Fitch Affirms State Street's Ratings at 'A+/F1+'; Outlook Stable

  Fitch Affirms State Street's Ratings at 'A+/F1+'; Outlook Stable

Business Wire

NEW YORK -- December 06, 2012

Fitch Ratings has affirmed the long-term Issuer Default ratings of State
Street Corporation (STT) and its primary subsidiary State Street Bank and
Trust Company at 'A+/F1+'. The Rating Outlook is Stable. A complete list of
ratings follows at the end of this release.

Today's rating action is reflective of STT's strong franchise in global asset
servicing and investment management, low risk balance sheet, ample liquidity,
and strong capital position. Offsetting these positives are continued earnings
pressure, some regulatory uncertainty, and operational risk inherent to STT's
business.

RATING ACTION RATIONALE

STT's Viability Rating (VR) of 'a+' is supported by a low-risk balance sheet
and strong capital position. STT's investment portfolio quality is good with
issues rated 'AAA' or 'AA' comprising approximately 88% of total holdings as
of Sept. 30, 2012. Similarly, STT's loan credit quality is sound. Fitch
further notes that the balance sheet also sports ample liquidity as STT's core
businesses provide stable sources of funding.

Fitch continues to note that STT's capital levels continue to be above the
company's historical range with the company's Tier 1 common ratio under Basel
1 rules at a solid 17.8% as of Sept. 30, 2012. STT estimates that under
current Basel 3 proposals, STT's Tier 1 common ratio would have been 11.3%,
which is well above STT's regulatory minimums and any likely buffer that will
be applied to institutions such as STT that are deemed to be systemically
important financial institutions.

While the factors noted above support STT's strong credit profile, the
company's earnings growth continues to be challenging which Fitch notes serves
as a constraint to ratings. Volatile markets and the low interest rate
environment continue to be strong headwinds for meaningful revenue growth.

STT's fee revenue has modestly declined during the year as strength in asset
servicing and management has been offset by weakness in foreign exchange
trading and securities lending. Additionally, the low interest rate
environment continues to pressure the company's net interest margin (NIM),
which as of Sept. 30, 2012 declined to 1.44%. Fitch expects continued NIM
compression over a near-to-intermediate term time horizon.

To help support the company's earnings amid the challenging environment noted
above, management has engaged in a business transformation program which
includes some explicit cost savings, process improvements, and significant
information technology (IT) enhancements and initiatives.

Fitch notes that this has helped buffer STT's bottom line results and that the
IT investments have improved the company's risk management functions from the
perspective of data collection and security as well as analyzing and assessing
enterprise-wide risks.

RATING DRIVERS & SENSITIVITIES - VR, IDRs, & SENIOR DEBT

The Rating Outlook is Stable, but Fitch believes there is over time the
potential for upside to STT's ratings or Rating Outlook. This would likely be
predicated on sustainably improved earnings and further establishing a track
record of favorable risk management.

Fitch does believe that STT's risk management processes, procedures, and
infrastructure have been significantly enhanced in the wake of its past risk
management issues during the financial crisis. However, given their relatively
new implementation, some are still untested in various market environments.

Fitch views the biggest downside risks to STT's business and ratings could
result from a technological or operational loss particular to STT, resulting
in reputational damage that causes clients to flee the firm. While these types
of risks are inherently difficult to predict and quantify, and large
occurrence would likely prompt Fitch to review ratings to determine if a
negative was appropriate.

Other risks to STT's business and ratings include litigation risks, the
potential for significant losses in foreign exchange trading, or potential
contagion impacts from European market and economic issues. In terms of the
latter, management has taken steps to measure aggregate exposure levels, and
Fitch believes the overall level is manageable. Most of the exposure is in the
stronger Eurozone countries, with risk to peripheral countries relatively low.

RATING DRIVERS & SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

STT's current 'A+' long-term IDR is equalized with its 'a+' VR, which remains
above its support rating floor. STT's '1' Support Rating and 'A' Support
Rating Floor factor in government support in the event of need for STT and
other U.S. G-SIFIs.

While Fitch believes the broad policy goal is to no longer provide full
support to systemically important banks, this is progressing at an uneven pace
globally. Fitch could reassess its support ratings for U.S. G-SIFIs if global
market conditions normalize and resolution regimes become more harmonized
across international jurisdictions. At STT's current VR, the firm's long-term
IDR would not be affected by a change in support rating floor.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by STT and by various
issuing vehicles are all notched down from STT's or its bank subsidiaries' VRs
in accordance with Fitch's assessment of each instrument's respective
nonperformance and relative loss severity risk profiles. Their ratings are
primarily sensitive to any change in the VRs of STT or its bank subsidiaries.

HOLDING COMPANY RATING DRIVERS AND SENSITIVITIES

STT's IDR and VR are equalized with those of its operating companies and
banks, reflecting its role as the bank holding company, which is mandated in
the U.S. to act as a source of strength for its bank subsidiaries.

SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES

The IDRs and VRs of STT's bank subsidiary benefit from the cross-guarantee
mechanism in the U.S. under FIRREA and therefore IDRs and VRs are equalized
across the group.

State Street, based in Boston, MA, is the world's largest institutional
investment manager and the third largest global custodian.

Fitch has affirmed the following ratings:

State Street Corporation

--Long-term Issuer Default Rating (IDR) at 'A+';

--Short-term IDR at 'F1+';

--Viability rating at 'a+';

--Support at '1';

--Support Rating Floor at 'A';

--Commercial paper at 'F1+';

--Junior subordinated debt at 'BBB';

--Preferred stock at 'BBB-'

--Long-term senior debt at 'A+'.

State Street Bank and Trust Company

--Long-term IDR at 'A+';

--Short-term IDR at 'F1+';

--Viability rating at 'a+';

--Support at '1';

--Support Rating Floor at 'A';

--Long-term deposits at 'AA-';

--Short-term deposits at 'F1+';

--Long-term subordinated at 'A'.

State Street Capital I

State Street Capital IV

--Trust preferred securities at 'BBB'.

The Rating Outlook is Stable.

Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Investment Managers and Alternative Funds Criteria' (Dec. 23, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=661367

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Contact:

Fitch Ratings
Primary Analyst
Joseph Scott, +1-212-908-0624
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Justin Fuller, CFA, +1-312-368-2057
Director
or
Committee Chairperson
Joo-Yung Lee, +1-212-908-0560
Managing Director
or
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Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com