GENERAL

State Street Corporation is a financial holding company headquartered in Boston, Massachusetts. Through its subsidiaries, including its principal bank subsidiary, State Street Bank and Trust Company, which we refer to as State Street Bank, State Street Corporation provides a full range of products and services to meet the needs of institutional investors worldwide. Unless otherwise indicated or unless the context requires otherwise, all references in this Management's Discussion and Analysis to "State Street," "we," "us," "our" or similar terms mean State Street Corporation and its subsidiaries on a consolidated basis. All references in this Form 10-Q to the parent company are to State Street Corporation. At March 31, 2009, we had consolidated total assets of $142.14 billion, consolidated total deposits of $83.92 billion, consolidated total shareholders' equity of $13.86 billion, and employed 27,500.

Our customers include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. Our two lines of business, Investment Servicing and Investment Management, provide products and services including custody, recordkeeping, daily pricing and administration, shareholder services, foreign exchange, brokerage and other trading services, securities finance, deposit and short-term investment facilities, loan and lease financing, investment manager and hedge fund manager operations outsourcing, performance, risk and compliance analytics, investment research and investment management, including passive and active U.S. and non-U.S. equity and fixed-income strategies. We had $11.34 trillion of assets under custody and $1.40 trillion of assets under management at March 31, 2009. Financial information about our business lines is provided later in the "Line of Business Information" section of this Management's Discussion and Analysis.

This Management's Discussion and Analysis is part of our Quarterly Report on Form 10-Q filed with the SEC, and updates the Management's Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2008, which we refer to as the 2008 Form 10-K, and which we previously filed with the SEC. You should read the financial information in this Management's Discussion and Analysis and elsewhere in this Form 10-Q in conjunction with the financial information contained in that report. Certain previously reported amounts have been reclassified to conform to current period classifications as presented in this Form 10-Q.

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles, which we refer to as GAAP, and which require management to make judgments in the application of its accounting policies that involve significant estimates and assumptions about the effect of matters that are inherently uncertain. Accounting policies considered by management to be relatively more significant in this respect are accounting for the fair value of financial instruments, special purpose entities, and goodwill and other intangible assets. Additional information about these accounting policies is included in the "Significant Accounting Estimates" section of Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2008 Form 10-K. Although no significant changes were made to these accounting policies during the first quarter of 2009, we have provided updated information with respect to our accounting for the fair value of financial instruments and our accounting for special purpose entities in this Management's Discussion and Analysis.

Certain financial information provided in this Management's Discussion and Analysis has been prepared on both a GAAP basis and an "operating" basis. Management measures and compares certain financial information on an operating basis, as it believes this presentation supports meaningful comparisons from period to period and the analysis of comparable financial trends with respect to State Street's normal ongoing business operations. Management believes that operating-basis financial information, which reports revenue from non-taxable sources on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of the normal course of our business, facilitates an investor's understanding and analysis of State Street's underlying financial performance and trends in addition to financial information prepared in accordance with GAAP.

FORWARD-LOOKING STATEMENTS

This Form 10-Q, particularly this Management's Discussion and Analysis, contains statements that are considered "forward-looking," including statements about industry trends, management's future expectations and other matters that do not relate strictly to historical facts, are based on assumptions by management, and are often identified by such forward-looking terminology as "expect," "look," "believe," "anticipate," "estimate," "seek," "may," "will," "trend," "target" and "goal," or similar statements or variations of such terms. Forward-looking statements may include, among other things, statements about State Street's confidence in its strategies and its expectations about its financial performance, market growth, acquisitions and divestitures, new technologies, services and opportunities and earnings.

Forward-looking statements are subject to various risks and uncertainties, which change over time, are based on management's expectations and assumptions at the time the statements are made, and are not guarantees of future results. Management's expectations and assumptions, and the continued validity of the forward-looking statements, are subject to change due to a broad range of factors affecting the national and global economies, the equity, debt, currency and other financial markets, as well as factors specific to State Street and its subsidiaries, including State Street Bank. Factors that could cause changes in the expectations or assumptions on which forward-looking statements are based include, but are not limited to:

• global financial market disruptions and the current worldwide economic recession, and monetary and other governmental actions designed to address such disruptions and recession in the U.S. and internationally;

• the possibility that changes in market conditions, regulatory activities or asset performance (including the financial condition of any insurer or guarantor, or the ratings, of any assets) or to accounting rules may require any off-balance sheet activities, including the unconsolidated asset-backed commercial paper conduits we administer, to be consolidated into our financial statements, requiring the recognition of associated losses;

• the financial strength of the counterparties with which we or our clients do business and with which we have investment or financial exposure;

• the liquidity of the U.S. and international securities markets, particularly the markets for fixed-income securities, and the liquidity requirements of our customers;

• the credit quality and credit agency ratings of the securities in our investment securities portfolio, a deterioration or downgrade of which could lead to other-than-temporary impairment of the respective securities and the recognition of an impairment loss;

• the maintenance of credit agency ratings for our debt obligations as well as the level of credibility of credit agency ratings;

• the possibility of our customers incurring substantial losses in investment pools where we act as agent, and the possibility of further general reductions in the valuation of assets;

• our ability to attract deposits and other low-cost, short-term funding;

• potential changes to the competitive environment, including changes due to the effects of consolidation, extensive and changing government regulation and perceptions of State Street as a suitable service provider or counterparty;

• the level and volatility of interest rates and the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally;

• our ability to measure the fair value of securities in our investment securities portfolio and in the unconsolidated asset-backed commercial paper conduits we administer;

• the results of litigation and similar disputes and, in particular, the effect of current or potential litigation concerning State Street Global Advisors', or SSgA's, active fixed-income strategies, and the enactment of legislation and changes in regulation and enforcement that impact us and our customers, as well as the effects of legal and regulatory proceedings;

• adverse publicity or other reputational harm;

• our ability to pursue acquisitions, strategic alliances and divestures, finance future business acquisitions and obtain regulatory approvals and consents for acquisitions;

• the performance and demand for the products and services we offer, including the level and timing of withdrawals from our collective investment products;

• our ability to continue to grow revenue, attract highly skilled people, control expenses and attract the capital necessary to achieve our business goals and comply with regulatory requirements;

• our ability to control operating risks, information technology systems risks and outsourcing risks, the possibility of errors in the quantitative models we use to manage our business and the possibility that our controls will fail or be circumvented;

• the potential for new products and services to impose additional costs on us and expose us to increased operational risk, and our ability to protect our intellectual property rights;

• our ability to obtain quality and timely services from third parties with which we contract;

• changes in accounting standards and practices, including changes in the interpretation of existing standards, that impact our consolidated financial statements; and

• changes in tax legislation and in the interpretation of existing tax laws by U.S. and non-U.S. tax authorities that impact the amount of taxes due.

Therefore, actual outcomes and results may differ materially from what is expressed in our forward-looking statements and from our historical financial results due to the factors discussed in this Management's Discussion and Analysis and elsewhere in this Form 10-Q or disclosed in our other SEC filings. Forward-looking statements should not be relied upon as representing our expectations or beliefs as of any time subsequent to the time this Form 10-Q is filed with the SEC. State Street undertakes no obligation to revise the forward-looking statements contained in this Form 10-Q to reflect events after the time it is filed with the SEC. The factors discussed above are not intended to be a complete summary of all risks and uncertainties that may affect our businesses. We cannot anticipate all potential economic, operational and financial developments that may adversely impact our operations and our financial results.

Forward-looking statements should not be viewed as predictions, and should not be the primary basis upon which investors evaluate State Street. Any investor in State Street should consider all risks and uncertainties disclosed in our SEC filings, including our filings under the Securities Exchange Act of 1934, in particular our reports on Form 10-K, Form 10-Q and Form 8-K, or registration statements filed under the Securities Act of 1933, all of which are accessible on the SEC's website at www.sec.gov or on our website at www.statestreet.com.

OVERVIEW OF FINANCIAL RESULTS



                                                                 Quarters Ended March 31,
(Dollars in millions, except per share amounts)            2009            2008          % Change
Total fee revenue                                        $   1,422       $   1,961          (27)%
Net interest revenue                                           564             625         (10)
Gains (Losses) related to investment securities, net            16              (9 )

Total revenue                                                2,002           2,577         (22)
Provision for loan losses                                       84               -
Expenses:
Expenses from operations                                     1,287           1,748         (26)
Merger and integration costs                                    17              26         (35)

Total expenses                                               1,304           1,774         (26)

Income before income tax expense                               614             803         (24)
Income tax expense                                             138             273

Net income                                               $     476       $     530         (10)

Net income available to common shareholders              $     445       $     530         (16)

Earnings per common share:
Basic                                                    $    1.03       $    1.36
Diluted                                                       1.02            1.35
Average common shares outstanding (in thousands):
Basic                                                      432,179         387,942
Diluted                                                    435,299         393,647
Cash dividends declared                                  $     .01       $     .23
Return on common shareholders' equity                         15.7 %          18.7 %

Financial Highlights

For the first quarter of 2009, we recorded net income available to common shareholders of $445 million, or $1.02 per diluted common share, compared to $530 million, or $1.35 per diluted share, for the first quarter of 2008. Return on common shareholders' equity was 15.7% compared to 18.7% for the first quarter of 2008.

Total revenue for the first quarter of 2009 decreased 22% from the first quarter of 2008, with total fee revenue down 27%. Generally, all fee revenue types were down compared to the prior-year quarter, reflecting the impact of the ongoing instability in the global financial markets. Servicing fee and management fee revenue were down 20% and 35%, respectively, from the year-ago quarter, compared to more significant declines in equity market valuations over the same period as measured by the published indices presented in the "INDEX" table in this Management's Discussion and Analysis on page 8. Trading services revenue decreased primarily as a result of lower trading volumes, partially offset by higher levels of volatility. Securities finance revenue decreased compared to the first quarter of 2008 primarily from lower lending volumes caused by lower demand.

Net interest revenue decreased 10% compared to the first quarter of 2008, or 8% on a fully taxable-equivalent basis ($596 million compared to $648 million, reflecting tax-equivalent adjustments of $32 million and $23 million, respectively), with a related decrease in net interest margin of 19 basis points. The decline was generally the result of decreases in interest-bearing deposit volumes and interest rate spreads, as well as the impact of a more

conservative re-investment strategy with respect to our investment securities portfolio, which included the investment of excess cash in short-term money market instruments, in light of the continued disruption in the financial markets and to increase overall liquidity.

We recorded a provision for loan losses of $84 million during the first quarter of 2009, related to commercial real estate loans purchased in 2008 from certain customers pursuant to indemnified repurchase agreements. The provision reflected management's revised expectation of future principal and interest cash flows with respect to these loans. Management's change in expectation resulted primarily from its assessment of the impact of deteriorating economic conditions in the commercial real estate markets during the quarter.

Total expenses of $1.30 billion for the first quarter of 2009 decreased 26% from the first quarter of 2008, primarily the result of a 31% reduction in salaries and benefits expense. This decrease was mainly attributable to a reduction in incentive compensation for the first quarter of 2009, as well as the impact of our previously announced reduction in force. The decrease also reflected the impact of lower transaction processing expenses and lower professional fees. Expenses for the first quarter of 2009 included $17 million of merger and integration costs associated with the 2007 acquisition of Investors Financial, compared to $26 million for the first quarter of 2008.

With the decline in total expenses exceeding the decline in total revenue for the first quarter of 2009 compared to the first quarter of 2008, we achieved positive operating leverage. Operating leverage is defined as the difference between the growth rate of total revenue and the growth rate of total expenses.

Results for the first quarter of 2009 included the following significant items outside of the ordinary course of our business.

• We earned $7 million of pre-tax net interest revenue related to our participation in the Federal Reserve's AMLF (see the "Net Interest Revenue" section of this Management's Discussion and Analysis for addition information); and

• We recorded $17 million of merger and integration costs during the first quarter of 2009 associated with our July 2007 acquisition of Investors Financial.

At March 31, 2009, we had aggregate assets under custody of $11.34 trillion, which decreased $704 billion, or 6%, from $12.04 trillion at December 31, 2008, and decreased $3.56 trillion, or 24%, from $14.90 trillion at March 31, 2008. At March 31, 2009, we had aggregate assets under management of $1.40 trillion, which decreased $49 billion, or 3%, from $1.44 trillion at December 31, 2008, and decreased $560 billion, or 29%, from $1.96 trillion at March 31, 2008. The decreases in assets under custody and assets under management from December 31, 2008 to March 31, 2009 were primarily associated with the continued instability in the financial markets and resulting declines in asset valuations.

During the first quarter of 2009, we generated approximately $111 billion of new business in assets to be serviced, for which we will provide various services including accounting, fund administration, custody, foreign exchange, transition management, currency management, securities finance, transfer agency, performance analytics, compliance reporting and monitoring, hedge fund servicing and private equity administration, and investment manager operations outsourcing. With respect to this new business, we expect to earn fee revenue in future periods as we service the assets.

During the first quarter of 2009, we generated approximately $37 billion of net new business in assets to be managed, for which we will provide various asset management services including passive index strategies and

exchange-traded funds. With respect to this new business, we expect to earn fee revenue in future periods as we manage the customer assets.

Our effective tax rate for the first quarter of 2009 was 22.5%, down from 34.0% in the 2008 quarter, and we expect it to be about 31.5% for the full year 2009. Consistent with our business strategy, our intent to reinvest the earnings in certain of our non-U.S. subsidiaries allowed us to reduce taxes accrued with respect to 2009 earnings, as well as certain taxes accrued in prior periods, by approximately $63 million.

CONSOLIDATED RESULTS OF OPERATIONS

This section discusses our consolidated results of operations for the first quarter of 2009 compared to the same period in 2008, and should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Form 10-Q.