Jan 18 State Street Corp said on Friday it would cut about 630 jobs worldwide, lifting its stock 5 percent, as it reported a 26 percent boost in fourth-quarter net income amid pressure from some of its largest shareholders to cut expenses.
State Street, the world's No. 2 stand-alone custody bank, reported higher growth in revenue and assets under management than its closest rival, No. 1 Bank of New York Mellon Corp , whose fourth-quarter results disappointed investors.
State Street's job cuts are the strongest signal yet from Chief Executive Jay Hooley that the bank will continue to encounter a tough revenue environment. Still, State Street's results were the best among large custody banks, Nomura analyst Glenn Schorr said in a research note. The stock surged 5 percent to $52.97 in Friday morning trade.
State Street's net income was $468 million, or $1.00 a share, including the impact of acquisition and restructuring costs of $139 million. The Boston-based custody bank earned $371 million, or 76 cents a share, in the year-ago period.
The bank handily beat Wall Street estimates on an operating basis, earning $521 million, or $1.11 a share, compared to the $1 a share expected by analysts, according to Thomson Reuters I/B/E/S.
Total revenue climbed 7 percent to $2.46 billion as global stock markets helped boost State Street's investment management fees. Revenue from trading foreign currencies continued its decline, though, dropping 21 percent year-over-year to $118 million.
Forex trading accounted for 10 percent of the bank's total revenue in 2008, but that contribution declined to 5 percent in 2012 amid less volatility and a shift away from non-negotiated trades, which are the subject of several lawsuits by pension funds and U.S. authorities.
Custody banks lend stocks, track mutual fund prices and collect and distribute dividend and interest payments for investors.
State Street's assets under management rose 13 percent to $2.1 trillion from year-ago levels. In comparison, BNY Mellon's rose 10 percent while its total revenue climbed only 2 percent.
On the expense front, State Street's compensation and employee benefits costs were $915 million, up 5 percent from year-ago levels.
The announced job cuts, or 2 percent of its work force, would reduce State Street's global headcount from the 29,650 employees it reported in November.
Compensation and expense management have been bones of contention among some shareholders, such as Nelson Peltz, founder and chief executive of Trian Fund Management LP in New York. Trian is State Street's eighth-largest investor, owning 2 percent of the company's stock, according to Thomson Reuters data.
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