Line of Business Information

Our operations are organized into two lines of business: Investment Servicing and Investment Management, which are defined based on products and services provided. The results of operations for these lines of business are not necessarily comparable with those of other companies, including companies in the financial services industry.

Investment Servicing provides services for U.S. mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations and endowments worldwide. Products include custody; product and participant level accounting; daily pricing and administration; master trust and master custody; depotbank services (a fund oversight role created by regulation); record-keeping; cash management; foreign exchange, brokerage and other trading services; securities finance; our enhanced custody product, which integrates principal securities lending and custody; deposit and short-term investment facilities; loans and lease financing; investment manager and alternative investment manager operations outsourcing; performance, risk and compliance analytics; and financial data management to support institutional investors.

Investment Management, through SSGA, provides a broad array of investment management, investment research and investment advisory services to corporations, public funds and other sophisticated investors. SSGA offers passive and active asset management strategies across equity, fixed-income, alternative, multi-asset solutions (including OCIO) and cash asset classes. Products are distributed directly and through intermediaries using a variety of investment vehicles, including ETFs, such as the SPDR^® ETF brand.

Our investment servicing strategy is to focus on total client relationships and the full integration of our products and services across our client base through cross-selling opportunities. In general, our clients will use a combination of services, depending on their needs, rather than one product or service. For instance, a custody client may purchase securities finance and cash management services from different business units. Products and services that we provide to our clients are parts of an integrated offering to these clients. We price our products and services on the basis of overall client relationships and other factors; as a result, revenue may not necessarily reflect the stand-alone market price of these products and services within the business lines in the same way it would for separate business entities.

Our servicing and management fee revenue from the Investment Servicing and Investment Management business lines, including trading services and securities finance activities, represents approximately 75% to 80% of our consolidated total revenue. The remaining 20% to 25% is composed of processing fees and other revenue as well as NII, which is largely generated by our investment of client deposits, short-term borrowings and long-term debt in a variety of assets, and net gains (losses) related to investment securities. These other revenue types are generally fully allocated to, or reside in, Investment Servicing and Investment Management.

Revenue and expenses are directly charged or allocated to our lines of business through management information systems. Assets and liabilities are allocated according to policies that support management’s strategic and tactical goals. Capital is allocated based on the relative risks and capital requirements inherent in each business line, along with management judgment. Capital allocations may not be representative of the capital that might be required if these lines of business were separate business entities.

The following is a summary of our line of business results for the periods indicated.

The “Other” column for the year ended December 31, 2017 included net acquisition and restructuring costs of $266 million.

The “Other” column for the year ended December 31, 2016 included net costs of $199 million composed of the following -


•	Net acquisition and restructuring costs of $209 million; and


•	Net severance costs associated with staffing realignment of $(10) million.

The “Other” column for the year ended December 31, 2015 included net costs of $98 million composed of the following -


•	Net acquisition and restructuring costs of $25 million;


•	Net severance costs associated with staffing realignment of $73 million.

The following is a summary of our line of business results for the periods indicated. The amounts in the “Other” columns were not allocated to State Street's business lines. Prior reported results reflect reclassifications, for comparative purposes, related to management changes in methodologies associated with allocations of revenue and expenses to lines of business in 2017.



	Years Ended December 31,
	Investment Servicing									Investment Management									Other									Total
(Dollars in millions)	2017			2016			2015			2017			2016			2015			2017			2016			2015			2017			2016			2015
Servicing fees	$	5,365		$	5,073		$	5,153		$	—		$	—		$	—		$	—		$	—		$	—		$	5,365		$	5,073		$	5,153
Management fees	—			—			—			1,616			1,292			1,174			—			—			—			1,616			1,292			1,174
Trading services	999			1,038			1,091			72			61			55			—			—			—			1,071			1,099			1,146
Securities finance	606			562			496			—			—			—			—			—			—			606			562			496
Processing fees and other	240			119			342			7			(29		)	(33		)	—			—			—			247			90			309
Total fee revenue	7,210			6,792			7,082			1,695			1,324			1,196			—			—			—			8,905			8,116			8,278
Net interest income	2,309			2,081			2,086			(5		)	3			2			—			—			—			2,304			2,084			2,088
Gains (losses) related to investment securities, net	(39		)	7			(6		)	—			—			—			—			—			—			(39		)	7			(6		)
Total revenue	9,480			8,880			9,162			1,690			1,327			1,198			—			—			—			11,170			10,207			10,360
Provision for loan losses	2			10			12			—			—			—			—			—			—			2			10			12
Total expenses	6,717			6,660			6,990			1,286			1,218			962			266			199			98			8,269			8,077			8,050
Income before income tax expense	$	2,761		$	2,210		$	2,160		$	404		$	109		$	236		$	(266	)	$	(199	)	$	(98	)	$	2,899		$	2,120		$	2,298
Pre-tax margin	29		%	25		%	24		%	24		%	8		%	20		%										26		%	21		%	22		%

Average assets (in billions)	$	214.0		$	225.3		$	246.6		$	5.4		$	4.4		$	3.9											$	219.4		$	229.7		$	250.5