State Street Corporation announced today first-quarter earnings per share of $0.54, up 13% from comparable operating earnings per share of $0.48 in the first quarter of 2001. Operating results for the first quarter of 2001 exclude the write-off of $50 million, or $0.10 per share after tax, of a State Street equity investment. Comparable results for 2001 also exclude $8 million, or $0.01 per share after tax, of goodwill amortization expenses. Effective January 1, 2002, State Street adopted Financial Accounting Standard 142, which affects goodwill accounting. Reported earnings per share for the first quarter of 2001 were $0.37.
Total revenue on a taxable-equivalent basis was $996 million in the quarter, up
$43 million, or 5%, from operating revenue of a year ago. Net income was $178 million, up from comparable operating net income of $159 million last year, and return on stockholders’ equity was 18.2%.
David A. Spina, chairman and chief executive officer, said, “We begin 2002 with excellent performance. Earnings-per-share grew 13% from a year ago. Additionally, we won new business at a strong pace in the quarter.”
“Our continuing excellent performance in today’s uncertain business environment demonstrates that our strategy of focusing on serving the needs of sophisticated investors is sound. We are committed to growth by staying ahead of the pace set by our clients, by earning our reputation as a trusted partner to our clients, and by achieving our financial objectives. By focusing on these goals, I am confident that State Street will continue its record of long-term profitable 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 6% in the first quarter, to $422 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 drove growth in servicing fees; higher securities lending revenue contributed as well. The impact of declines in comparable average equity market valuations offset some of the growth. Total assets under custody were $6.3 trillion, compared to $5.8 trillion a year ago.
Management fees from investment management services, delivered through State Street Global Advisors, were $135 million, up 6% from $127 million a year ago, reflecting new business, including business gained through acquisition. The impact of declines in comparable average equity market valuations partially offset growth in management fees. 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 $808 billion, compared to $703 billion a year previously.
Foreign exchange trading revenue was $68 million for the quarter, compared to $99 million a year ago, primarily reflecting low currency volatility in the quarter.
Taxable-equivalent net interest revenue for the first quarter was $296 million, up $35 million, or 14%, 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, reflecting the impact of significant rate decreases worldwide in 2001, and growth in interest-earning assets drove the increase in net interest revenue.
Operating expenses were $715 million, up $17 million, or 2%, from comparable expenses of $698 million. Comparable expenses for the first quarter of 2001 exclude $8 million of goodwill amortization expenses. During the last year, State Street has lowered its growth rate of expenses by aligning more rigorously our levels of expense with our strategic priorities, while continuing to invest in the best key initiatives that offer opportunities for future growth. Salaries and employee benefits expenses, which increased $29 million, or 7%, to $421 million, reflect increased staff hired in the first half of 2001 to support new business installed that year.