Close on the heels of declaring better-than-expected results,
State Street Corporation
) announced to eliminate nearly 630 jobs worldwide - 2% of its
workforce. Majority of the layoffs (nearly 260 jobs) are expected
to occur in Massachusetts.
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State Street made this announcement during the earnings
conference call on Jan 18. The company's CEO stated that the
impending job cuts are aimed at offsetting the effects of the
persistent low interest rate environment and low trading
activity. The company has been facing tremendous pressure from
the shareholders to contain the rising costs and boost the bottom
State Street - one of the biggest custody banks - expects the
operating backdrop to remain challenging in 2013. Consequently,
the company anticipates tougher counteractive measures to keep
intact the top-line expansion.
In 2010, State Street announced a global multi-year program
designed to accelerate growth. The company plans to achieve
annual pre-tax expense savings of approximately $540 million by
the end of 2014 and approximately $600 million in 2015. The
company currently remains on track to achieve its target.
This is not first time State Street has resorted to retrenchment.
Earlier in 2010, the company had eliminated approximately 1,400
jobs and in 2009, it had chopped of about 1,700 jobs. Some of the
other banks that have slashed their workforces as part of their
cost containment measures include
Bank of America Corporation
The Bank of New York Mellon Corporation
State Street had reported fourth-quarter earnings per share,
which substantially surpassed the Zacks Consensus Estimate.
Better-than-expected results benefited from improvement in the
top line, partly offset by higher operating expenses. Although
asset position remained robust, capital ratios showed mixed
It is imperative for financial institutions to take up cost
containment measures seriously amid such a challenging operating
State Street currently carries Zacks Rank #3 (Hold).