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State Street Announces Multi-Year Program to Enhance Service Excellence and Innovation, Increase Efficiencies and Position for

^{Published on 2010-11-30 14:26:12 - Market Wire}
 

BOSTON--([ BUSINESS WIRE ])--State Street Corporation (NYSE:STT) announced today a planned global multi-year program designed to enhance service excellence and innovation, deliver increased efficiencies in its operating model and position the Company for accelerated growth. The program will begin immediately and includes operational and information technology enhancements and targeted cost initiatives, including a reduction in force and actions to lower occupancy costs.

"I am confident that this multi-year plan will transform our operating model and enable State Street to continue its industry leadership in service to clients, innovation and operational excellence"

To implement these actions, the company expects to recognize restructuring costs of approximately $400 million to $450 million over four years, beginning in the fourth quarter of 2010. In the fourth quarter of 2010, the Company will record approximately $160 million to $165 million of these restructuring costs, which relate primarily to a reduction in force of approximately 1,400 employees and a portion of a planned real estate consolidation. Excluding restructuring charges, the Company anticipates that benefits from the fourth-quarter actions and from the program will offset its 2011 incremental costs and result in a slight pre-tax cost savings related to the program in 2011. By the end of 2014, the Company expects the related annual pre-tax run-rate savings will be approximately $575 million to $625 million.

aI am confident that this multi-year plan will transform our operating model and enable State Street to continue its industry leadership in service to clients, innovation and operational excellence,a said Jay Hooley, president and chief executive officer of State Street. aWith continued momentum in our core businesses, our history of successful acquisitions and our strong global presence, we are in an excellent position to benefit from leveraging our scale and capacity as well as advancing our record of technology and industry-leading product development.a

Over the past several years, State Street has expanded its global presence through organic growth and acquisitions. In 2010, State Street completed its acquisitions of Intesa Sanpaoloa™s securities services business and Mourant International Finance Administration, and recently announced its agreement to acquire Bank of Ireland Asset Management. The companya™s stated goal is to double its non-US revenues over the five-year period ending in 2014.

Transformation of Business Operations and Information Technology

In parallel with its global growth, State Street has implemented programs to transform business processes and create efficiencies across the company. Initiatives that have already been successfully implemented include utilizing Lean methodologies, establishing centers of excellence to align core functions with client needs, and leveraging the companya™s global scale to deliver continuous 24/7 operations and client service. As part of the multi-year program announced today, State Street will broaden and accelerate these successful initiatives across the organization.

State Street will also build on its strong technology platforms with sustained investments that will accelerate State Streeta™s development of leading-edge solutions for its clients. The Company is investing in powerful technologies, such as private processing clouds, which vastly increase global computing capabilities, and is also developing new methods and tools to accelerate the pace of innovation and the introduction of new services and solutions. State Streeta™s focus with these initiatives is to continually improve its excellent client service and to provide a competitive advantage for its clients.

Targeted Cost Initiatives

In addition to the cost savings expected from the planned business operations and information technology transformation, State Street will also focus on leveraging its scale, business process improvements and the capacity it has built into the organization to deliver long-term structural cost benefits. These actions will include targeted staff reductions. The first reduction will be implemented in December 2010 and be substantially completed by the end of 2011, impacting approximately 1,400 employees or 5 percent of State Streeta™s workforce. Recognizing the contributions of the impacted employees, State Street will provide appropriate separation packages including outplacement services.

To lower its occupancy costs, which have grown in recent years through acquisitions, State Street will exercise early buy-outs, lease terminations, or certain sublease arrangements. In addition, State Street will take advantage of alternative work arrangements.

Hooley concluded, aThe strength of our business model has been proven over time through economic cycles. Amid the current challenging economic conditions, we will continue to improve our operating environment in the short-term while ensuring that we have the right structure in place for long-term growth. The combination of initiatives that we are focused on with this program will help State Street continue to build upon its market-leading position.a

State Street Corporation (NYSE:STT) is one of the worlda™s leading providers of financial services to institutional investors, including investment management, investment research and trading, and investment servicing. With $20.2 trillion in assets under custody and administration and $1.9 trillion in assets under management at September 30, 2010, State Street operates in 25 countries and more than 100 geographic markets worldwide. For more information, visit State Streeta™s web site at [ www.statestreet.com ].

Forward-Looking Statements

This news release contains forward-looking statements as defined by United States securities laws, including statements about our planned global multi-year program designed to enhance service excellence and innovation, deliver increased efficiencies in our operating model and position us for accelerated growth, related operational, information technology, reduction in force and real estate optimization initiatives and the costs and financial and other effects associated with such related actions and initiatives, as well as relating to our goals and expectations regarding our business, financial condition, results of operations and strategies, the financial and market outlook, governmental and regulatory initiatives and developments, and the business environment. Forward-looking statements are often identified by such forward-looking terminology as "plan," "expect," "look," "believe," "anticipate," "estimate," "seek," "may," "will," "trend," "target,a 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 November 30, 2010.

Important factors that may affect future results and outcomes include, but are not limited to:

• the finalization and execution of our planned global multi-year program designed to enhance service excellence and innovation, deliver increased efficiencies in our operating model and position us for accelerated growth, including our ability to implement programs to transform and improve technology and business processes and create efficiencies, to develop constructive vendor, outsourcing and other third-party relationships and to promote other business model enhancement and cost savings initiatives;
• increases in the volatility of our GAAP-basis and operating-basis earnings resulting from a change in our estimate of the charges or expenses necessary to execute our planned global multi-year program announced today and the resulting savings from such program;

• changes in law or regulation that may adversely affect our, our clientsa™ or our counterpartiesa™ business activities and the products or services that we sell, including additional or increased taxes or assessments thereon, capital adequacy requirements and changes that expose us to risks related to compliance;
• financial market disruptions and the economic recession, whether in the U.S. or internationally, and monetary and other governmental actions, including regulation, taxes and fees, designed to address or otherwise be responsive to such disruptions and recession, including actions taken in the U.S. and internationally to address the financial and economic disruptions that began in 2007;
• increases in the volatility of, or declines in the levels of, our net interest revenue, changes in the composition of the assets on our consolidated balance sheet and the possibility that we may be required to change the manner in which we fund those assets;
• the financial strength and continuing viability of the counterparties with which we or our clients do business and to which we have investment, credit or financial exposure;
• the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities, and the liquidity requirements of 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 the respective securities and the recognition of an impairment loss in our consolidated statement of income;
• the maintenance of credit agency ratings for our debt and depository obligations as well as the level of credibility of credit agency ratings;
• the risks that acquired businesses will not be integrated successfully, or that the integration will take longer than anticipated, that expected synergies will not be achieved or unexpected disynergies 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 relationships with clients, employees or regulators;
• the ability to complete acquisitions, divestitures and joint ventures, including the ability to obtain regulatory approvals, the ability to arrange financing as required, and the ability to satisfy other closing conditions;
• the performance and demand for the products and services we offer, including the level and timing of redemptions and withdrawals from our collateral pools and other collective investment products;
• the possibility of our clients incurring substantial losses in investment pools where we act as agent, and the possibility of further general reductions in the valuation of assets;
• our ability to attract deposits and other low-cost, short-term funding;
• potential changes to the competitive environment, including changes due to the effects of consolidation and perceptions of State Street as a suitable service provider or counterparty;
• the level and volatility of interest rates and the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally;
• our ability to measure the fair value of the investment securities on our consolidated balance sheet;
• the results of litigation, government investigations and similar disputes or proceedings;
• our ability to control operating risks, information technology systems risks and outsourcing risks, and 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 fail or be circumvented;
• adverse publicity or other reputational harm;
• our ability to grow revenue, attract, retain and compensate highly skilled people, control expenses and attract the capital necessary to achieve our business goals and comply with regulatory requirements;
• the potential for new products and services to impose additional costs on us and expose us to increased operational risk;
• changes in accounting standards and practices; and
• changes 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 2009 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 speak only as of the date hereof, November 30, 2010, and we do not undertake efforts to revise those forward-looking statements to reflect events after that date.