STT State Street Corporation

By Justin Baer 

State Street Corp. said Friday it would shed about 1,500 employees, a new sign that the asset-management industry's struggles are rippling through the rest of Wall Street.

The cuts will sweep through higher-cost offices such as Boston, New York and London as State Street automates parts of its operations. They include the 100 or so senior management jobs the bank had previously announced and represent less than 4% of the company's roughly 40,000-person workforce.

The job reductions mark a more aggressive phase in the custody bank's yearslong plan to trim expenses, root out manual processes and keep pace with the dramatic changes under way at many investment firms.

What explains the added urgency is a late 2018 market rout that spooked investors and punished the asset management industry. State Street provides the bookkeeping and other back-office services to nearly 90% of the biggest investment firms.

"Market dynamics are changing for our clients," Ronald O'Hanley, State Street's chief executive, said to analysts on Friday. "The resulting margin compression for investment managers has led them to increase pressure on their providers."

Asset managers are wrestling with the challenges posed by uneasy investors and shaky markets as more firms compete to push prices lower. Last year clients started to commit less new money to investment funds and other products. Then a market selloff reduced the value of assets managed by many of these firms, further draining the fees they pocket for managing others' money.

BlackRock Inc., the world's biggest asset manager, said this week that its assets fell by roughly $468 billion in the fourth quarter. Last week it announced 500 job cuts as a way of coping with the shifts under way in its industry.

State Street isn't the only service provider to the asset management industry looking to pare back. Bank of New York Mellon Corp. said Wednesday it had set aside severance expenses in the fourth quarter as it began to eliminate layers of managers throughout the company.

At State Street, the need to take out costs didn't seem quite so urgent when Mr. O'Hanley spoke last month at an investor conference and revealed the plans to cut about 15% of senior managers, or roughly 100 people. That was before the market's selloff steepened in the final weeks of the year, and investors were confronted with new worries, including the effects of a prolonged partial shutdown of the U.S. government, Mr. O'Hanley said.

"We certainly control our destiny," the CEO said in an interview. "But in terms of the market levels, and the underlying market sentiment in what investors do, we don't control that."

State Street also said Friday that in the fourth quarter its net income rose 19% to $398 million, or $1.04 a share, from $334 million, or 89 cents, a year earlier. Excluding charges and other items, State Street earned $1.68 a share in the most-recent period. On that basis, analysts had expected a $1.70 profit.

Revenue rose 4.9% to $2.99 billion, slightly above analysts' average estimate. The bank's shares closed 25 cents higher, at $71.30.

State Street finished the year with $31.6 trillion in assets under custody, down from $34 trillion at the end of the third quarter. The firm had $2.51 trillion in assets under management, an 11% drop from September.

Write to Justin Baer at justin.baer@wsj.com

(END) Dow Jones Newswires

January 18, 2019 17:03 ET (22:03 GMT)

State Street (NYSE:STT)
Historical Stock Chart
From Mar 2024 to Apr 2024

State Street (NYSE:STT)
Historical Stock Chart
From Apr 2023 to Apr 2024