State Street Set to Cut 1,400 Jobs

The third-largest custody bank will cut staff by 5 percent and trim real estate costs.

Starting this week, State Street will reduce its staff by 5 percent or roughly 1,400 positions in an effort to save an estimated $625 million a year by the end of 2014. Bloomberg reports that the Boston-based company will book restructuring expenses of up to $450 million before taxes over four years.

"They're feeling the effect of the low interest-rate environment, and they want to show investors they will manage expenses as astutely as they can," Gerard Cassidy, an analyst at RBC Capital Markets told Bloomberg.

Chief Executive Officer Joseph "Jay" Hooley, who took over in March, has discussed a long-term goal of increasing earnings by 10 to 15 percent a year. As record-low interest rates erode bank earnings, the buy side giant has made acquisitions to boost profit.

These aren't the first severe cuts in the buy side firm's workforce. State Street employs about 28,000 globally and it cut 1,700 positions in 2009. It also cut bonuses and reduced its quarterly dividend from 24 cents a share to a penny, according to media reports.

State Street is making these cuts thanks to increased competition and advances in technology that has forced prices down for the services provided by State Street and its main rivals, Bank of New York Mellon Corp. and Northern Trust of Chicago.

The job cuts will start this week and be completed by the end of next year, according to State Street. About 400 positions will be eliminated in Massachusetts, where it employs 12,600 workers.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio