US - Revenue at State Street Corp.'s Global Securities Services division, which it recently bought from Deutsche Bank, is set to fall by 124 million dollars this year as the company posts “disappointing” first-quarter earnings.

State Street Global Advisors is the ninth largest manager of European pension fund assets, with around 59 billion dollars of such assets under management.

The news follows the announcement in April of 1,800 job cuts in addition to the 1,000 job losses associated with the GSS acquisition. The jobs would go through voluntary early retirement and enhanced severance programmes in a bid to trim 125 million dollars from its costs in 2003.

State Street said the GSS business - which it bought for 1.5 billion dollars from Deutsche in January - had an annualised revenue of 700 million dollars when the deal was announced in November last year.

"Based on the first two months of operations, the business as acquired is generating approximately 576 million dollars of annualised revenue," the company said in its first-quarter earnings statement.

The Boston-based company says the lower revenue reflects the decline in world stock prices, delays to the closing of the deal in Austria and Italy and "client attrition" that was anticipated.

The GSS business is also generating 552 million dollars in annualised costs, State Street added. The division contributed 96 million dollars in fee revenue in the first quarter.

The company continues to convert GSS clients to its own systems and expects more than 500 conversions over the next six months.

Overall, the company posted first-quarter diluted earnings per share of 0.29 dollars, down from 0.54 dollars a year before. The earnings were in line with previous guidance the company had given. Net income fell to 96 million dollars from 178 million dollars. Revenue edged up to 1.02 billion dollars from 981 million dollars.

Chairman and chief executive David Spina called the results "disappointing". He attributed it to "the constraint imposed by a challenging interest-rate environment".

He said the firm recorded a return on equity of 11.7% and added that it was re-setting its ROE goal for 2003 and 2004 at 13%-15%.

Total assets under custody were 7.9 trillion dollars, including 1.9 trillion dollars from GSS. Investment management fees at its State Street Global Advisors arm declined to 122 million dollars from 124 million dollars. Total assets under management declined to 788 billion dollars from 808 billion dollars.

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