* State Street to cut about 630 jobs worldwide
* Foreign exchange revenue posts another steep decline
* Stock climbs 6 percent
* Total revenue up 7 percent
By Tim McLaughlin
Jan 18 Shares of State Street Corp
surged 6 percent on Friday after fourth-quarter profit beat Wall
Street estimates and the custody bank said it would cut about
630 jobs worldwide amid pressure from some of its largest
shareholders to cut expenses.
State Street, the world's No. 2 stand-alone custody bank,
also 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
earlier this week.
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. Jefferies & Co analyst
Ken Usdin credited the company with better cost controls and
good momentum on core fees.
Hooley, in a telephone interview, said revenue growth is
constrained because investors remain cautious and interest rates
continue to bounce along rock-bottom levels.
"We take deposits and we invest them. In the current
interest rate environment, it's very difficult to generate
meaningful yield on our investments," Hooley said.
Still, State Street's results were the best among large
custody banks, Nomura analyst Glenn Schorr said in a research
note. The stock surged 6 percent to $53.33 in Friday 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
$1.00 a share expected by analysts, according to Thomson Reuters
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
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
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
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