EUROPE – State Street sees an opportunity to cut costs by moving some of its processing operations to Eastern Europe, says chief executive Ron Logue.
“We see Eastern Europe as two different types of opportunity,” Logue told Bloomberg TV. “One is in terms of product manufacturing, processing at a lower factor cost than in some areas in Western Europe.”
“So there’s an opportunity to move operations to some Eastern European countries – to, again, work on the efficiency and expense side of the balance sheet.”
“Over time, these markets in and of themselves will be very legitimate markets, where we will have an infrastructure that we will put in place, because of the processing desires there.”
Logue said he thought markets in the region would grow. “I think they’ll become an extension of what’s happening in Western Europe and we need to be there.”
A spokeswoman said there were no plans in place and that Logue was just talking about potentially moving processing - not moving jobs but “creating capacity for future growth”.
In terms of custody industry consolidation, Logue said: “We definitely will be a buyer instead of a seller and I think we’ve proven to ourselves and the market that when we buy we know how to acquire well and, importantly, integrate.”
He added: “The reason I think there’s going to be more consolidation is because the stakes are being raised year after year in terms of the investment especially as our customers go globally we and our competitors need to go global with them.”
And he thought that there would be some organisations in the custody industry that “may make the decision to reallocate capital elsewhere”.
The Boston-based company boosted its global workforce with the creation of roughly 1,000 new positions during 2005.
According to a State Street spokesperson, half these jobs correlated with new business growth and 200 were attributed to middle office roles following outsourcing contracts. A further 170 joined following State Street’s acquisition of a tech centre in China.
The spokesperson added that approximately 100 of the 1,000 new positions were created in Europe.
State Street told IPE that growth in Europe is “ongoing” and has been “especially successful” over the past year. “It’s a case of onwards and upwards,” the spokesperson said. State Street had 21,000 employees worldwide as at 31 December 2005.