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State Street cutting 1,500 jobs as weaker markets dampen Q4'18 servicing fee

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State Street cutting 1,500 jobs as weaker markets dampen Q4'18 servicing fee

Confirming a recent media report, State Street Corp. announced a plan to generate underlying cost savings of $350 million in 2019, which includes a reduction in its senior management, citing "challenging market and industry headwinds."

The company's new expense program includes reducing senior managers by 15% "through management delayering and aligning global organizations" and laying off 6% of its workforce, or about 1,500 employees, in high cost locations. In addition, it includes implementing "a more rigorous performance management system," and greater vendor management in professional services and subcustody. Further, it includes rationalization and streamlining of three operational hubs and two joint ventures, and retiring legacy applications.

Including the impact of a $223 million pretax repositioning charge, the company posted net income applicable to common shares of $398 million, or $1.04 per share, for the 2018 fourth quarter. In the year-ago period, it had net income of $334 million, or 89 cents per share, in the same quarter of 2017.

The S&P Global Market Intelligence consensus normalized EPS estimate for the 2018 fourth quarter was $1.69.

"Structural costs are still too high and our automation efforts have not moved fast enough," President and CEO Ronald O'Hanley said. "Weaker equity markets and challenging industry conditions drove underperformance in servicing fees."

Total revenue increased year over year to $2.99 billion from $2.85 billion. Total fee revenue increased to $2.29 billion from $2.23 billion in the year-ago period due to higher foreign exchange trading revenues and its acquisition of Charles River Development.

Total expenses came in at $2.47 billion, compared to $2.13 billion in the fourth quarter of 2017. The increase was due to the acquisition of Charles River Development and the new revenue recognition standard.

Net interest income rose year over year to $697 million from $616 million in the year-ago period due to higher interest rates in the U.S.

State Street also said it plans to resume common share repurchases in January and expects to buy back up to $600 million through June 30 under its previously announced program.