Ronald E. Logue, State Street Corp.'s chairman and chief executive officer, said the Boston company will need to acquire to enhance its international profile.
State Street, which generated 43% of its revenue outside of the United States last year, needs that figure to reach 50% to truly consider itself a "global company," Mr. Logue said in an interview Tuesday.
"We can't just do this organically," he said. "There isn't enough time to grow at the pace we want in non-U.S. markets by doing it organically."
The international revenue figure rose 4 percentage points from a year earlier, but Mr. Logue said that when State Street's deal to acquire Investors Financial Services Corp. of Boston closes in the middle of the year, that percentage would fall to 39% because, a larger percentage of Investors Financial's revenue is generated in the United States.
State Street would be "significantly larger in international markets than any of our near-term competitors," he said.
State Street has "significant and critical mass of assets" in most markets in Europe and Asia, including both China and Japan, Mr. Logue said, but acquisitions will be critical to continue expanding. Before acquiring Deutsche Bank AG's global securities servicing business in January 2003, the company's market share in Germany was only 0.5%, and now it is 25%, he said.
"Over time there may be other markets in regions where we want a greater presence," he said. "But we have developed a significant presence in the U.K., Germany, and France. As Italy and Spain evolve, we may want a bigger presence there."
State Street will consider moving to emerging markets, such as India and Eastern Europe, Mr. Logue said.
Analysts said that most fee-based banking companies are targeting foreign markets for growth, and that State Street will need to use both organic growth and acquisitions to reach its international growth targets.
Mr. Logue said State Street will continue to be opportunistic because, though it wants to grow internationally, it will continue to consider U.S. acquisitions.
"We are in a consolidating industry," he said. "There will be service providers and management companies in the U.S. that cannot generate enough capital to continue investing in this business. … It is becoming expensive to be a global investment company, and to remain in this business, companies have to grow globally, because markets outside of the U.S. are growing twice as fast."
State Street also wants to develop State Street Global Advisors, Mr. Logue said. Currently the asset management business generates 24% of the company's revenue, versus 17% two years ago.
He said it is hard to pinpoint exactly how large he expects the business to grow. Two years ago he told its management team that he wanted that percentage to reach about 25%, and it "reached that goal faster than I thought they would," he said. "We want to continue to grow in markets and in products that are growing faster than others."
