State Street Corporation announced fourth-quarter earnings per share of $0.52, up 16% from $0.45 per share in the fourth quarter of 2000. Total revenue on a taxable-equivalent basis was $1.0 billion in the quarter, up $115 million, or 13%, from a year ago. Net income was $171 million, up from $148 million last year, and return on stockholders’ equity was 17.8%.For the full year 2001 on an operating basis, earnings per share increased 10%, from $1.81 to $2.00. Total taxable-equivalent revenue was $3.9 billion, up $299 million, or 8%, from 2000. Net income was $661 million, up from $595 million last year, and return on stockholders’ equity was 18.2%. Operating results for 2001 exclude the first-quarter write-off of $50 million, or $0.10 per share after tax, of State Street’s investment in Bridge Information Systems.
David A. Spina, chairman and chief executive officer, said, “I am very pleased with our strong financial performance in the fourth quarter and for all of 2001. Equally important, we provided consistent, high-level service to our clients during a climate of political and economic uncertainty worldwide. Reflecting the rapid slowdown in economic activity, equity markets in the U.S. declined for two consecutive years for the first time since 1973. Despite this, State Street’s strategy of focusing on services for sophisticated global investors continues to be rewarding.
“The long-term trends that are driving our growth around the world remain robust. Rapidly changing markets lead our clients to innovate. In turn, they look to us to expand our services for their increasingly complex investment products and strategies. A strong, committed State Street team looks forward with confidence to continuing our growth.”
State Street generates revenue by providing sophisticated global investors with integrated products, services and strategies to help them achieve their investment goals.
Servicing fees were up 16% in the fourth quarter, to $414 million. Servicing fees are derived from accounting, administration, custody, daily pricing, securities lending, performance and analytics, compliance monitoring, and operations outsourcing for investment managers. New business from existing and new clients, and strength in securities lending revenue resulting from effective use of collateral in a very favorable U.S. interest-rate environment, drove growth in servicing fees. Continued declines in equity market values worldwide offset some of the growth. Total assets under custody were $6.2 trillion, compared to $6.1 trillion a year ago, reflecting new business and additional contribution of assets by existing clients, partially offset by declining market values.
Management fees from investment management services, delivered through State Street Global Advisors, were $128 million, compared to $129 million a year ago, reflecting continued declines in equity market values worldwide. Management fees include revenue from an extensive range of investment management strategies, securities lending, specialized investment management advisory services, and other services. Total assets under management were $775 billion, up 9% from $711 billion a year previously.
Foreign exchange trading revenue was $83 million for the quarter, compared to $91 million a year ago, primarily reflecting low currency volatility in the quarter.
Taxable-equivalent net interest revenue for the fourth quarter was $305 million, up $58 million, or 23%, from a year ago. State Street provides repurchase agreements and deposit services for clients’ investment activities, which generates net interest revenue. Improved spreads between rates paid and rates earned versus a year ago, driven by declining interest rates, and growth in interest-earning assets drove the increase in taxable-equivalent net interest revenue.
Operating expenses were $736 million, up $83 million, or 13%, from the fourth quarter of 2000 to support new business and long-term growth initiatives. Salaries and employee benefits expenses increased $39 million, or 10%, to $434 million, reflecting increased staff to support new business, partially offset by lower performance-based compensation.
During the fourth quarter, State Street purchased 2.6 million shares of company stock as part of the company’s ongoing corporate stock purchase program. As previously announced, in December, State Street’s Board of Directors authorized a seven million-share increase in the program. The expanded program allows for the purchase of an additional 9.8 million shares.
State Street’s third-quarter Form 10-Q filing with the U.S. Securities and Exchange Commission includes a full discussion of the potential impact of the implementation of Financial Accounting Standard 142, which will change goodwill accounting in 2002. Financial results for 2001 include $38 million of goodwill expense, which affected earnings per share by approximately $0.08 in the year.