
 
3,683

 
0.05

 
2,048

 
0.62

 
(44.4
)
Federal funds purchased
 
—

 
—

 
—

 
—

 
—

Other short-term borrowings
 
1,313

 
0.80

 
1,327

 
1.28

 
1.1

Long-term debt
 
11,595

 
2.66

 
10,686

 
3.64

 
(7.8
)
Other interest-bearing liabilities
 
4,607

 
2.63

 
4,956

 
4.20

 
7.6

Total interest-bearing liabilities
 
143,758

 
0.42

 
144,593

 
0.68

 
0.6

Non-interest bearing deposits
 
41,248

 
 
 
35,832

 
 
 
(13.1
)
Other liabilities
 
12,379

 
 
 
19,804

 
 
 
60.0

Preferred shareholders' equity
 
3,197

 
 
 
3,327

 
 
 
4.1

Common shareholders' equity
 
18,868

 
 
 
19,829

 
 
 
5.1

Total liabilities and shareholders' equity
 
$
219,450

 
 
 
$
223,385

 
 
 
1.8

Excess of rate earned over rate paid
 
 
 
1.19
 %
 
 
 
1.32
%
 
 
Net interest margin
 
 
 
1.29
 %
 
 
 
1.47
%
 
 
Net interest income, fully taxable-equivalent basis
 
 
 
$
2,471

 
 
 
$
2,728

 
 
Tax-equivalent adjustment
 
 
 
(167
)
 
 
 
(57
)
 
 
Net interest income, GAAP-basis
 
 
 
$
2,304

 
 
 
$
2,671

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Rates earned/paid on interest-earning assets and interest-bearing liabilities include the impact of hedge activities associated with our asset and liability management activities where applicable.
(2) Reflects the impact of balance sheet netting under enforceable netting agreements of approximately $31 billion and $36 billion as of December 31, 2017 and 2018, respectively. Excluding the impact of netting, the average interest rates would be approximately 0.79% and 0.87% for the years ended December 31, 2017 and 2018, respectively.
(3) Average rates include the impact of FX swap expense of approximately $141 million and $106 million for the years ended December 31, 2017 and 2018, respectively. Average rates for total interest-bearing deposits excluding the impact of FX swap expense were 0.02% and 0.20% for the years ended December 31, 2017 and 2018, respectively.

8

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
ASSETS UNDER CUSTODY AND/OR ADMINISTRATION
 
 
 
Quarters
 
% Change
(Dollars in billions)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
Assets Under Custody and/or Administration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
 
$
7,033

 
$
7,123

 
$
7,394

 
$
7,603

 
$
7,503

 
$
8,548

 
$
8,717

 
$
7,912

 
4.1
 %
 
(9.2
)%
Collective funds, including ETFs
 
8,024

 
8,560

 
9,190

 
9,707

 
9,908

 
9,615

 
9,646

 
8,999

 
(7.3
)
 
(6.7
)
Pension products
 
5,775

 
5,937

 
6,571

 
6,704

 
6,802

 
6,808

 
6,807

 
6,489

 
(3.2
)
 
(4.7
)
Insurance and other products
 
9,001

 
9,417

 
8,955

 
9,105

 
9,071

 
8,896

 
8,826

 
8,220

 
(9.7
)
 
(6.9
)
Total Assets Under Custody and/or Administration
 
$
29,833

 
$
31,037

 
$
32,110

 
$
33,119

 
$
33,284

 
$
33,867

 
$
33,996

 
$
31,620

 
(4.5
)
 
(7.0
)
By Financial Instrument(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
 
$
17,041

 
$
17,859

 
$
18,423

 
$
19,214

 
$
19,198

 
$
19,475

 
$
20,070

 
$
18,041

 
(6.1
)
 
(10.1
)
Fixed-income
 
9,300

 
9,560

 
9,883

 
10,070

 
10,186

 
10,189

 
10,018

 
9,758

 
(3.1
)
 
(2.6
)
Short-term and other investments
 
3,492

 
3,618

 
3,804

 
3,835

 
3,900

 
4,203

 
3,908

 
3,821

 
(0.4
)
 
(2.2
)
Total Assets Under Custody and/or Administration
 
$
29,833

 
$
31,037

 
$
32,110

 
$
33,119

 
$
33,284

 
$
33,867

 
$
33,996

 
$
31,620

 
(4.5
)
 
(7.0
)
By Geographic Location(2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
 
$
22,361

 
$
23,020

 
$
23,675

 
$
24,418

 
$
24,336

 
$
24,989

 
$
25,157

 
$
23,203

 
(5.0
)
 
(7.8
)
Europe/Middle East/Africa
 
5,979

 
6,464

 
6,806

 
7,028

 
7,211

 
7,134

 
7,094

 
6,699

 
(4.7
)
 
(5.6
)
Asia/Pacific
 
1,493

 
1,553

 
1,629

 
1,673

 
1,737

 
1,744

 
1,745

 
1,718

 
2.7

 
(1.5
)
Total Assets Under Custody and/or Administration
 
$
29,833

 
$
31,037

 
$
32,110

 
$
33,119

 
$
33,284

 
$
33,867

 
$
33,996

 
$
31,620

 
(4.5
)
 
(7.0
)
Assets Under Custody(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By Product Classification:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
 
$
6,499

 
$
6,577

 
$
6,818

 
$
6,998

 
$
6,894

 
$
7,950

 
$
8,086

 
$
7,344

 
4.9

 
(9.2
)
Collective funds, including ETFs
 
6,601

 
7,107

 
7,638

 
8,091

 
8,189

 
7,602

 
7,455

 
6,936

 
(14.3
)
 
(7.0
)
Pension products
 
5,212

 
5,399

 
5,480

 
5,606

 
5,682

 
5,703

 
5,627

 
5,237

 
(6.6
)
 
(6.9
)
Insurance and other products
 
4,193

 
4,279

 
4,304

 
4,325

 
4,281

 
4,160

 
4,132

 
3,731

 
(13.7
)
 
(9.7
)
Total Assets Under Custody
 
$
22,505

 
$
23,362

 
$
24,240

 
$
25,020

 
$
25,046

 
$
25,415

 
$
25,300

 
$
23,248

 
(7.1
)
 
(8.1
)
By Geographic Location(2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
 
$
17,747

 
$
18,223

 
$
18,691

 
$
19,276

 
$
19,131

 
$
19,545

 
$
19,433

 
$
17,652

 
(8.4
)
 
(9.2
)
Europe/Middle East/Africa
 
3,635

 
3,969

 
4,323

 
4,487

 
4,617

 
4,557

 
4,561

 
4,309

 
(4.0
)
 
(5.5
)
Asia/Pacific
 
1,123

 
1,170

 
1,226

 
1,257

 
1,298

 
1,313

 
1,306

 
1,287

 
2.4

 
(1.5
)
Total Assets Under Custody
 
$
22,505

 
$
23,362

 
$
24,240

 
$
25,020

 
$
25,046

 
$
25,415

 
$
25,300

 
$
23,248

 
(7.1
)
 
(8.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Certain previously reported amounts have been reclassified to conform to current period presentation.
(2) Geographic mix is generally based on the domicile of the entity servicing the funds and is not necessarily representative of the underlying asset mix.
(3) Assets under custody are a component of assets under custody and/or administration presented above.

9

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
ASSETS UNDER MANAGEMENT
 
 
 
 
 
 
Quarters
 
% Change
(Dollars in billions)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
Assets Under Management
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By Asset Class and Investment Approach:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Active
 
$
77

 
$
82

 
$
95

 
$
95

 
$
94

 
$
92

 
$
96

 
$
80

 
(15.8
)%
 
(16.7
)%
   Passive
 
1,482

 
1,512

 
1,545

 
1,650

 
1,576

 
1,575

 
1,693

 
1,464

 
(11.3
)
 
(13.5
)
Total Equity
 
1,559

 
1,594

 
1,640

 
1,745

 
1,670

 
1,667

 
1,789

 
1,544

 
(11.5
)
 
(13.7
)
Fixed-Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Active
 
69

 
71

 
73

 
77

 
79

 
79

 
80

 
81

 
5.2

 
1.3

   Passive
 
312

 
327

 
326

 
337

 
354

 
358

 
343

 
341

 
1.2

 
(0.6
)
Total Fixed-Income
 
381

 
398

 
399

 
414

 
433

 
437

 
423

 
422

 
1.9

 
(0.2
)
Cash(1)
 
335

 
334

 
347

 
330

 
336

 
333

 
317

 
287

 
(13.0
)
 
(9.5
)
Multi-Asset-Class Solutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Active
 
19

 
18

 
18

 
18

 
18

 
18

 
20

 
19

 
5.6

 
(5.0
)
   Passive
 
113

 
113

 
116

 
129

 
128

 
126

 
125

 
113

 
(12.4
)
 
(9.6
)
Total Multi-Asset-Class Solutions
 
132

 
131

 
134

 
147

 
146

 
144

 
145

 
132

 
(10.2
)
 
(9.0
)
Alternative Investments(2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Active
 
26

 
27

 
24

 
23

 
23

 
22

 
22

 
21

 
(8.7
)
 
(4.5
)
   Passive
 
128

 
122

 
129

 
123

 
121

 
120

 
114

 
105

 
(14.6
)
 
(7.9
)
Total Alternative Investments
 
154

 
149

 
153

 
146

 
144

 
142

 
136

 
126

 
(13.7
)
 
(7.4
)
Total Assets Under Management
 
$
2,561

 
$
2,606

 
$
2,673

 
$
2,782

 
$
2,729

 
$
2,723

 
$
2,810

 
$
2,511

 
(9.7
)
 
(10.6
)
By Geographic Location(3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
1,772

 
$
1,802

 
$
1,845

 
$
1,931

 
$
1,885

 
$
1,897

 
$
1,956

 
$
1,731

 
(10.4
)
 
(11.5
)
Europe/Middle East/Africa
 
486

 
496

 
510

 
521

 
511

 
495

 
476

 
421

 
(19.2
)
 
(11.6
)
Asia/Pacific
 
303

 
308

 
318

 
330

 
333

 
331

 
378

 
359

 
8.8

 
(5.0
)
Total Assets Under Management
 
$
2,561

 
$
2,606

 
$
2,673

 
$
2,782

 
$
2,729

 
$
2,723

 
$
2,810

 
$
2,511

 
(9.7
)
 
(10.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes both floating- and constant-net-asset-value portfolios held in commingled structures or separate accounts.
(2) Includes real estate investment trusts, currency and commodities, including SPDR® Gold Shares ETF and SPDR® Long Dollar Gold Trust ETF. State Street is not the investment manager for SPDR® Gold Shares ETF and SPDR® Long Dollar Gold Trust ETF, but acts as marketing agent.
(3) Geographic mix is based on client location or fund management location.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange-Traded Funds(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By Asset Class:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alternative Investments
 
$
46

 
$
46

 
$
48

 
$
48

 
$
48

 
$
46

 
$
40

 
$
43

 
(10.4
)%
 
7.5
 %
Cash
 
2

 
2

 
2

 
2

 
3

 
3

 
4

 
9

 
350.0

 
125.0

Equity
 
457

 
460

 
478

 
531

 
513

 
524

 
566

 
482

 
(9.2
)
 
(14.8
)
Fixed-Income
 
53

 
58

 
61

 
63

 
65

 
66

 
69

 
66

 
4.8

 
(4.3
)
Total Exchange-Traded Funds
 
$
558

 
$
566

 
$
589

 
$
644

 
$
629

 
$
639

 
$
679

 
$
600

 
(6.8
)
 
(11.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Exchange-traded funds are a component of assets under management presented above.

10

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
INDUSTRY FLOW DATA BY ASSET CLASS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in billions)
 
Quarters
 
 
 
 
 
 
1Q18
 
2Q18
 
3Q18
 
Three Months Ended November 30, 2018(4)
 
 
YTD 2017
 
YTD 2018(4)
North America - ICI Market Data(1)(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long Term Funds(5)
 
$
38.0

 
$
(28.3
)
 
$
(50.4
)
 
$
(148.6
)
 
 
$
66.8

 
$
(195.3
)
 
Money Market
 
(52.2
)
 
(51.7
)
 
35.8

 
50.2

 
 
81.2

 
20.5

 
ETF
 
62.8

 
55.8

 
87.2

 
89.2

 
 
470.8

 
314.3

 
 
Total ICI Flows
 
$
48.6

 
$
(24.2
)
 
$
72.6

 
$
(9.2
)
 
 
$
618.8

 
$
139.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Europe - Broadridge Market Data(1)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long Term Funds(5)
 
$
160.5

 
$
(24.9
)
 
$
(16.2
)
 
$
(126.9
)
 
 
$
713.5

 
$
57.6

 
Money Market
 
(10.3
)
 
(17.8
)
 
(21.9
)
 
2.0

 
 
75.7

 
(39.5
)
 
 
Total Broadridge Flows
$
150.2

 
$
(42.7
)
 
$
(38.1
)
 
$
(124.9
)
 
 
$
789.2

 
$
18.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Industry data is provided for illustrative purposes only and is not intended to reflect the Company's or its clients' activity.
(2) Source: Investment Company Institute.
Investment Company Institute (ICI) data includes funds not registered under the Investment Company Act of 1940. Mutual fund data represents estimates of net new cash flow, which is new sales minus redemptions combined with net exchanges, while exchange-traded fund (ETF) data represents net issuance, which is gross issuance less gross redemptions. Data for mutual funds that invest primarily in other mutual funds and ETFs that invest primarily in other ETFs were excluded from the series. ICI classifies mutual funds and ETFs based on language in the fund prospectus.
(3) Source: © Copyright 2018, Broadridge Financial Solutions, Inc.
Funds of funds have been excluded from Broadridge data (to avoid double counting). Therefore, a market total is the sum of all the investment categories excluding the three funds of funds categories (in-house, ex-house and hedge). ETFs are included in Broadridge’s database on mutual funds, but this excludes exchange-traded commodity products that are not mutual funds.
(4) 4Q18 data is through November 30, 2018 on a rolling 3 month basis and includes September, October and November 2018 market data. FY 2018 represents the rolling twelve month period from December 2017 through November 2018, the last date for which information is available. Flows for FY 2018 will not equal the sum of the four quarters.
(5) The long term fund flows reported by ICI are composed of North America Market flows mainly in Equities, Hybrids and Fixed Income Asset Classes. The long term fund flows reported by Broadridge are composed of EMEA Market flows mainly in Equities, Fixed Income, and Multi Asset Classes.


11

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
INVESTMENT PORTFOLIO HOLDINGS BY ASSET CLASS
 
December 31, 2018
 
Ratings
 
 
 
 
 
 
 
 
(Dollars in billions, or where otherwise noted)
 
UST/AGY
 
AAA
 
AA
 
A
 
BBB
 
<BBB
 
NR
 
Book Value(1)
 
Book Value
(% Total)
 
Net Unrealized After-tax MTM Gain/(Loss)
(In millions)(2)
 
Fixed Rate/
Floating Rate
Government & agency securities
 
49
%
 
14
%
 
21
%
 
8
%
 
6
%
 
—
%
 
2
%
 
$
32.2

 
36.8
%
 
$
(134
)
 
100% / 0%
Asset-backed securities
 
—

 
67

 
27

 
2

 
3

 
1

 
—

 
9.3

 
10.7

 
29

 
0% / 100%
Student loans
 
—

 
38

 
54

 
1

 
6

 
1

 
—

 
3.8

 
40.9

 
12

 
 
Credit cards
 
—

 
100

 
—

 
—

 
—

 
—

 
—

 
1.2

 
12.9

 
(20
)
 
 
Auto & equipment
 
—

 
79

 
21

 
—

 
—

 
—

 
—

 
0.7

 
7.5

 
(1
)
 
 
Non-U.S. residential mortgage backed securities
 
—

 
78

 
12

 
5

 
2

 
3

 
—

 
2.3

 
24.7

 
41

 
 
Collateralized loan obligation
 
—

 
100

 
—

 
—

 
—

 
—

 
—

 
1.2

 
12.9

 
(3
)
 
 
Other
 
—

 
26

 
73

 
1

 
—

 
—

 
—

 
0.1

 
1.1

 
—

 
 
Mortgage-backed securities
 
100

 
—

 
—

 
—

 
—

 
—

 
—

 
35.7

 
40.8

 
(465
)
 
98% / 2%
Agency MBS
 
100

 
—

 
—

 
—

 
—

 
—

 
—

 
35.5

 
99.4

 
(484
)
 
 
Non-agency MBS
 
—

 
8

 
5

 
8

 
14

 
51

 
14

 
0.2

 
0.6

 
19

 
 
CMBS
 
74

 
26

 
—

 
—

 
—

 
—

 
—

 
3.2

 
3.7

 
(46
)
 
54% / 46%
Corporate bonds
 
—

 
—

 
15

 
48

 
37

 
—

 
—

 
3.0

 
3.4

 
(28
)
 
94% / 6%
Covered bonds
 
—

 
100

 
—

 
—

 
—

 
—

 
—

 
1.3

 
1.5

 
—

 
5% / 95%
Municipal bonds
 
—

 
27

 
65

 
8

 
—

 
—

 
—

 
0.9

 
1.0

 
1

 
100% / 0%
Clipper tax-exempt bonds/other
 
—

 
15

 
68

 
13

 
4

 
—

 
—

 
1.8

 
2.1

 
11

 
35% / 65%
Total Portfolio
 
61
%
 
15
%
 
14
%
 
5
%
 
5
%
 
—
%
 
—
%
 
$
87.4

 
100.0
%
 
$
(632
)
 
84% / 16%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Book Value
 
$
53.6

 
$
13.4

 
$
11.6

 
$
4.6

 
$
3.6

 
$
0.2

 
$
0.4

 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred.
(2) At December 31, 2018, the after-tax unrealized MTM gain/(loss) includes after-tax unrealized loss on securities available-for-sale of $156 million, after-tax unrealized loss on securities held-to-maturity of $417 million and after-tax unrealized loss primarily related to securities previously transferred from available-for-sale to held-to-maturity of $59 million.



12

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
INVESTMENT PORTFOLIO NON-U.S. INVESTMENTS
 
December 31, 2018
 
 
 
 
 
Book Value
(Dollars in billions)
 
Book Value
 
Average Rating
 
Gov't/Agency(1)
 
ABS
FRMBS
 
ABS
All Other
 
Corporate Bonds
 
Covered Bonds
 
Other
United Kingdom
 
$
3.7

 
AAA
 
$
1.9

 
$
0.6

 
$
0.7

 
$
0.2

 
$
0.3

 
$
—

Australia
 
3.2

 
AAA
 
0.8

 
1.1

 
—

 
0.2

 
0.3

 
0.8

Canada
 
2.2

 
AAA
 
1.9

 
—

 
—

 
0.2

 
0.1

 
—

Germany
 
2.0

 
AA
 
1.5

 
—

 
0.5

 
—

 
—

 
—

France
 
1.9

 
AA
 
1.0

 
—

 
0.5

 
0.2

 
0.2

 
—

Spain
 
1.6

 
BBB
 
1.4

 
0.1

 
0.1

 
—

 
—

 
—

Japan
 
1.3

 
A
 
1.3

 
—

 
—

 
—

 
—

 
—

Austria
 
1.3

 
AA
 
1.3

 
—

 
—

 
—

 
—

 
—

Netherlands
 
1.3

 
AAA
 
0.6

 
0.4

 
—

 
0.2

 
0.1

 
—

Ireland
 
1.3

 
A
 
1.3

 
—

 
—

 
—

 
—

 
—

Italy
 
1.1

 
A
 
0.8

 
0.2

 
0.1

 
—

 
—

 
—

Belgium
 
1.0

 
AA
 
0.8

 
—

 
—

 
—

 
0.2

 
—

Finland
 
0.8

 
AA
 
0.8

 
—

 
—

 
—

 
—

 
—

Hong Kong
 
0.5

 
AA
 
0.5

 
—

 
—

 
—

 
—

 
—

Other
 
0.8

 
AA
 
0.5

 
—

 
—

 
0.2

 
0.1

 
—

Total Non-U.S. Investments(2)
 
$
24.0

 
 
 
$
16.4

 
$
2.4

 
$
1.9

 
$
1.2

 
$
1.3

 
$
0.8

U.S. Investments
 
63.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
 
$
87.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Sovereign debt is reflected in the government / agency column.
(2) Country of collateral used except for corporates where country of issuer is used.





13

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF NON-GAAP FINANCIAL INFORMATION
In addition to presenting State Street's financial results in conformity with U.S. generally accepted accounting principles, or GAAP, management also presents certain financial information on a basis that excludes or adjusts one or more items from GAAP. This latter basis is a non-GAAP presentation. In general, our non-GAAP financial results adjust selected GAAP-basis financial results to exclude the impact of revenue and expenses outside of State Street’s normal course of business or other notable items, such as acquisition and restructuring charges, repositioning charges and gains/losses on sales. Management believes that this presentation of financial information facilitates an investor's further understanding and analysis of State Street's financial performance and trends with respect to State Street’s business operations from period to period, including providing additional insight into our underlying margin and profitability. In addition, Management may also provide additional non-GAAP measures. For example, we present capital ratios, calculated under regulatory standards scheduled to be effective in the future or other standards, that management uses in evaluating State Street’s business and activities and believes may similarly be useful to investors. Additionally, we may present revenue and expense measures on a constant currency basis to identify the significance of changes in foreign currency exchange rates (which often are variable) in period-to-period comparisons. This presentation represents the effects of applying prior period weighted average foreign currency exchange rates to current period results.

Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in conformity with GAAP.
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters
 
% Change
 
Year-to-Date
 
% Change
(Dollars in millions)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
 
2017
 
2018
 
YTD 2018
vs.
YTD 2017
Fee Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total fee revenue, GAAP-basis(1)
 
$
2,198

 
$
2,235

 
$
2,242

 
$
2,230

 
$
2,378

 
$
2,358

 
$
2,280

 
$
2,289

 
2.6
 %
 
 
0.4
 %
 
 
$
8,905

 
$
9,305

 
4.5
 %
 
Less: Gain on sale
 
(30
)
 
—

 
(26
)
 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
(56
)
 
—

 
 
 
Add: legal and related
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
8

 
 
 
 
 
 
 
—

 
8

 
 
 
Add: Impact of tax legislation
 
—

 
—

 
—

 
18

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
18

 
—

 
 
 
Total fee revenue, excluding notable items
 
$
2,168

 
$
2,235

 
$
2,216

 
$
2,248

 
$
2,378

 
$
2,358

 
$
2,280

 
$
2,297

 
2.2

 
 
0.7

 
 
$
8,867

 
$
9,313

 
5.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue, GAAP-basis
 
$
2,668

 
$
2,810

 
$
2,846

 
$
2,846

 
$
3,019

 
$
3,026

 
$
2,951

 
$
2,986

 
4.9
 %
 
 
1.2
 %
 
 
$
11,170

 
$
11,982

 
7.3
 %
 
Less: Gain on sale
 
(30
)
 
—

 
(26
)
 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
(56
)
 
—

 
 
 
Add: legal and related
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
8

 
 
 
 
 
 
 
—

 
8

 
 
 
Add: Impact of tax legislation
 
—

 
—

 
—

 
20

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
20

 
—

 
 
 
Total revenue, excluding notable items
 
$
2,638

 
$
2,810

 
$
2,820

 
$
2,866

 
$
3,019

 
$
3,026

 
$
2,951

 
$
2,994

 
4.5

 
 
1.5

 
 
$
11,134

 
$
11,990

 
7.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total expenses, GAAP-basis
 
$
2,086

 
$
2,031

 
$
2,021

 
$
2,131

 
$
2,256

 
$
2,159

 
$
2,079

 
$
2,474

 
16.1
 %
 
 
19.0
 %
 
 
$
8,269

 
$
8,968

 
8.5
 %
 
Less: Notable expense items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition and restructuring costs
 
(29
)
 
(71
)
 
(33
)
 
(133
)
 
—

 
—

 
—

 
(24
)
 
 
 
 
 
 
 
(266
)
 
(24
)
 
 
 
Repositioning charges
 
—

 
—

 
—

 
—

 
—

 
(77
)
 
—

 
(223
)
 
 
 
 
 
 
 
—

 
(300
)
 
 
 
Business exit: Channel Islands
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(24
)
 
 
 
 
 
 
 
—

 
(24
)
 
 
 
Legal and related
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(42
)
 
 
 
 
 
 
 
—

 
(42
)
 
 
 
Total expenses, excluding notable items
 
$
2,057

 
$
1,960

 
$
1,988

 
$
1,998

 
$
2,256

 
$
2,082

 
$
2,079

 
$
2,161

 
8.2

 
 
3.9

 
 
$
8,003

 
$
8,578

 
7.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee Operating Leverage, GAAP-Basis:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total fee revenue, GAAP-basis(1)
 
$
2,198

 
$
2,235

 
$
2,242

 
$
2,230

 
$
2,378

 
$
2,358

 
$
2,280

 
$
2,289

 
2.65
 %
 
 
0.39
 %
 
 
$
8,905

 
$
9,305

 
4.49
 %
 
Total expenses, GAAP-basis
 
2,086

 
2,031

 
2,021

 
2,131

 
2,256

 
2,159

 
2,079

 
2,474

 
16.10

 
 
19.00

 
 
8,269

 
8,968

 
8.45

 
Fee operating leverage, GAAP-basis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(13.45
)
pts
 
(18.61
)
pts
 
 
 
 
 
(3.96
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee Operating Leverage, excluding notable items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total fee revenue, excluding notable items (as reconciled above)
 
$
2,168

 
$
2,235

 
$
2,216

 
$
2,248

 
$
2,378

 
$
2,358

 
$
2,280

 
$
2,297

 
2.18
 %
 
 
0.75
 %
 
 
$
8,867

 
$
9,313

 
5.03
 %
 
Total expenses, excluding notable items (as reconciled above)
 
2,057

 
1,960

 
1,988

 
1,998

 
2,256

 
2,082

 
2,079

 
2,161

 
8.16

 
 
3.94

 
 
8,003

 
8,578

 
7.18

 
Fee operating leverage, excluding notable items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5.98
)
pts
 
(3.19
)
pts
 
 
 
 
 
(2.15
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Leverage, GAAP-Basis:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue, GAAP-basis
 
$
2,668

 
$
2,810

 
$
2,846

 
$
2,846

 
$
3,019

 
$
3,026

 
$
2,951

 
$
2,986

 
4.92
 %
 
 
1.19
 %
 
 
$
11,170

 
$
11,982

 
7.27
 %
 
Total expenses, GAAP-basis
 
2,086

 
2,031

 
2,021

 
2,131

 
2,256

 
2,159

 
2,079

 
2,474

 
16.10

 
 
19.00

 
 
8,269

 
8,968

 
8.45

 
Operating leverage, GAAP-basis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(11.18
)
pts
 
(17.81
)
pts
 
 
 
 
 
(1.18
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Leverage, excluding notable items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue, excluding notable items (as reconciled above)
 
$
2,638

 
$
2,810

 
$
2,820

 
$
2,866

 
$
3,019

 
$
3,026

 
$
2,951

 
$
2,994

 
4.47
 %
 
 
1.46
 %
 
 
$
11,134

 
$
11,990

 
7.69
 %
 
Total expenses, excluding notable items (as reconciled above)
 
2,057

 
1,960

 
1,988

 
1,998

 
2,256

 
2,082

 
2,079

 
2,161

 
8.16

 
 
3.94

 
 
8,003

 
8,578

 
7.18

 
Operating leverage, excluding notable items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3.69
)
pts
 
(2.48
)
pts
 
 
 
 
 
0.51

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF NON-GAAP FINANCIAL INFORMATION (Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters
 
% Change
 
Year-to-Date
 
% Change
(Dollars in millions, except per Earnings per share, or where otherwise noted)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
 
2017
 
2018
 
YTD 2018
vs.
YTD 2017
Net Income Available to Common Shareholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Available to Common Shareholders, GAAP-basis
 
$
446

 
$
584

 
$
629

 
$
334

 
$
605

 
$
698

 
$
709

 
$
398

 
19.2
 %
 
 
(43.9
)%
 
 
$
1,993

 
$
2,410

 
20.9
 %
 
Less: Notable items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
Gain on sale
 
(30
)
 
—

 
(26
)
 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
(56
)
 
—

 
 
 
Acquisition and restructuring costs
 
29

 
71

 
33

 
133

 
—

 
—

 
—

 
24

 
 
 
 
 
 
 
266

 
24

 
 
 
Impact of tax legislation (revenue)
 
—

 
—

 
—

 
20

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
20

 
—

 
 
 
Impact of tax legislation (income tax)
 
—

 
—

 
—

 
250

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
250

 
—

 
 
 
Repositioning charges
 
—

 
—

 
—

 
—

 
—

 
77

 
—

 
223

 
 
 
 
 
 
 
—

 
300

 
 
 
Business exit: Channel Islands
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
24

 
 
 
 
 
 
 
—

 
24

 
 
 
Legal and related
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
50

 
 
 
 
 
 
 
—

 
50

 
 
 
Tax impact of notable items
 
(23
)
 
(25
)
 
2

 
(45
)
 
—

 
(16
)
 
—

 
(73
)
 
 
 
 
 
 
 
(91
)
 
(89
)
 
 
 
Net Income Available to Common Shareholders, excluding notable items
 
$
422

 
$
630

 
$
638

 
$
692

 
$
605

 
$
759

 
$
709

 
$
646

 
(6.6
)
 
 
(8.9
)
 
 
$
2,382

 
$
2,719

 
14.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings per Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share, GAAP-basis
 
$
1.15

 
$
1.53

 
$
1.66

 
$
0.89

 
$
1.62

 
$
1.88

 
$
1.87

 
$
1.04

 
16.9
 %
 
 
(44.4
)%
 
 
$
5.24

 
$
6.40

 
22.1
 %
 
Less: Notable items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sale
 
(0.11
)
 
—

 
(0.03
)
 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
(0.14
)
 
—

 
 
 
Acquisition and restructuring costs
 
0.05

 
0.12

 
0.06

 
0.23

 
—

 
—

 
—

 
0.04

 
 
 
 
 
 
 
0.45

 
0.04

 
 
 
Impact of tax legislation (revenue)
 
—

 
—

 
—

 
0.05

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
0.04

 
—

 
 
 
Impact of tax legislation (income tax)
 
—

 
—

 
—

 
0.67

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
0.67

 
—

 
 
 
Repositioning charges
 
—

 
—

 
—

 
—

 
—

 
0.16

 
—

 
0.43

 
 
 
 
 
 
 
—

 
0.61

 
 
 
Business exit: Channel Islands
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.05

 
 
 
 
 
 
 
—

 
0.05

 
 
 
Legal and related
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.12

 
 
 
 
 
 
 
—

 
0.12

 


 
Diluted earnings per share, excluding notable items
 
$1.09
 
$1.65
 
$1.69
 
$1.84
 
$1.62
 
$2.04
 
$1.87
 
$1.68
 
(8.7
)
 
 
(10.2
)
 
 
$6.26
 
$7.22
 
15.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax Margin:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax margin, GAAP-basis
 
21.9
%
 
27.6
%
 
28.9
%
 
25.2
%
 
25.3
%
 
28.6
%
 
29.4
%
 
16.9
%
 
(8.3
)%
pts
 
(12.5
)%
pts
 
26.0
 %
 
25.0
%
 
(1.0
)%
pts
Less: Notable items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
Gain on sale
 
(1.1)
 
—
 
(0.9)
 
—
 
—
 
—
 
—
 
—
 
 
 
 
 
 
 
(0.5
)
 
—

 
 
 
Acquisition and restructuring costs
 
1.1
 
2.5
 
1.2
 
4.6
 
—
 
—
 
—
 
0.8
 
 
 
 
 
 
 
2.4

 
0.2

 
 
 
Impact of tax legislation (revenue)
 
—
 
—
 
—
 
0.6
 
—
 
—
 
—
 
—
 
 
 
 
 
 
 
0.2

 
—

 
 
 
Repositioning charges
 
—
 
—
 
—
 
—
 
—
 
2.5
 
—
 
7.4
 
 
 
 
 
 
 
—

 
2.5

 
 
 
Business exit: Channel Islands
 
—
 
—
 
—
 
—
 
—
 
—
 
—
 
0.8
 
 
 
 
 
 
 
—

 
0.2

 
 
 
Legal and related
 
—
 
—
 
—
 
—
 
—
 
—
 
—
 
1.7
 
 
 
 
 
 
 
—

 
0.4

 
 
 
Pre-tax margin, excluding notable items
 
21.9%
 
30.1%
 
29.2%
 
30.4%
 
25.3%
 
31.1%
 
29.4%
 
27.6%
 
(2.8
)
pts
 
(1.8
)
pts
 
28.1%
 
28.3%
 
0.2

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Approximately $15 million of swap costs in 1Q18 were reclassified from processing fees and other revenue within fee revenue to net interest income to conform to current presentation. No other prior periods were revised.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

15

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF CONSTANT CURRENCY FX IMPACTS
 
GAAP-Basis Quarter Comparison
 
Reported
 
Currency Translation Impact
 
Excluding Currency Impact
 
% Change Constant Currency
(Dollars in millions)
 
4Q17
 
3Q18
 
4Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
 
4Q18
vs.
4Q17
 
4Q18
vs.
3Q18
Fee revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicing fees
 
$
1,379

 
$
1,333

 
$
1,286

 
$
(17
)
 
$
(10
)
 
$
1,303

 
$
1,296

 
(5.5
)%
 
(2.8
)%
Management fees
 
418

 
474

 
440

 
(3
)
 
(2
)
 
443

 
442

 
6.0

 
(6.8
)
Foreign exchange trading services
 
248

 
288

 
294

 
(1
)
 
—

 
295

 
294

 
19.0

 
2.1

Securities finance
 
147

 
128

 
120

 
—

 
—

 
120

 
120

 
(18.4
)
 
(6.3
)
Processing fees and other(1)
 
38

 
57

 
149

 
—

 
—

 
149

 
149

 
292.1

 
161.4

Total fee revenue
 
2,230

 
2,280

 
2,289

 
(21
)
 
(12
)
 
2,310

 
2,301

 
3.6

 
0.9

Net interest income(1)
 
616

 
672

 
697

 
(5
)
 
(2
)
 
702

 
699

 
14.0

 
4.0

Gains (losses) related to investment securities, net
 
—

 
(1
)
 
—

 
—

 
—

 
—

 
—

 
nm

 
nm

Total revenue(2)
 
$
2,846

 
$
2,951

 
$
2,986

 
$
(26
)
 
$
(14
)
 
$
3,012

 
$
3,000

 
5.8

 
1.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
$
1,067

 
$
1,103

 
$
1,303

 
$
(14
)
 
$
(6
)
 
$
1,317

 
$
1,309

 
23.4

 
18.7

Information systems and communications
 
301

 
332

 
356

 
(1
)
 
(1
)
 
357

 
357

 
18.6

 
7.5

Transaction processing services
 
219

 
236

 
214

 
(2
)
 
(1
)
 
216

 
215

 
(1.4
)
 
(8.9
)
Occupancy
 
117

 
110

 
146

 
(2
)
 
(1
)
 
148

 
147

 
26.5

 
33.6

Acquisition and restructuring costs
 
133

 
—

 
24

 
—

 
—

 
24

 
24

 
(82.0
)
 
100.0

Amortization of other intangible assets
 
54

 
47

 
81

 
(1
)
 
—

 
82

 
81

 
51.9

 
72.3

Other
 
240

 
251

 
350

 
(3
)
 
(1
)
 
353

 
351

 
47.1

 
39.8

Total expenses(3)
 
$
2,131

 
$
2,079

 
$
2,474

 
$
(23
)
 
$
(10
)
 
$
2,497

 
$
2,484

 
17.2

 
19.5

GAAP-Basis YTD Comparison
 
Reported
 
Currency Translation Impact
 
Excluding Currency Impact
 
% Change Constant Currency
(Dollars in millions)
 
2017
 
2018
 
YTD 2018
vs.
YTD 2017
 
2018
 
YTD 2018
vs.
YTD 2017
Fee revenue:
 
 
 
 
 
 
 
 
 
 
Servicing fees
 
$
5,365

 
$
5,421

 
$
41

 
$
5,380

 
0.3
 %
Management fees
 
1,616

 
1,851

 
15

 
1,836

 
13.6

Foreign exchange trading services
 
1,071

 
1,201

 
6

 
1,195

 
11.6

Securities finance
 
606

 
543

 
1

 
542

 
(10.6
)
Processing fees and other(1)
 
247

 
289

 
1

 
288

 
16.6

Total fee revenue
 
8,905

 
9,305

 
64

 
9,241

 
3.8

Net interest income(1)
 
2,304

 
2,671

 
5

 
2,666

 
15.7

Gains (losses) related to investment securities, net
 
(39
)
 
6

 
—

 
6

 
(115.4
)
Total revenue(2)
 
$
11,170

 
$
11,982

 
$
69

 
$
11,913

 
6.7

 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
$
4,394

 
$
4,780

 
$
28

 
$
4,752

 
8.1

Information systems and communications
 
1,167

 
1,324

 
3

 
1,321

 
13.2

Transaction processing services
 
838

 
938

 
4

 
934

 
11.5

Occupancy
 
461

 
500

 
2

 
498

 
8.0

Acquisition and restructuring costs
 
266

 
24

 
—

 
24

 
(91.0
)
Amortization of other intangible assets
 
214

 
226

 
4

 
222

 
3.7

Other
 
929

 
1,176

 
11

 
1,165

 
25.4

Total expenses(3)
 
$
8,269

 
$
8,968

 
$
52

 
$
8,916

 
7.8

 
 
 
 
 
 
 
 
 
 
 
(1) Approximately $15 million of swap costs in 1Q18 were reclassified from processing fees and other revenue within fee revenue to net interest income to conform to current presentation. No other prior periods were revised.
(2) Revenues associated with the acquired CRD business were $121 million for 4Q18
(3) Expenses associated with the acquired CRD business include approximately $39 million for 4Q18 spread across multiple expense lines, and $18 million intangible asset amortization.
nm Not meaningful
 
 
 
 
 
 
 
 
 
 

16

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATION OF TANGIBLE COMMON EQUITY RATIO
 
The accompanying materials present capital ratios in addition to, or adjusted from, those calculated in conformity with applicable regulatory requirements. These include capital ratios based on tangible common equity, as well as capital ratios adjusted to reflect our estimate of the impact of the relevant Basel III requirements, as specified in the July 2013 final rule issued by the Board of Governors of the Federal Reserve System, referred to as the Basel III final rule. These non-regulatory and adjusted capital measures are non-GAAP financial measures. Management currently calculates the non-GAAP capital ratios presented in the news release to aid in its understanding of State Street’s capital position under a variety of standards, including currently applicable and transitioning regulatory requirements. Management believes that the use of the non-GAAP capital ratios presented in the accompanying materials similarly aids in an investor's understanding of State Street's capital position and therefore is of interest to investors.
The common equity tier 1 risk-based capital, or CET1, tier 1 risk-based capital, total risk-based capital and tier 1 leverage ratios have each been calculated in conformity with applicable regulatory requirements as of the dates that each was first publicly disclosed. The capital component, or numerator, of these ratios was calculated in conformity with the provisions of the Basel III final rule. For the periods below the total risk-weighted assets component, or denominator, used in the calculation of the CET1, tier 1 risk-based capital and total risk-based capital ratios were each calculated in conformity with the advanced approaches and standardized approach provisions of Basel III, as the case may be.
The advanced approaches-based ratios (actual and estimated) included in this presentation reflect calculations and determinations with respect to our capital and related matters, based on State Street and external data, quantitative formula, statistical models, historical correlations and assumptions, collectively referred to as “advanced systems,” in effect and used by us for those purposes as of the respective date of each ratio’s first public announcement. Significant components of these advanced systems involve the exercise of judgment by us and our regulators, and these advanced systems may not, individually or collectively, precisely represent or calculate the scenarios, circumstances, outputs or other results for which they are designed or intended. Due to the influence of changes in these advanced systems, whether resulting from changes in data inputs, regulation or regulatory supervision or interpretation, State Street-specific or market activities or experiences or other updates or factors, we expect that our advanced systems and our capital ratios calculated in conformity with the Basel III framework will change and may be volatile over time, and that those latter changes or volatility could be material as calculated and measured from period to period.
The tangible common equity, or TCE, ratio is an additional capital ratio that management believes provides context useful in understanding and assessing State Street's capital adequacy. The TCE ratio is calculated by dividing consolidated total common shareholders’ equity by consolidated total assets, after reducing both amounts by goodwill and other intangible assets net of related deferred taxes. Total assets reflected in the TCE ratio also exclude cash balances on deposit at the Federal Reserve Bank and other central banks in excess of required reserves. The TCE ratio is not required by GAAP or by banking regulations, but is a metric used by management to evaluate the adequacy of State Street’s capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and adjusted tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP or other applicable requirements. Reconciliations with respect to the calculation of the TCE ratios are provided within the Reconciliation of Tangible Common Equity Ratio within this package.
The following table presents the calculation of State Street's ratios of tangible common equity to total tangible assets.
 
 
Quarters
(Dollars in millions)
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
Consolidated total assets
 
$
236,802

 
$
238,274

 
$
235,986

 
$
238,425

 
$
250,286

 
$
248,308

 
$
234,007

 
$
244,626

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Goodwill
 
5,855

 
5,945

 
5,997

 
6,022

 
6,068

 
5,973

 
6,016

 
7,446

   Other intangible assets
 
1,710

 
1,693

 
1,658

 
1,613

 
1,578

 
1,500

 
1,461

 
2,369

Cash balances held at central banks in excess of required reserves
 
59,780

 
56,326

 
51,965

 
56,712

 
62,901

 
64,640

 
51,707

 
62,867

Adjusted assets
 
169,457

 
174,310

 
176,366

 
174,078

 
179,739

 
176,195

 
174,823

 
171,944

   Plus related deferred tax liabilities
 
649

 
651

 
647

 
479

 
477

 
465

 
461

 
464

Total tangible assets
A
$
170,106

 
$
174,961

 
$
177,013

 
$
174,557

 
$
180,216

 
$
176,660

 
$
175,284

 
$
172,408

Consolidated total common shareholders' equity
 
$
18,098

 
$
18,872

 
$
19,301

 
$
19,121

 
$
19,203

 
$
19,375

 
$
20,863

 
$
21,100

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Goodwill
 
5,855

 
5,945

 
5,997

 
6,022

 
6,068

 
5,973

 
6,016

 
7,446

   Other intangible assets
 
1,710

 
1,693

 
1,658

 
1,613

 
1,578

 
1,500

 
1,461

 
2,369

Adjusted equity
 
10,533

 
11,234

 
11,646

 
11,486

 
11,557

 
11,902

 
13,386

 
11,285

   Plus related deferred tax liabilities
 
649

 
651

 
647

 
479

 
477

 
465

 
461

 
464

Total tangible common equity
B
$
11,182

 
$
11,885

 
$
12,293

 
$
11,965

 
$
12,034

 
$
12,367

 
$
13,847

 
$
11,749

Tangible common equity ratio
B/A
6.6
%
 
6.8
%
 
6.9
%
 
6.9
%
 
6.7
%
 
7.0
%
 
7.9
%
 
6.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Basis:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income available to common shareholders
 
$
446

 
$
584

 
$
629

 
$
334

 
$
605

 
$
698

 
$
709

 
$
398

Return on tangible common equity
 
16.0
%
 
17.3
%
 
18.0
%
 
16.7
%
 
20.1
%
 
21.1
%
 
19.4
%
 
20.5
%

17

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
REGULATORY CAPITAL
 
 
 
Quarters
 
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
3Q18
 
4Q18
(Dollars in millions)
 
Basel III Advanced Approaches(1)
 
Basel III Standardized Approach(2)
 
Basel III Advanced Approaches(1) 
 
Basel III Standardized Approach(2)
 
Basel III Advanced Approaches(1) 
 
Basel III Standardized Approach(2)
 
Basel III Advanced Approaches(1) 
 
Basel III Standardized Approach(2)
 
Basel III Advanced Approaches(1) 
 
Basel III Standardized Approach(2)
 
Basel III Advanced Approaches(1) 
 
Basel III Standardized Approach(2)
 
Basel III Advanced Approaches(1) 
 
Basel III Standardized Approach(2)
 
Basel III Advanced Approaches(1) 
 
Basel III Standardized Approach(2)
RATIOS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
11.2
%
 
11.5
%
 
12.0
%
 
11.2
%
 
12.6
%
 
11.6
%
 
12.3
%
 
11.9
%
 
12.1
%
 
10.8
%
 
12.4
%
 
11.3
%
 
14.1
%
 
13.0
%
 
12.1
%
 
11.5
%
Tier 1 capital
 
14.4

 
14.7

 
15.1

 
14.2

 
15.8

 
14.5

 
15.5

 
15.0

 
15.4

 
13.7

 
15.7

 
14.3

 
17.9

 
16.4

 
16.0

 
15.1

Total capital
 
15.4

 
15.9

 
16.2

 
15.2

 
16.9

 
15.6

 
16.5

 
16.0

 
16.4

 
14.6

 
16.4

 
15.1

 
18.7

 
17.2

 
16.8

 
16.0

Tier 1 leverage
 
6.8

 
6.8

 
7.0

 
7.0

 
7.4

 
7.4

 
7.3

 
7.3

 
6.9

 
6.9

 
7.1

 
7.1

 
8.1

 
8.1

 
7.2

 
7.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supporting Calculations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
$
11,319

 
$
11,319

 
$
12,007

 
$
12,007

 
$
12,439

 
$
12,439

 
$
12,204

 
$
12,204

 
$
11,950

 
$
11,950

 
$
12,223

 
$
12,223

 
$
13,703

 
$
13,703

 
$
11,580

 
$
11,580

Total risk-weighted assets
 
100,843

 
98,494

 
100,265

 
107,069

 
98,997

 
107,580

 
99,156

 
102,683

 
98,512

 
110,477

 
98,502

 
107,740

 
97,367

 
105,770

 
95,416

 
100,832

Common equity tier 1 risk-based capital ratio
 
11.2
%
 
11.5
%
 
12.0
%
 
11.2
%
 
12.6
%
 
11.6
%
 
12.3
%
 
11.9
%
 
12.1
%
 
10.8
%
 
12.4
%
 
11.3
%
 
14.1
%
 
13.0
%
 
12.1
%
 
11.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tier 1 capital
 
$
14,475

 
$
14,475

 
$
15,165

 
$
15,165

 
$
15,606

 
$
15,606

 
$
15,382

 
$
15,382

 
$
15,146

 
$
15,146

 
$
15,419

 
$
15,419

 
$
17,393

 
$
17,393

 
$
15,270

 
$
15,270

Total risk-weighted assets
 
100,843

 
98,494

 
100,265

 
107,069

 
98,997

 
107,580

 
99,156

 
102,683

 
98,512

 
110,477

 
98,502

 
107,740

 
97,367

 
105,770

 
95,416

 
100,832

Tier 1 risk-based capital ratio
 
14.4
%
 
14.7
%
 
15.1
%
 
14.2
%
 
15.8
%
 
14.5
%
 
15.5
%
 
15.0
%
 
15.4
%
 
13.7
%
 
15.7
%
 
14.3
%
 
17.9
%
 
16.4
%
 
16.0
%
 
15.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total capital
 
$
15,542

 
$
15,617

 
$
16,243

 
$
16,314

 
$
16,684

 
$
16,758

 
$
16,367

 
$
16,435

 
$
16,107

 
$
16,179

 
$
16,184

 
$
16,257

 
$
18,159

 
$
18,228

 
$
16,061

 
$
16,131

Total risk-weighted assets
 
100,843

 
98,494

 
100,265

 
107,069

 
98,997

 
107,580

 
99,156

 
102,683

 
98,512

 
110,477

 
98,502

 
107,740

 
97,367

 
105,770

 
95,416

 
100,832

Total risk-based capital ratio
 
15.4
%
 
15.9
%
 
16.2
%
 
15.2
%
 
16.9
%
 
15.6
%
 
16.5
%
 
16.0
%
 
16.4
%
 
14.6
%
 
16.4
%
 
15.1
%
 
18.7
%
 
17.2
%
 
16.8
%
 
16.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tier 1 capital
 
$
14,475

 
$
14,475

 
$
15,165

 
$
15,165

 
$
15,606

 
$
15,606

 
$
15,382

 
$
15,382

 
$
15,146

 
$
15,146

 
$
15,419

 
$
15,419

 
$
17,393

 
$
17,393

 
$
15,270

 
$
15,270

Adjusted quarterly average assets
 
212,361

 
212,361

 
216,940

 
216,940

 
211,396

 
211,396

 
209,328

 
209,328

 
219,582

 
219,582

 
216,896

 
216,896

 
214,103

 
214,103

 
211,924

 
211,924

Tier 1 leverage ratio
 
6.8
%
 
6.8
%
 
7.0
%
 
7.0
%
 
7.4
%
 
7.4
%
 
7.3
%
 
7.3
%
 
6.9
%
 
6.9
%
 
7.1
%
 
7.1
%
 
8.1
%
 
8.1
%
 
7.2
%
 
7.2
%
(1) CET1, tier 1 capital, total capital, and tier 1 leverage ratios for each period above were calculated in conformity with the advanced approaches provisions of the Basel III final rule.
(2) CET1, tier 1 capital, total capital, and tier 1 leverage ratios for each period above were calculated in conformity with the standardized approach provisions of the Basel III final rule.

18

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF FULLY PHASED-IN CAPITAL RATIOS
 
Fully phased-in pro-forma estimates of common equity tier 1 capital include 100% of the accumulated other comprehensive income component of common shareholder’s equity, including accumulated other comprehensive income attributable to available-for-sale securities, cash flow hedges and defined benefit pension plans, as well as 100% of applicable deductions, including but not limited to, intangible assets net of deferred tax liabilities. Fully phased-in pro-forma estimates of tier 1 and total capital both reflect the transition of trust preferred capital securities from tier 1 capital to total capital. For both Basel III advanced and standardized approaches, fully phased-in pro-forma estimates of risk-weighted assets reflect the exclusion of intangible assets, offset by additions related to non-significant equity exposures and deferred tax assets related to temporary differences. All fully phased-in ratios are preliminary estimates, based on our interpretations of the Basel III final rule as of the date each such ratio was first announced publicly and as applied to our businesses and operations as of the date of such ratio.
The following tables reconcile our fully phased-in estimated pro-forma common equity tier 1 capital, tier 1 capital, total capital and tier 1 leverage ratios, calculated in conformity with the Basel III final rule, as of the dates indicated, to those same ratios calculated in conformity with the applicable regulatory requirements as of such dates. Effective January 1, 2018, the applicable final rules are in effect and the ratios are calculated based on fully phased-in CET1, Tier 1 and Total capital numbers.  As such, beginning with 1Q18, reconciliations of ratios calculated in conformity with applicable regulatory requirements equal fully phased-in ratios and a reconciliation is no longer needed. Reconciliations of prior period ratios continue to be provided to allow for better comparison of trends.
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
(Dollars in millions)
 
Basel III Advanced Approaches
 
Phase-In Provisions
 
Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate
 
Basel III Standardized Approach
 
Phase-In Provisions
 
Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate
Common equity tier 1 capital
 
$
12,204

 
$
(320
)
 
$
11,884

 
$
12,204

 
$
(320
)
 
$
11,884

Tier 1 capital
 
15,382

 
(302
)
 
15,080

 
15,382

 
(302
)
 
15,080

Total capital
 
16,367

 
(302
)
 
16,065

 
16,435

 
(302
)
 
16,133

Risk weighted assets
 
99,156

 
(42
)
 
99,114

 
102,683

 
(40
)
 
102,643

Adjusted quarterly average assets
 
209,328

 
(220
)
 
209,108

 
209,328

 
(220
)
 
209,108

 
 
 
 
 
 
 
 
 
 
 
 
 
Capital ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
12.3
%
 
 
 
12.0
%
 
11.9
%
 
 
 
11.6
%
Tier 1 capital
 
15.5

 
 
 
15.2

 
15.0

 
 
 
14.7

Total capital
 
16.5

 
 
 
16.2

 
16.0

 
 
 
15.7

Tier 1 leverage
 
7.3

 
 
 
7.2

 
7.3

 
 
 
7.2

 
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2017
(Dollars in millions)
 
Basel III Advanced Approaches
 
Phase-In Provisions
 
Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate
 
Basel III Standardized Approach
 
Phase-In Provisions
 
Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate
Common equity tier 1 capital
 
$
12,439

 
$
(297
)
 
$
12,142

 
$
12,439

 
$
(297
)
 
$
12,142

Tier 1 capital
 
15,606

 
(268
)
 
15,338

 
15,606

 
(268
)
 
15,338

Total capital
 
16,684

 
(267
)
 
16,417

 
16,758

 
(268
)
 
16,490

Risk weighted assets
 
98,997

 
(57
)
 
98,940

 
107,580

 
(54
)
 
107,526

Adjusted quarterly average assets
 
211,396

 
(184
)
 
211,212

 
211,396

 
(184
)
 
211,212

 
 
 
 
 
 
 
 
 
 
 
 
 
Capital ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
12.6
%
 
 
 
12.3
%
 
11.6
%
 
 
 
11.3
%
Tier 1 capital
 
15.8

 
 
 
15.5

 
14.5

 
 
 
14.3

Total capital
 
16.9

 
 
 
16.6

 
15.6

 
 
 
15.3

Tier 1 leverage
 
7.4

 
 
 
7.3

 
7.4

 
 
 
7.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

19

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF FULLY PHASED-IN CAPITAL RATIOS (Continued)
As of June 30, 2017
(Dollars in millions)
 
Basel III Advanced Approaches
 
Phase-In Provisions
 
Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate
 
Basel III Standardized Approach
 
Phase-In Provisions
 
Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate
Common equity tier 1 capital
 
$
12,007

 
$
(315
)
 
$
11,692

 
$
12,007

 
$
(315
)
 
$
11,692

Tier 1 capital
 
15,165

 
(277
)
 
14,888

 
15,165

 
(277
)
 
14,888

Total capital
 
16,243

 
(277
)
 
15,966

 
16,314

 
(277
)
 
16,037

Risk weighted assets
 
100,265

 
66

 
100,331

 
107,069

 
62

 
107,131

Adjusted quarterly average assets
 
216,940

 
(205
)
 
216,735

 
216,940

 
(205
)
 
216,735

 
 
 
 
 
 
 
 
 
 
 
 
 
Capital ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
12.0
%
 
 
 
11.7
%
 
11.2
%
 
 
 
10.9
%
Tier 1 capital
 
15.1

 
 
 
14.8

 
14.2

 
 
 
13.9

Total capital
 
16.2

 
 
 
15.9

 
15.2

 
 
 
15.0

Tier 1 leverage
 
7.0

 
 
 
6.9

 
7.0

 
 
 
6.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2017
(Dollars in millions)
 
Basel III Advanced Approaches
 
Phase-In Provisions
 
Basel III Advanced Approaches Fully Phased-In Pro-Forma Estimate
 
Basel III Standardized Approach
 
Phase-In Provisions
 
Basel III Standardized Approach Fully Phased-In Pro-Forma Estimate
Common equity tier 1 capital
 
$
11,319

 
$
(339
)
 
$
10,980

 
$
11,319

 
$
(339
)
 
$
10,980

Tier 1 capital
 
14,475

 
(299
)
 
14,176

 
14,475

 
(299
)
 
14,176

Total capital
 
15,542

 
(299
)
 
15,243

 
15,617

 
(299
)
 
15,318

Risk weighted assets
 
100,843

 
134

 
100,977

 
98,494

 
127

 
98,621

Adjusted quarterly average assets
 
212,361

 
(269
)
 
212,092

 
212,361

 
(269
)
 
212,092

 
 
 
 
 
 
 
 
 
 
 
 
 
Capital ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital
 
11.2
%
 
 
 
10.9
%
 
11.5
%
 
 
 
11.1
%
Tier 1 capital
 
14.4

 
 
 
14.0

 
14.7

 
 
 
14.4

Total capital
 
15.4

 
 
 
15.1

 
15.9

 
 
 
15.5

Tier 1 leverage
 
6.8

 
 
 
6.7

 
6.8

 
 
 
6.7

 
 
 
 
 
 
 
 
 
 
 
 
 


20

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF SUPPLEMENTARY LEVERAGE RATIOS
 
        In 2014, U.S. banking regulators issued final rules implementing a supplementary leverage ratio, or SLR, for certain bank holding companies, like State Street, and their insured depository institution subsidiaries, like State Street Bank. We refer to these final rules as the SLR final rule. Under the SLR final rule, which was implemented as of January 1, 2018, (i) State Street Bank must maintain an SLR of at least 6% to be well capitalized under the U.S. banking regulators’ Prompt Corrective Action framework and (ii) if State Street maintains an SLR of at least 5%, it is not subject to limitations on distribution and discretionary bonus payments under the SLR final rule. Beginning with reporting for March 31, 2015, State Street was required to include SLR disclosures with its other Basel disclosures.
        Estimated pro forma fully phased-in SLR ratios for the periods below are preliminary estimates by State Street (in each case, fully phased-in as of January 1, 2018, as per the phase-in requirements of the SLR final rule), calculated based on our interpretations of the SLR final rule as of October 23, 2017 and as applied to our businesses and operations for the periods below.
     The following tables reconcile our estimated pro forma fully-phased in SLR ratios in conformity with the SLR final rule, as described, to our SLR ratios calculated in conformity with applicable regulatory requirements as of the dates indicated.
 
 
 
 
 
 
 
 
 
State Street
 
 
 
State Street Bank
As of December 31, 2018
(Dollars in millions)
 
 
 
Fully Phased-In SLR
 
 
 
Fully Phased-In SLR
Tier 1 Capital
 
 
A
$
15,270

 
 
 
$
16,941

On-and off-balance sheet leverage exposure
 
 
 
250,738

 
 
 
247,873

Less: regulatory deductions
 
 
 
(9,545
)
 
 
 
(9,102
)
Total assets for SLR
 
 
B
241,193

 
 
 
238,771

Supplementary Leverage Ratio
 
 
A/B
6.3
%
 
 
 
7.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
State Street
 
 
 
State Street Bank
As of September 30, 2018
(Dollars in millions)
 
 
 
Fully Phased-In SLR
 
 
 
Fully Phased-In SLR
Tier 1 Capital
 
 
C
$
17,393

 
 
 
$
19,012

On-and off-balance sheet leverage exposure
 
 
 
253,821

 
 
 
250,764

Less: regulatory deductions
 
 
 
(7,210
)
 
 
 
(6,769
)
Total assets for SLR
 
 
D
246,611

 
 
 
243,995

Supplementary Leverage Ratio
 
 
C/D
7.1
%
 
 
 
7.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 30, 2018
(Dollars in millions)
 
 
 
State Street
 
 
 
State Street Bank
 
 
 
Fully Phased-In SLR
 
 
 
Fully Phased-In SLR
Tier 1 Capital
 
 
E
$
15,419

 
 
 
$
16,795

On-and off-balance sheet leverage exposure
 
 
 
257,354

 
 
 
254,588

Less: regulatory deductions
 
 
 
(7,194
)
 
 
 
(6,755
)
Total assets for SLR
 
 
F
250,160

 
 
 
247,833

Supplementary Leverage Ratio
 
 
E/F
6.2
%
 
 
 
6.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2018
(Dollars in millions)
 
 
 
State Street
 
 
 
State Street Bank
 
 
 
Fully Phased-In SLR
 
 
 
Fully Phased-In SLR
Tier 1 Capital
 
 
G
$
15,146

 
 
 
$
16,296

On-and off-balance sheet leverage exposure
 
 
 
259,650

 
 
 
256,593

Less: regulatory deductions
 
 
 
(7,288
)
 
 
 
(6,860
)
Total assets for SLR
 
 
H
252,362

 
 
 
249,733

Supplementary Leverage Ratio
 
 
G/H
6.0
%
 
 
 
6.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



21

STATE STREET CORPORATION
EARNINGS RELEASE ADDENDUM
RECONCILIATIONS OF SUPPLEMENTARY LEVERAGE RATIOS (Continued)
 
 
 
 
 
As of December 31, 2017
(Dollars in millions)
 
State Street
 
State Street Bank
 
Transitional SLR
 
Fully Phased-In SLR
 
Transitional SLR
 
Fully Phased-In SLR
Tier 1 Capital
I
$
15,382

 
$
15,080

 
$
16,531

 
$
16,240

On-and off-balance sheet leverage exposure
 
243,958

 
243,958

 
240,373

 
240,373

Less: regulatory deductions
 
(6,972
)
 
(7,250
)
 
(6,583
)
 
(6,854
)
Total assets for SLR
J
236,986

 
236,708

 
233,790

 
233,519

Supplementary Leverage Ratio
I/J
6.5
%
 
6.4
%
 
7.1
%
 
7.0
%
 
 
 
 
 
As of September 30, 2017
(Dollars in millions)
 
State Street
 
State Street Bank
 
Transitional SLR
 
Fully Phased-In SLR
 
Transitional SLR
 
Fully Phased-In SLR
Tier 1 Capital
K
$
15,606

 
$
15,338

 
$
16,323

 
$
16,067

On-and off-balance sheet leverage exposure
 
247,527

 
247,527

 
244,114

 
244,114

Less: regulatory deductions
 
(6,891
)
 
(7,161
)
 
(6,535
)
 
(6,795
)
Total assets for SLR
L
240,636

 
240,366

 
237,579

 
237,319

Supplementary Leverage Ratio
K/L
6.5
%
 
6.4
%
 
6.9
%
 
6.8
%
 
 
 
 
 
 
 
 
 
 
As of June 30, 2017
(Dollars in millions)
 
State Street
 
State Street Bank
 
Transitional SLR
 
Fully Phased-In SLR
 
Transitional SLR
 
Fully Phased-In SLR
Tier 1 Capital
M
$
15,165

 
$
14,888

 
$
16,002

 
$
15,738

On-and off-balance sheet leverage exposure
 
250,543

 
250,543

 
247,156

 
247,156

Less: regulatory deductions
 
(6,633
)
 
(6,838
)
 
(6,237
)
 
(6,434
)
Total assets for SLR
N
243,910

 
243,705

 
240,919

 
240,722

Supplementary Leverage Ratio
M/N
6.2
%
 
6.1
%
 
6.6
%
 
6.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2017
(Dollars in millions)
 
State Street
 
State Street Bank
 
Transitional SLR
 
Fully Phased-In SLR
 
Transitional SLR
 
Fully Phased-In SLR
Tier 1 Capital
O
$
14,475

 
$
14,176

 
$
15,492

 
$
15,206

On-and off-balance sheet leverage exposure
 
244,964

 
244,964

 
241,563

 
241,563

Less: regulatory deductions
 
(6,818
)
 
(7,087
)
 
(6,422
)
 
(6,683
)
Total assets for SLR
P
238,146

 
237,877

 
235,141

 
234,880

Supplementary Leverage Ratio
O/P
6.1
%
 
6.0
%
 
6.6
%
 
6.5
%


22
exhibit99
4Q 2018 Financial Highlights   January 18, 2019   (NYSE: STT)    
 
2   This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s news release announcing its fourth quarter and full   year 2018 financial results. That news release contains a more detailed discussion of many of the matters described in this presentation and is accompanied by   detailed financial tables. This presentation is designed to be reviewed together with that news release, which is available on State Street’s website, at   http://investors.statestreet.com, and is incorporated herein by reference.   This presentation (and the conference call accompanying it) contains forward-looking statements as defined by United States securities laws. These statements   are not guarantees of future performance, are inherently uncertain, are based on assumptions that are difficult to predict and have a number of risks and   uncertainties. The forward-looking statements in this presentation speak only as of the time this presentation is first furnished to the SEC on a Current Report on   Form 8-K, and State Street does not undertake efforts to revise forward-looking statements. See “Forward-looking statements” in the Appendix for more   information, including a description of certain factors that could affect future results and outcomes.   Certain financial information in this presentation is presented on both a GAAP basis and on a basis that excludes or adjusts one or more items from GAAP. The   latter basis is a non-GAAP presentation. Refer to the Appendix for explanations of our non-GAAP financial measures and to the Addendum for reconciliations of   our non-GAAP financial information.   Preface and Forward-looking Statements    
 
3   4Q18 & FY2018 highlights   All comparisons are to prior year periods unless noted otherwise   4Q18:   • New servicing business wins of ~$140B and new business yet to be installed of ~$385B   at quarter-end1   • Better positioned for CCAR 2019, with 11.5% CET1 and 7.2% T1L at quarter-end; and a   higher performing, less capital intensive investment portfolioA   • Continued NIM expansion and NII growth   FY2018:   • ROE of 12.2% and double-digit EPS growth   Financial   performance   4Q18:   • Revenue growth of 5% driven by strong NII, FX business and CRD contribution, offset by   weaker equity market levels and challenged industry conditions impacting servicing feesB   • Strong FX trading revenue driven by client volumes and volatility   • CRD generated a robust pre-tax margin on revenues of $121M   • Implemented new pricing governance and enhancing client coverage model   FY2018:   • Record new servicing business wins of ~$1.9T1   Revenue and   business metrics   4Q18:   • Launched comprehensive firm-wide expense savings program through 2019   – Repositioning charge of $223M, which will drive organizational efficiencies   – Aggressively managing down expenses driven by resource discipline and process re-   engineering & automation   FY2018:   • Delivered on commitment to keep 2H18 underlying expenses flat to 1H18 and achieved   Beacon net savings of ~$245MC   Expense   management   and Beacon   A CET1 ratio based on standardized approach. B The impact of the new revenue recognition standard contributed $67M to Total fee revenue relative to 4Q17. C 2H18   underlying expenses were flat to 1H18 underlying expenses excluding seasonal deferred incentive compensation for retirement-eligible employees of $148M in 1Q18.   Underlying expenses are calculated as GAAP expenses less notable items and CRD operating expenses and CRD-related intangible asset amortization. This is a non-GAAP   measure. Refer to endnote 2 for further details on underlying expenses.   Refer to the Appendix included with this presentation for endnotes 1 to 12.    
 
4   Focused on realizing our vision with five key strategic priorities   Reignite servicing fee growth   Innovate to grow diversified revenue streams   Deploy the leading front-to-back office platform   Generate structural expense saves of 2–3%   annually through further efficiency and digitization   initiativesA   Foster a high-performing and leaner organization with   increased accountability   1   2   3   4   5   Delivering   results   through   focused   execution   Essential   partner   Leading platform with   a broad revenue mix   Technology-driven   scale provider   High-performing   organization   A Structural expenses include compensation and employee benefits, occupancy, other expenses, and certain transaction processing expenses. It does not include   reserves for repositioning or litigation-related activities or other similar-type expenses.   Vision Medium-term strategic priorities    
 
5   4Q18 notable items   Repositioning charge:   Compensation and employee benefits $198   Occupancy $25   Total repositioning charge $223 $(0.43)   Acquisition and restructuring costs (net) $24 $(0.04)   Business exit: Channel Islands $24 $(0.05)   Legal and related $50 $(0.12)   Total notable items $321 $(0.64)   ($M, except EPS data)   4Q18   Pre-tax   EPS   Impact   Repositioning charge of $223M   • Reduce senior management by 15% and compressing   layers by 25%   • Elimination of redundant roles and occupancy   optimization   Other notable items of $98M   • Acquisition and restructuring costs of $24M primarily   associated with the Charles River Development   acquisition   • $24M of expenses related to the divestiture of an   alternatives business   • Legal and related of $50M includes $42M of legal-related   expenses and $8M reduction in revenue    
 
6   Summary of 4Q18 and FY2018 results   A Effects of the new revenue recognition standard (ASU 2014-09) increased 4Q18 Total fee revenue and Total expenses by $67M each. Relative to 4Q17, the new revenue   recognition standard contributed 3% to both Total fee revenue and expense growth, and relatively flat to 3Q18. The revenue impact was $50M in Management fees, $11M in   FX trading services, and $6M across other revenue line items. The expense impact was $11M in Transaction processing, $48M in Other expenses, and $8M across other   expense line items. B Notable items are noted on slide 5. The memo, ex-notable items listed are non-GAAP measures. Refer to the Appendix for explanations of our non-   GAAP financial measures.   4Q17 3Q18 4Q18 4Q17 3Q18 2017 2018 % ∆   Revenue:   Servicing fees $1,379 $1,333 $1,286 (7)% (4)% $5,365 $5,421 1%   Management feesA 418 474 440 5 (7) 1,616 1,851 15   Foreign exchange trading servicesA 248 288 294 19 2 1,071 1,201 12   Securities finance 147 128 120 (18) (6) 606 543 (10)   Processing fees and other 38 57 149 292 161 247 289 17   Total fee revenueA 2,230 2,280 2,289 3 0 8,905 9,305 5   Net interest income 616 672 697 13 4 2,304 2,671 16   Total revenue $2,846 $2,951 $2,986 5% 1% $11,170 $11,982 7%   Total expensesA $2,131 $2,079 $2,474 16% 19% $8,269 $8,968 9%   Net income $370 $765 $439 19% (43)% $2,177 $2,599 19%   Diluted earnings per share $0.89 $1.87 $1.04 17% (44)% $5.24 $6.40 22%   Return on average common equity 6.9% 14.0% 7.5% 0.6%pts (6.5)%pts 10.6% 12.2% 1.6%pts   Pre-tax margin 25.2% 29.4% 16.9% (8.3)%pts (12.5)%pts 26.0% 25.0% (1.0)%pts   Operating leverage (YoY) (11.2%) (1.2%)   Fee operating leverage (YoY) (13.5%) (4.0%)   Memo, ex-notable items (non-GAAP) B:   Total expenses $1,998 $2,079 $2,161 8% 4% $8,003 $8,578 7%   Net income available to common shareholders $692 $709 $646 (7)% (9)% $2,382 $2,719 14%   EPS $1.84 $1.87 $1.68 (9)% (10)% $6.26 $7.22 15%   Pre-tax margin 30.4% 29.4% 27.6% (2.8)%pts (1.8)%pts 28.1% 28.3% 0.2%pts   ($M, except EPS data, or where otherwise noted)   Quarters % ∆ Full Year    
 
7   Diluted EPS   ($)   ROE   (%)   4Q184Q17 3Q18   $0.89   $1.87   $1.04   +17%   -44%   FY2017 FY2018   $5.24   $6.40   +22%   4Q17 3Q18 4Q18   14.0%   6.9%   7.5%   +0.6%pts   -6.5%pts   FY2017 FY2018   10.6%   12.2%   +1.6%pts   Earnings and return on equity driven by NII and FX business growth, CRD   contribution, and lower taxesA   A Relative to 4Q17 and FY2017.    
 
8   AUCA and AUMA Market indices   • (5)% and (7)% decrease from 4Q17   and 3Q18, respectively, primarily   driven by:   – Lower equity market levels   • (10)% and (11)% decrease from 4Q17   and 3Q18, respectively, reflecting:   – Lower equity market levels   – Outflows in cash and institutional,   partially offset by ETF inflows   4Q17 3Q18 4Q18   $33.1 $34.0 $31.6   -5%   -7%   4Q17 3Q18 4Q18   $ 2,511   $ 2,782 $ 2,810   -10%   -11%   A Changes to AUCA and AUM also reflect FX translation.   Refer to the Appendix included with this presentation for endnotes 1 to 12.   Lower market levels and lighter industry flows drove lower AUCA and   AUM   AUCA ($T, as of period-end)   AUM ($B, as of period-end)   (Spot as of year-end;   % YoY comparison)   % Change   2017 2018   S&P 500 19% (6)%   MSCI EAFE 22 (16)   MSCI Emerging   Markets 34 (17)   HFRI Asset   Weighted Index 7 (1)   Barclays Global   Aggregate Bond 8 (1)   Industry flows   (Cumulative full year, $B)   Total flows   2017 20183   North America4 619 140   Europe5 789 18    
 
9   A Effects of the new revenue recognition standard (ASU 2014-09) increased 4Q18 Total fee revenue by $67M relative to 4Q17. The revenue impact was $50M in   Management fees, $11M in FX trading services, and $6M across other revenue line items. B FX translation negatively impacted Total revenue when compared to 4Q17 and   3Q18 by $26M and $14M, respectively.   Revenue: Servicing fees impacted by lower market levels and challenging   industry conditions   RevenueA,B   ($M)   4Q18 Servicing fee performance   3Q18   $1,379   4Q17   $1,286$1,333   4Q18   $2,846   $2,951 $2,986   +5%   +1%   Servicing fees of $1,286M   • Down (7)% YoY and (4)% QoQ driven by:   – Weaker equity market levels   – Challenging industry conditions including fee concessions   – Previously announced client transition   – Partially offset by new business wins and client activity   Drivers of servicing fee revenues differ based on the   nature of services provided:   • Custody and accounting services are typically more variable, in line   with asset values and flows   • Reporting, administration and middle office services are typically   more transaction volume driven   New servicing fee growth initiatives include:   • Upgrading client coverage program   – Unrelenting focus on sales force effectiveness   – Leverage CRD related conversations to propel further core   servicing fee revenues   • Strengthen pricing discipline: Implemented new pricing governance   model   Servicing fees Other   Servicing   fees   NII   Mgmt.   fees,   Markets   and Other    
 
10   A Effects of the new revenue recognition standard (ASU 2014-09) increased 4Q18 Total fee revenue by $67M relative to 4Q17. The revenue impact was $50M in   Management fees, $11M in FX trading services, and $6M across other revenue line items. B FX translation negatively impacted Total revenue when compared to 4Q17 and   3Q18 by $26M and $14M, respectively. C FX trading services includes Brokerage & other revenue. D CRD revenue of $121M primarily attributable to processing fees and   other revenue, with the remaining $5M primarily attributable to FX trading services.   Refer to the Appendix included with this presentation for endnotes 1 to 12.   Revenue: Management fees, Markets and Other fee revenue supported   by higher FX trading momentum and CRD contribution   RevenueA,B   ($M)   4Q18 Management fees, Markets and Other revenue   performance   Mgmt. fees FX tradingC Sec. Finance   Proc. & Other Other   CRD metrics: 4Q18   ($M)   RevenueD $121   Operating expenses $39   Pre-tax income $82   STT expenses related to CRD   Amortization costs $18   Acquisition and restructuring   costs (net) $24   • New bookings of   $14M and $29M for   4Q18 and FY2018,   respectively6   • Confident in   announced revenue   and cost synergies7   Management fees, Markets and Other of $1,003M up   18% YoY and 6% QoQ   • Management fees of $440MA   – Up 5% YoY reflecting revenue recognition, partially offset by   weaker equity market levels   – Down (7)% QoQ primarily driven by weaker equity market levels   and outflows   • FX trading services of $294MA,C   – Up 19% YoY and 2% QoQ due to client volumes and volatility   • Securities finance of $120M   – Down (18)% YoY and (6)% QoQ primarily due to a decline in   assets on loan and lower spreads   • Processing fees and other of $149M   – Up YoY and QoQ reflecting ~$116M contribution from CRD$418   $2,951   $288$248   $474   $128$147   4Q17   $120   3Q18   $440   $294   4Q18   $2,846   $2,986   Servicing   fees   NII   Mgmt.   fees,   Markets   and Other   $149$57$38   $851   $947 YoY +18%   QoQ +6%   $1,003    
 
11   Revenue: Continued NII and NIM expansion driven by higher U.S. interest   rates and disciplined liability pricing   4Q18 NII and NIM Performance   Average Assets & Deposits   ($B)   4Q17 3Q18 4Q18   Total assets $216 $221 $221   Loans and leases 24 23 24   Total investment securities 96 86 85   Total deposits 161 160 158   NII of $697M   • Up 13% YoY primarily due to higher U.S. interest rates and   disciplined liability pricing   • Up 4% QoQ mainly due to the September and December Fed hikes   and one-time benefits from hedging activities   NIM of 1.55%   • Up 17bps YoY and 7bps QoQ due to higher U.S. interest rates,   disciplined liability pricing and a smaller interest-earning asset base   NII Other revenue   RevenueA   ($M)   A NII is presented on a GAAP-basis; NIM is presented on an FTE-basis. Refer to the Addendum for reconciliations of our FTE-basis presentation.   $697$672$616   4Q17 3Q18 4Q18   $2,951   $2,846   $2,986   Servicing   fees   NII   1.38% 1.48% 1.55% YoY+17bps   QoQ   +7bps   NIM   (%)   Mgmt.   fees,   Markets   and Other    
 
12   Modest underlying expense growth largely reflecting technology   enhancements, offset by controlled compensation costsA   ExpensesA,B   ($M)   4Q18 Financial performanceA   (Ex-notable items, and CRD & related items; Non-GAAP)   Underlying expenses of $2,104M up 5% YoY and 1%   QoQ   • Compensation and employee benefits of ~$1.1B   – Up 1% YoY primarily driven by contract services and merit   increases, partially offset by lower performance-based incentive   compensation and savings from Beacon   – Down (2)% QoQ primarily related to lower performance-based   incentive compensation and savings from Beacon   • Information systems and communications of $349M   – Up 16% YoY and 5% QoQ largely reflecting technology   infrastructure enhancements   • Transaction processing services of $214MC   – Down (2)% YoY and (9)% QoQ due to lower subcustody costs   • Occupancy of $114M   – Down (3)% YoY largely reflecting advancement of our footprint   optimization efforts   – Up 4% QoQ due to an increase in global hubs   • Other of $350MC,D   – Up 19% YoY primarily reflecting revenue recognition   – Up 17% QoQ largely due to professional fees and other   A Underlying expenses are calculated as GAAP expenses less notable items and CRD operating expenses and CRD-related intangible asset amortization. Underlying   expenses are non-GAAP measures. Refer to endnote 2 for further details. B FX translation positively impacted Total expenses when compared to 4Q17 and 3Q18 by $23M   and $10M, respectively. C Effects of the new revenue recognition standard (ASU 2014-09) increased 4Q18 Total expenses by $67M relative to 4Q17. The expense impact   was $11M in Transaction processing, $48M in Other expenses, and $8M across other expense line items. D Other includes other expenses and amortization of other   intangible assets.   $219   $301   $2,131   $2,474   $133   $1,067   $294   4Q17   $1,103   $332   $236   $2,079   $298   3Q18   $313   57   $1,077   $349   $214   4Q18   $350   $110$117   Comp. & ben. Info. sys. Tran. processing Occupancy   $114   OtherD Notable items CRD & related   $1,998 $2,079   $2,104   YoY +5%   QoQ +1%    
 
13   Active expense management kept 2H18 underlying expenses flat to 1H18A   Expense Notable items CRD Related   1H18 to 2H18 expensesA   ($M)   Actively managed expenses in 2H18A   (Ex-notable items, and CRD & related items; Non-GAAP)   2H17   $4,415   $3,986 $4,190   1H18   $313   $4,183   2H18   $4,152   $4,553$77   $148   $166 77 $313NotablesB   - 148 -   Seasonal   Deferred IC   $3,986 $4,190 $4,183   Expenses   ex items   (non-GAAP)A   - - $57   CRD &   RelatedC   $166   A 2H18 underlying expenses were flat to 1H18 underlying expenses excluding seasonal deferred incentive compensation for retirement-eligible employees of $148M.   Underlying expenses are calculated as GAAP expenses less notable items and CRD operating expenses and CRD-related intangible asset amortization. This is a non-   GAAP measure. Refer to endnote 2 for further details on underlying expenses. B Additional details on notable items are referenced on slide 5. C $57M in 2H18 include CRD   operating expenses of $39M and CRD-related intangible asset amortization of $18M.   Flat   ex CRD,   notables &   seasonal   ICA   $57   Seasonal   deferred IC   Disciplined expense management to keep underlying   expenses flat to 1H18 in light of the current revenue   environment while also maintaining business   investments   • Beacon savings expanded, resulting in 2018 net saves of $245M   (vs original $150M target) through footprint optimization and the   deployment of technology to improve process efficiencies   • Tactical cost savings initiatives building on our Beacon success   created additional total savings of ~$70M in 2H18:   – Contractor vendor management savings   – Renegotiation of sub-custodian spend   – Further management of discretionary spend, including T&E   – Initial management delayering   • Investment spending recalibrated to the current revenue   environment    
 
14   New expense savings program expected to generate productivity   savings of ~$350M in 2019   4Q18 repositioning costs   $223M   Occupancy   Compensation   and employee   benefits   2019 resource discipline benefitsA   2019 process re-engineering and automation benefitsA   • Reducing senior managers by 15% through management delayering   and aligning global organization   • Rollout of rigorous performance management system   • Vendor management with initial focus on subcustody and   professional services   • Real estate footprint optimization; increasing occupancy rates   • Reducing workforce by 6%, or 1,500 employees, in high cost   locations as we take advantage of automation and standardize   globalized processes   - Limit regional or client operating differences, reducing the number   of manual and bespoke activities   - Standardize processes and products, eliminating redundant   activities   • Streamline three operational hubs and two joint ventures   • Move to common platforms, retire legacy applications   Total expected savings of ~$160M   Total expected savings of ~$190M   Spans & layers; senior   management compression   • Structurally compress the   senior management   pyramid by ~15%   • Improve spans and reduce   layers by 25%, creating a   more agile organization   Redundancy of roles and   occupancy optimization   • Reduce real estate footprint   • Eliminate redundant roles   across the workforce   25   198   4Q18 repositioning   costs   Expect 12-15 month payback   from 4Q18 repositioning costs   A Expected 2019 savings from resource discipline and process re-engineering & automation are expected to be generated from current and prior period actions, partially   including the 4Q18 repositioning costs of $223M (for which a portion of the payback expected in 2019 is reflected in our expected 2019 productivity savings of ~$350M).    
 
15   Investment portfolio & capital ratios   Quarter-End Capital Ratios   (%, Fully phased-in as of period-end)   Refer to the Appendix included with this presentation for endnotes 1 to 12.   Capital Ratios8,9,10,11   • Expect to resume common stock repurchases in January   and intend to repurchase up to $600M through June 30,   2019 under previously announced program   • Lower quarter-end capital ratios in 4Q18 reflect the   October 1, 2018 closing of Charles River Development   • Better positioned for CCAR 2019 and increased capital   distribution12   12.0%   6.4%   7.2%   12.1%   2Q18   11.6%   4Q17   6.9%   6.0%   10.8%   14.1%   12.1%   1Q18   7.1%   6.2%   11.3%   3Q18   12.4%   6.3%   8.1%   7.1%   13.0%   7.2%   11.5%   4Q18   Tier 1 Leverage SLR Standardized CET1 Advanced CET1   Investment Portfolio Highlights   ($B, book value as of quarter-end)   • Rebalancing of investment portfolio during 4Q18 ahead of   CCAR to better position the balance sheet for upcoming   stress tests   • 4Q18 activity included ~10% portfolio turnover with minimal   expected impact to future NII   HTM %   Portfolio Metrics:   Duration   42% 47% 48%   2.7 3.3 3.1   4Q18   $87.4   $97.5   3Q184Q17   $87.2   39%   61%   19%   81%   24%   76%   Non-HQLA   HQLA    
 
16   FY2019 Outlook   Targeting 4% productivity savings resulting in ~1% underlying expense reductionA   Market and operating environment   Expense management   ($M)   Capital return   • Targeting total payout greater than 80%C   A Underlying expenses are calculated as GAAP expenses, which includes seasonal deferred incentive compensation for retirement-eligible employees, less notable items   and CRD operating expenses and CRD-related intangible asset amortization. Underlying expenses are non-GAAP measures. Refer to endnote 2 for further details. B FY2018   GAAP expense of $8,968M include notable items of $390M and CRD & related expenses including CRD operating expense of $39M and CRD intangible asset amortization   costs of $18M. Excluding this, underlying expenses would be $8,521M. Underlying expenses are non-GAAP measures. Refer to the Appendix for explanations of our non-   GAAP financial measures. C Payouts calculated over CCAR cycles. CCAR cycles run from mid-year to mid-year. Refer to endnote 12 included in the Appendix of this   presentation for additional details.   Resource   Discipline   (Headcount   Oriented)   2018   Underlying   Expense   Resource   Discipline   (Non   Headcount   Oriented)   Process Re-   engineering &   Automations   Business   Investments   & Inflationary   Costs   Technology   Infrastructure   2019   Underlying   Expense   Target   $8,521   ~(1.0)%   ~(1.0)%   ~(2.0)% ~1.5%   ~1.5%   CRD   Expense   Targeting ~1% reduction   in FY2019 underlying expensesB   ~(4)% productivity saves ~3% investments   • Resource discipline expected to reduce   expenses by ~$160M   • Process re-engineering & automation expected   to reduce expenses by ~$190M   • Technology infrastructure related mainly to   upgrades and continued modernization   B   • Slowing global growth   • Market forward interest rates, including 0-1 Fed Fund hikes in 2019   • Modest 5% growth in equity markets off of a low year-end 2018   • Light flows and muted client activity    
 
17   Summary   FY2018 results moderated in 2H18 in light of weaker markets and industry conditions   • EPS growth of 22% and ROE improvement of 1.6%pts to 12.2%   • Record new servicing business wins of ~$1.9T1   • Pre-tax margin of 25%, or 28% excluding notable itemsA   • Acquired CRD, positioning State Street as a leading provider of investment software, and enables the industry’s first   ever front-to-back office servicing solutionB   • 4Q18 charge of $223M positions us for a lower underlying expense base in 2019D   All comparisons are to prior year periods unless noted otherwise   A Notable items are noted on slide 5. Metrics excluding notable items are non-GAAP measures. Refer to the Appendix for explanations of our non-GAAP financial measures.   B Offered by a single provider. C CET1 ratio based on standardized approach. D Underlying expenses are calculated as GAAP expenses less notable items and CRD   operating expenses and CRD-related intangible asset amortization. Underlying expenses are non-GAAP measures. Refer to endnote 2 for further details.   Refer to the Appendix included with this presentation for endnotes 1 to 12.   Reinitiating capital returns and aggressively managing expenses in 2019   • Common stock repurchase program expected to resume in January and to repurchase up to $600M through 2Q19   • Better positioned for 2019 CCAR cycle with robust capital levels including a 11.5% CET1 ratio and 7.2% Tier 1   Leverage ratio at quarter-end, and a rebalanced investment portfolioC   • Targeting $350M productivity savings resulting in a net ~1% underlying expense reductionD    
 
18   Appendix   FY2018 fee revenue, NII and expenses 19   Medium-term financial targets 20   Endnotes 21   Forward-looking statements 22   Non-GAAP measures 23   Definitions 24    
 
19   FY2018 fee revenue, NII and expenses   Fee RevenueA NII & NIMD ExpensesA   1,071 1,201   1,616 1,851   5,365   5,421   289247   20182017   Servicing fees   Management fees   Trading services   Securities finance   revenue   Processing fees   and other   8,905   9,305   +5%   2,304   2,671   1.29   1.47   1,400   2,200   1,000   1,800   2,600   2,800   0.80   1.80   1.20   1.00   1.40   1.60   20182017   NII +16%   NIM +18bps   NIM%   Other relevant metrics (Non-GAAP): YoY ∆   Fee revenue ex   notables ($M)B $8,867 $9,313 5%   Fee revenue ex   notables and   CRD ($M)B,C   $8,867 $9,192 4%   YoY   % ∆   1%   15%   12%   (10)%   17%   543606 1,143 1,402   838 938   1,167 1,324   4,394   4,780   266   2017   Comp and   Benefits   24   2018   Occupancy   Transaction   Proc Services   Info Sys   and Comm   Acq and   restructuring   Other   8,968   8,269   +9%   Other relevant metrics (Non-GAAP): YoY ∆   Expenses ex   notables ($M)B $8,003 $8,578 7%   Expenses ex   notables and   CRD ($M)B,C   $8,003 $8,521 7%   500461   YoY   % ∆   9%   14%   12%   9%   nm   23%   A Effects of the new revenue recognition standard (ASU 2014-09) increased FY2018 Total fee revenue and Total expenses by $272M each. Relative to FY2017, the new revenue   recognition standard contributed 3% to Total fee revenue and expense growth. The revenue impact was $190M in Management fees, $58M in FX trading services, and $24M   across other revenue line items. The expense impact was $59M in Transaction processing, $183M in Other expenses, and $30M across other expense line items. B Additional   details on notable items can be found in the 4Q18 Addendum. Metrics excluding notable items are non-GAAP measures. Refer to the Appendix for explanations of our non-GAAP   financial measures. C FY2018 CRD & related expenses were $57M, including $39M of CRD operating expenses and $18M of CRD intangible asset amortization costs. D NII is   presented on a GAAP-basis; NIM is presented on an FTE-basis. Please refer to the Addendum for reconciliations of our FTE-basis presentation.   Revenue recognition worth ~$272M, or 3%   of Total fee revenue growth   Revenue recognition worth ~$272M, or 3%   of Total expense growth    
 
20   Medium-term financial targetsA   A Financial targets to be met within a three-year time horizon ending 2021. Financial targets do not reflect items outside of the normal course of business. Revenue and   EPS growth targets stated on a YoY basis. Pre-tax margin stated relative to 2018. B Payouts calculated over CCAR cycles. CCAR cycles run from mid-year to mid-year.   Refer to endnote 12 included in the Appendix of this presentation for additional details.   Revenue growth   Pre-tax margin   EPS growth   Our strategic priorities will deliver growth,   drive innovation and enhance shareholder value   Capital return   ROE   4–5% with CRD   Further improve by an additional 2%pts   10–15%   Targeting total payout greater than or equal to 80%B   12–15%    
 
21   1 New asset servicing mandates and servicing assets remaining to be installed in future periods exclude new business which has been contracted, but for which the client has not yet provided permission   to publicly disclose and the new business is not yet installed. These excluded assets, which from time to time may be significant, will be included in new asset servicing mandates and reflected in   servicing assets remaining to be installed in the period in which the client provides its permission. Newly announced servicing asset mandates for 1Q18 include a significant amount of assets contracted   in 4Q17 for which we received client consent to disclose in 1Q18. Servicing mandates and servicing assets remaining to be installed in future periods are presented on a gross basis; therefore, also do   not include the impact of clients who have notified us during the period of their intent to terminate or reduce their relationship with State Street, which from time to time may be significant. New business   in assets to be serviced is reflected in our AUCA after we begin servicing the assets, and new business in assets to be managed is reflected in our AUM after we begin managing the assets. As such,   only a portion of any new asset servicing and asset management mandates may be reflected in our AUCA and AUM as of December 31, 2018.   2 Underlying expenses exclude notable items, CRD operating expenses and CRD-related intangible asset amortization. Underlying expenses are non-GAAP measures. 3Q17 GAAP expenses of $2,021M   included notable items of $33M related to acquisition and restructuring costs. Excluding these items, 3Q17 underlying expenses were $1,988M. 4Q17 GAAP expenses of $2,131M included notable items   of $133M related to acquisition and restructuring costs. Excluding these items, 4Q17 underlying expenses were $1,998M. 1Q18 GAAP and underlying expenses of $2,256M included seasonal deferred   incentive compensation for retirement-eligible employees of $148M. 1Q18 underlying expenses excluding these effects were $2,108M. 2Q18 GAAP expenses of $2,159M included $77M of notable items   related to repositioning charges. Excluding these items, 2Q18 underlying expenses were $2,082M. 3Q18 GAAP and underlying expenses were $2,079M. 4Q18 GAAP expenses of $2,474M included   notable items of $313M (consisting of $223M of repositioning charges, $24M of acquisition and restructuring charges, $24M of expenses related to a business exit, and $42M of legal and related   expenses) and CRD-related expense of $57M (consisting of $39M of operating expenses and $18M of intangible asset amortization). Excluding these items, 4Q18 underlying expenses were $2,104M.   1H18 underlying expenses further excluding for the seasonal effects noted above were therefore $4,190M, relative to 2H18 underlying expenses of $4,183M. Refer to slide 23 for further information on   our non-GAAP financial measures.   3 FY 2018 represents the rolling twelve month period from December 2017 through November 2018, the last date for which information is available.   4 Industry data is provided for illustrative purposes only and is not intended to reflect the Company's or its clients' activity. Source: Investment Company Institute. Investment Company Institute (ICI) data   includes funds not registered under the Investment Company Act of 1940. Mutual fund data represents estimates of net new cash flow, which is new sales minus redemptions combined with net   exchanges, while exchange-traded fund (ETF) data represents net issuance, which is gross issuance less gross redemptions. Data for mutual funds that invest primarily in other mutual funds and ETFs   that invest primarily in other ETFs were excluded from the series. ICI classifies mutual funds and ETFs based on language in the fund prospectus. The long term fund flows reported by ICI are composed   of North America Market flows mainly in Equities, Hybrids and Fixed Income Asset Classes.   5 Industry data is provided for illustrative purposes only and is not intended to reflect State Street’s or its clients' activity. Source: © Copyright 2018, Broadridge Financial Solutions, Inc. Funds of funds   have been excluded from Broadridge data (to avoid double counting). Therefore a market total is the sum of all the investment categories excluding the three funds of funds categories (inhouse, ex-   house and hedge). ETFs are included in Broadridge’s database on mutual funds, but this excludes exchange-traded commodity products that are not mutual funds. The long term fund flows reported by   Broadridge are composed of EMEA Market flows mainly in Equities, Fixed Income, and Multi Asset Classes.   6 New bookings represent annual contract value (ACV) bookings, which are defined as signed annual recurring revenue contracts.   7 Revenue synergies of $75-85M mainly represent opportunities to enhance the distribution of State Street products and capabilities to Charles River Development clients, cross sell Charles River   Development into State Street client base, expand share of wallet across our combined client base, bundle services to clients seeking an integrated experience and expand combined and integrated   capabilities into new client segments. Cost synergies of ~$55-65M are net of expenses and cost to achieve, excluding restructuring charges, on a pre-tax basis.   8 Unless otherwise noted, all capital ratios referenced on this slide and elsewhere in this presentation refer to State Street Corporation, or State Street, and not State Street Bank and Trust Company, or   State Street Bank. The lower of capital ratios calculated under the Basel III advanced approaches and under the Basel III standardized approach are applied in the assessment of our capital adequacy   for regulatory purposes. Refer to the Addendum included with this presentation for a further description of these ratios and for reconciliations applicable to State Street’s fully phased-in Basel III ratios.   December 31, 2018 capital ratios are presented as of quarter-end and are preliminary estimates.   9 The advanced approach-based ratios (actual and estimated) included in this presentation reflect calculations and determinations with respect to our capital and related matters, based on State Street and   external data, quantitative formulae, statistical models, historical correlations and assumptions, collectively referred to as “advanced systems.” Refer to the Addendum included with this presentation for a   description of the advanced approaches and a discussion of related risks. Effective January 1, 2018, the applicable final rules are in effect and the ratios presented are calculated based on fully phased-   in CET1, Tier 1 and total capital numbers.   10 Estimated pro-forma fully phased-in ratios as of December 31, 2017 reflect capital and total risk-weighted assets calculated under the Basel III final rule. Refer to the Addendum included with this   presentation for reconciliations of these estimated pro-forma fully phased-in ratios to our capital ratios calculated under the then applicable regulatory requirements. Effective January 1, 2018, the   applicable final rules are in effect and the ratios presented are calculated based on fully phased-in CET1, Tier 1 and total capital numbers.   11 Estimated pro-forma fully phased-in SLRs as of December 31, 2017 (fully phased-in as of January 1, 2018, as per the phase-in requirements of the SLR final rule) are preliminary estimates as calculated   under the SLR final rule. Refer to the Addendum included with this presentation for reconciliations of these estimated pro-forma fully phased-in SLRs to our SLRs under the then applicable regulatory   requirements. Effective January 1, 2018, the applicable final rules are in effect and the ratios presented are calculated based on fully phased-in CET1, Tier 1 and total capital numbers.   12 Subject to regulatory approval, including on the basis of annual CCAR process conducted by the Board of Governors of the Federal Reserve System. CCAR cycles run from mid-year to mid-year.   Endnotes    
 
22   Forward-looking statements   This presentation (and the conference call referenced herein) contains forward-looking statements within the meaning of United States securities laws, including statements about our goals and expectations regarding our business, financial and   capital condition, results of operations, strategies, the financial and market outlook, dividend and stock purchase programs, governmental and regulatory initiatives and developments, and the business environment. Forward-looking statements are   often, but not always, identified by such forward-looking terminology as “outlook,” “vision,” “expect,” "priority," “objective,” “intend,” “plan,” “forecast,” “believe,” “anticipate,” “estimate,” “seek,” “may,” “will,” “trend,” “target,” “strategy” and “goal,” or   similar statements or variations of such terms. These statements are not guarantees of future performance, are inherently uncertain, are based on current assumptions that are difficult to predict and involve a number of risks and uncertainties.   Therefore, actual outcomes and results may differ materially from what is expressed in those statements, and those statements should not be relied upon as representing our expectations or beliefs as of any date subsequent to January 18, 2019.   Important factors that may affect future results and outcomes include, but are not limited to: the financial strength of the counterparties with which we or our clients do business and to which we have investment, credit or financial exposures as a   result of our acting as agent for our clients, including as asset manager; increases in the volatility of, or declines in the level of, our NII, changes in the composition or valuation of the assets recorded in our consolidated statement of condition (and   our ability to measure the fair value of investment securities) and changes in the manner in which we fund those assets; the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities and inter-bank   credits; the liquidity of the assets on our balance sheet and changes or volatility in the sources of such funding, particularly the deposits of our clients; and demands upon our liquidity, including the liquidity demands and requirements of our clients;   the level and volatility of interest rates, the valuation of the U.S. dollar relative to other currencies in which we record revenue or accrue expenses and the performance and volatility of securities, credit, currency and other markets in the U.S. and   internationally; and the impact of monetary and fiscal policy in the U.S. and internationally on prevailing rates of interest and currency exchange rates in the markets in which we provide services to our clients; the credit quality, credit-agency ratings   and fair values of the securities in our investment securities portfolio, a deterioration or downgrade of which could lead to other-than-temporary impairment of such securities and the recognition of an impairment loss in our consolidated statement   of income; our ability to attract deposits and other low-cost, short-term funding; our ability to manage the level and pricing of such deposits and the relative portion of our deposits that are determined to be operational under regulatory guidelines;   and our ability to deploy deposits in a profitable manner consistent with our liquidity needs, regulatory requirements and risk profile; the manner and timing with which the Federal Reserve and other U.S. and foreign regulators implement or   reevaluate the regulatory framework applicable to our operations (as well as changes to that framework), including implementation or modification of the Dodd-Frank Act and related stress testing and resolution planning requirements,   implementation of international standards applicable to financial institutions, such as those proposed by the Basel Committee and European legislation (such as the AIFMD, UCITS, the Money Market Funds Regulation and MiFID II / MiFIR); among   other consequences, these regulatory changes impact the levels of regulatory capital and liquidity we must maintain, acceptable levels of credit exposure to third parties, margin requirements applicable to derivatives, restrictions on banking and   financial activities and the manner in which we structure and implement our global operations and servicing relationships. In addition, our regulatory posture and related expenses have been and will continue to be affected by changes in regulatory   expectations for global systemically important financial institutions applicable to, among other things, risk management, liquidity and capital planning, resolution planning, compliance programs, and changes in governmental enforcement   approaches to perceived failures to comply with regulatory or legal obligations; adverse changes in the regulatory ratios that we are, or will be, required to meet, whether arising under the Dodd-Frank Act or implementation of international   standards applicable to financial institutions, such as those proposed by the Basel Committee, or due to changes in regulatory positions, practices or regulations in jurisdictions in which we engage in banking activities, including changes in internal   or external data, formulae, models, assumptions or other advanced systems used in the calculation of our capital or liquidity ratios that cause changes in those ratios as they are measured from period-to-period; requirements to obtain the prior   approval or non-objection of the Federal Reserve or other U.S. and non-U.S. regulators for the use, allocation or distribution of our capital or other specific capital actions or corporate activities, including, without limitation, acquisitions, investments   in subsidiaries, dividends and stock purchases, without which our growth plans, distributions to shareholders, share repurchase programs or other capital or corporate initiatives may be restricted; changes in law or regulation, or the enforcement of   law or regulation, that may adversely affect our business activities or those of our clients or our counterparties, and the products or services that we sell, including additional or increased taxes or assessments thereon, capital adequacy   requirements, margin requirements and changes that expose us to risks related to the adequacy of our controls or compliance programs; economic or financial market disruptions in the U.S. or internationally, including those which may result from   recessions or political instability; for example, the U.K.'s decision to exit from the European Union may continue to disrupt financial markets or economic growth in Europe or potential changes in trade policy and bi-lateral and multi-lateral trade   agreements proposed by the U.S.; our ability to create cost efficiencies through changes in our operational processes and to further digitize our processes and interfaces with our clients, any failure of which, in whole or in part, may among other   things, reduce our competitive position, diminish the cost-effectiveness of our systems and processes or provide an insufficient return on our associated investment; our ability to promote a strong culture of risk management, operating controls,   compliance oversight, ethical behavior and governance that meets our expectations and those of our clients and our regulators, and the financial, regulatory, reputation and other consequences of our failure to meet such expectations; the impact   on our compliance and controls enhancement programs associated with the appointment of a monitor under the deferred prosecution agreement with the DOJ and compliance consultant appointed under a settlement with the SEC, including the   potential for such monitor and compliance consultant to require changes to our programs or to identify other issues that require substantial expenditures, changes in our operations, or payments to clients or reporting to U.S. authorities; the results   of our review of our billing practices, including additional findings or amounts we may be required to reimburse clients, as well as potential consequences of such review, including damage to our client relationships or our reputation and adverse   actions by governmental authorities; the results of, and costs associated with, governmental or regulatory inquiries and investigations, litigation and similar claims, disputes, or civil or criminal proceedings; changes or potential changes in the   amount of compensation we receive from clients for our services, and the mix of services provided by us that clients choose; the large institutional clients on which we focus are often able to exert considerable market influence and have diverse   investment activities, and this, combined with strong competitive market forces, subjects us to significant pressure to reduce the fees we charge, to potentially significant changes in our AUCA or our AUM in the event of the acquisition or loss of a   client, in whole or in part, and to potentially significant changes in our fee revenue in the event a client re-balances or changes its investment approach or otherwise re-directs assets to lower- or higher-fee asset classes; the potential for losses   arising from our investments in sponsored investment funds; the possibility that our clients will incur substantial losses in investment pools for which we act as agent, the possibility of significant reductions in the liquidity or valuation of assets   underlying those pools and the potential that clients will seek to hold us liable for such losses; the possibility that our clients or regulators will assert claims that our fees with respect to such investment products are not appropriate or consistent with   our fiduciary responsibilities; our ability to anticipate and manage the level and timing of redemptions and withdrawals from our collateral pools and other collective investment products; the credit agency ratings of our debt and depositary   obligations and investor and client perceptions of our financial strength; adverse publicity, whether specific to State Street or regarding other industry participants or industry-wide factors, or other reputational harm; our ability to control operational   risks, data security breach risks and outsourcing risks, our ability to protect our intellectual property rights, the possibility of errors in the quantitative models we use to manage our business, and the possibility that our controls will prove insufficient,   fail or be circumvented; our ability to expand our use of technology to enhance the efficiency, accuracy and reliability of our operations and our dependencies on information technology and our ability to control related risks, including cyber-crime   and other threats to our information technology infrastructure and systems (including those of our third-party service providers) and their effective operation both independently and with external systems, and complexities and costs of protecting the   security of such systems and data; changes or potential changes to the competitive environment, including changes due to regulatory and technological changes, the effects of industry consolidation and perceptions of State Street as a suitable   service provider or counterparty; our ability to complete acquisitions, joint ventures and divestitures, and our the ability to obtain regulatory approvals, the ability to arrange financing as required and the ability to satisfy closing conditions; the risks   that our acquired businesses, including our acquisition of Charles River Development, and joint ventures will not achieve their anticipated financial, operational and product innovation benefits or will not be integrated successfully, or that the   integration will take longer than anticipated; that expected synergies will not be achieved or unexpected negative synergies or liabilities will be experienced; that client and deposit retention goals will not be met; that other regulatory or operational   challenges will be experienced; and that disruptions from the transaction will harm our relationships with our clients, our employees or regulators; our ability to integrate Charles River Development's front office systems with our middle and back   office capabilities to offer an front to back office system that is competitive and meets our clients requirements; our ability to recognize evolving needs of our clients and to develop products that are responsive to such trends and profitable to us; the   performance of and demand for the products and services we offer; and the potential for new products and services to impose additional costs on us and expose us to increased operational risk; our ability to grow revenue, manage expenses,   attract and retain highly skilled people and raise the capital necessary to achieve our business goals and comply with regulatory requirements and expectations; changes in accounting standards and practices; and the impact of the U.S. tax   legislation enacted in 2017, and changes in tax legislation and in the interpretation of existing tax laws by U.S. and non-U.S. tax authorities that affect the amount of taxes due.   Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in our 2017 Annual Report on Form 10-K and our subsequent SEC filings. We encourage investors to   read these filings, particularly the sections on risk factors, for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this presentation (and the   conference call referenced herein) should not be relied on as representing our expectations or beliefs as of any time subsequent to the time this presentation is first furnished to the SEC on a Current Report on Form 8-K, and we do not undertake   efforts to revise those forward-looking statements to reflect events after that time.    
 
23   Non-GAAP measures   In addition to presenting State Street's financial results in conformity with U.S. generally accepted accounting principles, or GAAP, management also presents   certain financial information on a basis that excludes or adjusts one or more items from GAAP. This latter basis is a non-GAAP presentation. In general, our non-   GAAP financial results adjust selected GAAP-basis financial results to exclude the impact of revenue and expenses outside of State Street’s normal course of   business or other notable items, such as acquisition and restructuring charges, repositioning charges and gains/losses on sales. Management believes that this   presentation of financial information facilitates an investor's further understanding and analysis of State Street's financial performance and trends with respect to   State Street’s business operations from period-to-period, including providing additional insight into our underlying margin and profitability. In addition, Management   may also provide additional non-GAAP measures. For example, we present capital ratios, calculated under regulatory standards scheduled to be effective in the   future or other standards, that management uses in evaluating State Street’s business and activities and believes may similarly be useful to investors. Additionally,   we may present revenue and expense measures on a constant currency basis to identify the significance of changes in foreign currency exchange rates (which   often are variable) in period-to-period comparisons. This presentation represents the effects of applying prior period weighted average foreign currency exchange   rates to current period results.   Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in conformity with GAAP.   Refer to the Addendum for reconciliations of our non-GAAP financial information. To access the Addendum go to http://investors.statestreet.com and click on   “Filings & Reports – Quarterly Earnings”.    
 
24   Definitions   AUCA Assets under custody and administration   AUM Assets under management   Bps Basis points, with one basis point representing one hundredth of one percent   CCAR Comprehensive Capital Analysis and Review   CET1 Common equity tier 1 ratio   CRD Charles River Development   Diluted earnings per share (EPS) Net income available to common shareholders divided by diluted average common shares outstanding for the noted period   ETF Exchange-traded fund   Fee operating leverage Rate of growth of total fee revenue less the rate of growth of expenses, relative to the successive prior year period, as applicable   FX Foreign exchange   FY Full year   GAAP Generally accepted accounting principles in the United States   HTM Held-to-maturity   HQLA High quality liquid assets   Medium-term targets Financial targets defined as targets to be met by year-end 2021   Net interest income (NII) Income earned on interest bearing assets less interest paid on interest bearing liabilities. Net interest income was disclosed as net interest revenue prior to 1Q17   Net interest margin (NIM) Net interest income divided by average interest-earning assets   nm Not meaningful   Operating leverage Rate of growth of total revenue less the rate of growth of total expenses, relative to the successive prior year period, as applicable   Payout ratio Total payout ratio is equal to common stock dividends and common stock purchases as a percentage of net income available to common shareholders   Pre-tax operating margin Income before income tax expense divided by total revenue   %Pts Percentage points is the difference from one percentage value subtracted from another   Quarter-over-quarter (QoQ) Sequential quarter comparison   Return on equity (ROE) Net income less dividends on preferred stock divided by average common equity   Year-over-year (YoY) Current period compared to the same period a year ago   Year-to-date (YTD) The cumulative amount of time within a fiscal year up to the end of the quarter indicated (i.e., 4Q18YTD is equivalent to the twelve months ended December 31, 2018)