State Street to cut 425 jobs and restructure
GLOBAL – State Street Corp. says it will cut about 425 jobs and restructure some of its businesses amid a 12% fall in quarterly profits.
The Boston-based bank said it was limiting its near-term investment in wealth manager services, integrating the management of its balance sheet into the Treasury group and combining corporate cash management with securities operations. It would also exit the US education plan servicing business.
“As a result of these decisions and some others, we will eliminate about 425 positions, which will save us about 50 million dollars annualized with little impact on revenue,” the firm said. It expects a fourth-quarter charge of about 25 million dollars.
“We believe these actions will put us in a better position to achieve improved long-term results."
Third-quarter net income fell to 177 million dollars from 202 million dollars in the prior year period. Revenue, at 1.2 billion dollars, was down nine percent on the second quarter. This was “due to the impact of market-driven revenue, primarily related to foreign exchange and securities lending revenue”.
"While our investment servicing and management fees were up about 15% from the year-ago quarter and were flat with the second quarter of 2004, I am very disappointed with our results this quarter,” said chairman and chief executive Ron Logue, in his second earnings report since taking over from predecessor David Spina.
“We saw a sharp decline in foreign exchange, brokerage, and securities lending revenue in the quarter compared to the second quarter due to market activity.”
Logue said the firm is now “taking steps to align expenses with revenues, not as a reaction to this quarter's results, but as a conscious effort we began early in July”.
“These changes will not only help us better absorb shifts in market-driven revenue, but more importantly, strategically allocate our resources."
The group added 16 new asset-servicing assignments in Europe while its State Street Global Advisors asset management unit added 104 billion dollars in net new business.
Logue said: “As we continue to grow, we will continue to look at our business, and find areas where we can either eliminate or combine units to achieve greater efficiency and capitalize on scale.”
Assets under custody rose to nine trillion dollars while assets under management were up to 1.2 trillion dollars.