Operating EPS of $1.24 is up 8% Compared to Q3 2007

Strong Momentum Continues with Revenue up 24% and Operating Revenue up 12% Compared to Q3 2007

State Street Invited as One of the First Nine Financial Institutions to Take a Leadership Position in Treasury's Capital Purchase Program

State Street Corporation announced today third-quarter 2008 earnings per share of $1.09, an increase from $0.91 per share in the third quarter of 2007. Earnings per share in the third quarter include a $0.48 per share gain on the July 2008 sale of CitiStreet, $0.01 per share from acting as an intermediary under the Federal Reserve Bank’s Asset-Backed Commercial Paper Money Market Liquidity Facility (“AMLF”), a $(0.31) per share charge related to an increase in our reserve for sale-in, lease-out transactions (“SILOs”), a $(0.28) per share charge to establish a reserve to address our estimated net exposure on an indemnification obligation associated with collateral repurchase agreements with Lehman Brothers (“Lehman”), and $(0.05) per share in merger and integration costs associated with the July 2, 2007, acquisition of Investors Financial Services Corp. (“Investors Financial”). Operating-basis results are reported excluding these items. Earnings per share in the third quarter of 2007 include $(0.24) per share of merger and integration costs. On an operating basis, earnings in the third quarter of 2008 are $1.24 per share, up 8% from $1.15 per share in the third quarter of 2007.

Revenue of $2.771 billion in the third quarter of 2008 is up 24%, compared to $2.240 billion in the year-ago quarter. Excluding the $350 million gain we recognized on the sale of CitiStreet, $8 million in net interest revenue from the AMLF, and $(98) million for a reduction of net interest revenue related to SILO lease transactions, operating revenue is $2.536 billion, up 12.4% from $2.257 billion in last year’s third quarter. Total expenses in the third quarter of 2008 are $1.925 billion, up 14% from $1.689 billion in the third quarter of 2007. Excluding the $200 million reserve associated with our estimated net exposure on an indemnification obligation relating to collateralized repurchase agreements with Lehman, and merger and integration costs of $30 million in the third quarter of 2008 and $141 million in the third quarter of 2007 associated with the Investors Financial acquisition, expenses on an operating basis are $1.695 billion, up 9.5%, or $147 million, compared to $1.548 billion in the year-ago quarter. On an operating basis, State Street generated about 290 basis points of positive operating leverage. For the third quarter of 2008, return on shareholders’ equity is 13.6%, compared to 12.6% in the third quarter of 2007. The return on shareholders’ equity reflects the impact of the equity capital issuance in June 2008, as well as the non-operating items listed above. Excluding the non-operating items, operating return on equity is 15.4% in the third quarter of 2008 compared to 15.8% in the third quarter of 2007.

Ronald E. Logue, State Street's chairman and chief executive officer, said, “We are pleased to be one of the nine financial institutions key to the infrastructure of the global financial markets, selected by the U.S. Treasury to initiate the TARP Capital Purchase Program, a program aimed at addressing the financial turmoil and restoring confidence in the markets. Our selection demonstrates the important role that State Street plays for its customers and in the global markets and reflects our core financial strengths. Although we have always been and remain well capitalized, the program adds additional capital and affords us additional flexibility to continue our leadership role in meeting the challenges and opportunities in current markets. It’s my belief that the companies that will emerge from this turmoil are those, like State Street, with the right mix of businesses, a focus on customer service, and a prudent plan for this environment. As part of this program, State Street will issue $2 billion of senior preferred shares to the U.S. Treasury along with warrants to purchase common stock with a total market price equal to about $300 million at the time of issuance, which we anticipate will be minimally dilutive to our shareholders.”

He continued, “In the third quarter, the volatility of both the equity and fixed-income markets resulted in increased business for State Street as customers sought us out because of our reputation for stability and safety. Market events drove growth in our balance sheet from $146 billion at June 30, 2008, to $286 billion at quarter end. Our normalized balance sheet has grown to $155 billion, excluding a temporary balance of $77 billion due to the AMLF and $54 billion in excess balances held at central banks, which we believe reflect current market conditions. We bear no risk or any capital assessment relative to the AMLF balances. We are pleased to be a significant participant and one of the first banks to be fully operational in the AMLF program of the Federal Reserve. We are also pleased to have been appointed by the U.S. Treasury to manage a portion of the assets for its mortgage-backed securities portfolio.”

Logue added, “The recently announced Commercial Paper Funding Facility, that the Federal Reserve Bank has also appointed us to service, will provide liquidity to the commercial paper markets. In addition to its primary role in providing liquidity in the commercial paper markets, we expect this program to provide an additional source of liquidity for State Street’s asset-backed commercial paper program in these disrupted markets with a substantial amount of the program’s asset-backed commercial paper qualifying for the program.”

Logue noted, “Due to the unprecedented market illiquidity in the third quarter, the unrealized after-tax mark-to-market losses at quarter end on State Street’s investment portfolio have increased to $3.3 billion and in the asset-backed commercial paper conduits to $2.1 billion. However, as we have said in the past, the asset quality of both our investment portfolio and the conduit program remains high.”

Speaking of the Company’s secured exposure to Lehman Brothers, Logue said, “As we announced on September 18, 2008, we have no unsecured exposure to Lehman. However, we held mortgages as collateral for certain repurchase agreements. Following the Lehman bankruptcy, we evaluated the collateral securing our obligations in light of current market conditions and established a reserve of $200 million to address our estimated net exposure on indemnification obligations relating to these agreements.”

Addressing the future outlook, Logue concluded, “Due to our strong performance in the first nine months of 2008, we continue to confirm our earlier statements regarding our performance to our financial goals for 2008. We continue to expect our growth in operating earnings per share to be approaching the high end of the 10 to 15 percent range; growth in operating revenue to be above the high end of the 14 to 17 percent range and our operating return on equity to approach the high end of the 14 to 17 percent range.”

As State Street has previously disclosed, the market value of the portfolios that State Street Global Advisors manages in accounts that have entered into contracts with third-party financial institutional guarantors, continues to be under pressure, reflecting the illiquidity in the fixed-income markets. While State Street is not contractually obligated to do so, the Company is evaluating various options including providing some form of support to these accounts. This decision could result in a pre-tax charge of between $400 and $450 million in the fourth quarter. State Street is still reviewing this issue and has not yet determined what action, if any, to take.

State Street Corporation (NYSE: STT) is the world's leading provider of financial services to institutional investors, including investment servicing, investment management and investment research and trading. With $14.0 trillion in assets under custody and $1.7 trillion in assets under management at September 30, 2008, State Street operates in 26 countries and more than 100 geographic markets worldwide and employs 28,950 worldwide. For more information, visit State Street’s web site at www.statestreet.com/stockholder