By Tim McLaughlin
BOSTON, Nov 20 (Reuters) - State Street Corp on Tuesday said its long-time chief financial officer Ed Resch plans to retire next year, just months after a report said the custody bank’s largest investors wanted to oust him or Chief Executive Jay Hooley.
Boston-based State Street said 60-year-old Resch had informed the bank that he plans to retire in 2013 after more than a decade in his role as CFO. The move isn’t related to any investor discontent, State Street spokesman Carolyn Cichon said.
“Ed has been our CFO during one of the most challenging times for our industry,” Hooley said in a press release. “The timing of his retirement will enable a thorough transition process to his successor.”
Last month the Financial Times said four of State Street’s 10 largest shareholders are frustrated with the company’s stock price and pace of cost cutting. The FT said some of the investors, which were not named, wanted either Hooley or Resch to be replaced with “new blood”.
After the FT report, Hooley told Reuters that most shareholders like what he is doing and have confidence in State Street’s long-term prospects.
Compensation and expense management have been bones of contention among some shareholders, namely 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.
About a year ago, Trian released a critique of State Street’s operations, faulting the company for paying too much for acquisitions and not keeping a lid on expenses. The report said compensation costs increased dramatically while earnings per share declined.
Last week Resch told investors and analysts that weak foreign exchange revenue would hurt the custody bank’s chances of lowering its high ratio of compensation expenses.
State Street’s goal is to keep the compensation ratio at about 39 percent of revenue, compared with 40 percent in 2011. That goal could be hard to meet as foreign currency trading revenue withers from slack volume and volatility while key customers shift away from FX transactions with higher profit margins.