State Street chief says pension markets “intense”

GLOBAL – David Spina, chairman and chief executive of State Street Corp., says competition in the pensions markets continues to be “intense”.

The comments came as the Boston-based bank reported that fourth-quarter net income was slightly down, although it said the integration of the Global Securities Services business bought from Deutsche Bank a year ago “met or exceeded” expectations.

"We expect 2004 to be another challenging year for our industry,” Spina said. “Although economic conditions seem to be improving, the business environment is still extremely fragile and interest rates are at 50-year lows.”

“Competition continues to be intense, especially in the pension markets, and sales cycles are longer than we've seen in the past.”

State Street reported fourth-quarter net income of 447 million dollars on revenue of 1.5 billion dollars. A year ago it posted a net income of 477 million dollars on the same revenue.

The bank said that the GSS business, bought for 1.5 billion dollars, contributed 168 million dollars in revenue in the fourth quarter.

Total assets under management rose to 1.1 trillion dollars, from 763 billion dollars a year ago. Assets under custody rose to 9.4 trillion dollars from 6.2 trillion dollars.

Investment management fees, generated by State Street Global Advisors, rose 14% to 133 million dollars. Servicing fees were up 16% at 426 million dollars.

Spina added: “We won significant new business; we managed expenses aggressively; and we met or exceeded all the commitments we made for integration of the GSS business.”

The bank said that after 11 months of operation, the GSS business reported a profit of $0.01 per share – which exceeded its expectation of $0.01 to $0.03 dilution per share. The figure includes so-called ‘out-of-scope’ results and excludes one-time costs.

It added that it expects to retain around 88% of the available client revenue acquired with the acquisition and that it has completed around 550 client conversions. Client conversion would be “substantially complete by the end of 2004”.