State Street cuts 1,500 senior management jobs, Q4 results released
18 January 2019 London
Image: Shutterstock
State Street has cut its senior management by 15 percent, which equates to approximately 1,500 jobs.
Ronald O’Hanley, CEO of State Street said a combination of job reductions and new products are needed.
He also stated the firm needs to reduce structural costs by 2 percent to 3 percent a year.
State Street has also released its Q4 results.
State Street’s securities finance revenue for Q4 2018 has decreased to $120 million compared to the same period in 2017.
According to State Street, the 18.4 percent drop in revenue reflects balance sheet optimisation efforts.
The results showed that securities finance revenue dropped 6.3 percent from its Q3 figures because of lower assets on loan and lower spreads.
It also noted that State Street’s total revenue for Q4 2018 increased by 5 percent compared to Q4 2017. Fee revenue increased by 3 percent ($59 million), relative to Q4 2017, reflecting the acquisition of Central Registration Depository (CRD) and higher foreign exchange trading services revenue.
State Street noted that this was partially offset by lower servicing fees and securities finance revenue.
Meanwhile, for ‘new business’ asset servicing mandates announced that Q4 totaled approximately $140 billion and total new mandates in 2018 were $1.9 trillion.
Year-end servicing assets remaining to be installed in future periods totalled approximately $385, according to the report.
Ronald O'Hanley, president and CEO, said: "Over the course of 2018, I have engaged with State Street’s stakeholders including our investors, clients, employees and regulators. I have also led a reexamination of our investment servicing and investment management strategies. State Street has strong client relationships, unique assets and is well-positioned in attractive, high-growth markets. While we have made progress on our technology transformation, much remains to be done and we are not satisfied with our recent performance. Structural costs are still too high and our automation efforts have not moved fast enough.”
He added: "New business wins remained strong, with a record $1.9 trillion of new asset servicing commitments in 2018, including $140 billion of new mandates in the fourth quarter. Net interest income increased significantly and foreign exchange trading performed well, while weaker equity markets and challenging industry conditions drove underperformance in servicing fees.”
“Amidst challenging the market and industry headwinds, we have launched a new expense program designed to reduce costs. As part of that programme, we recorded a $223 million pre-tax repositioning charge, the benefits of which we expect to fully realise within 12-15 months. Our newly acquired Charles River Development business performed consistent with our expectations. Charles River Development is driving new activity with existing and new clients and we are making progress towards creating the industry's first fully integrated front-to-back offering."
O'Hanley concluded: "The changes we are making will position us well to realise our three-year
strategic vision to be the leading asset servicer, asset manager, and data insight provider to the owners and managers of the world's capital, which I outlined last month. We have already initiated a series of actions and as a result, we are highly focused on increasing capital return, revenue growth and margin expansion. I am confident that our strategy represents a significant opportunity to deliver growth, drive innovation and enhance shareholder value."
Ronald O’Hanley, CEO of State Street said a combination of job reductions and new products are needed.
He also stated the firm needs to reduce structural costs by 2 percent to 3 percent a year.
State Street has also released its Q4 results.
State Street’s securities finance revenue for Q4 2018 has decreased to $120 million compared to the same period in 2017.
According to State Street, the 18.4 percent drop in revenue reflects balance sheet optimisation efforts.
The results showed that securities finance revenue dropped 6.3 percent from its Q3 figures because of lower assets on loan and lower spreads.
It also noted that State Street’s total revenue for Q4 2018 increased by 5 percent compared to Q4 2017. Fee revenue increased by 3 percent ($59 million), relative to Q4 2017, reflecting the acquisition of Central Registration Depository (CRD) and higher foreign exchange trading services revenue.
State Street noted that this was partially offset by lower servicing fees and securities finance revenue.
Meanwhile, for ‘new business’ asset servicing mandates announced that Q4 totaled approximately $140 billion and total new mandates in 2018 were $1.9 trillion.
Year-end servicing assets remaining to be installed in future periods totalled approximately $385, according to the report.
Ronald O'Hanley, president and CEO, said: "Over the course of 2018, I have engaged with State Street’s stakeholders including our investors, clients, employees and regulators. I have also led a reexamination of our investment servicing and investment management strategies. State Street has strong client relationships, unique assets and is well-positioned in attractive, high-growth markets. While we have made progress on our technology transformation, much remains to be done and we are not satisfied with our recent performance. Structural costs are still too high and our automation efforts have not moved fast enough.”
He added: "New business wins remained strong, with a record $1.9 trillion of new asset servicing commitments in 2018, including $140 billion of new mandates in the fourth quarter. Net interest income increased significantly and foreign exchange trading performed well, while weaker equity markets and challenging industry conditions drove underperformance in servicing fees.”
“Amidst challenging the market and industry headwinds, we have launched a new expense program designed to reduce costs. As part of that programme, we recorded a $223 million pre-tax repositioning charge, the benefits of which we expect to fully realise within 12-15 months. Our newly acquired Charles River Development business performed consistent with our expectations. Charles River Development is driving new activity with existing and new clients and we are making progress towards creating the industry's first fully integrated front-to-back offering."
O'Hanley concluded: "The changes we are making will position us well to realise our three-year
strategic vision to be the leading asset servicer, asset manager, and data insight provider to the owners and managers of the world's capital, which I outlined last month. We have already initiated a series of actions and as a result, we are highly focused on increasing capital return, revenue growth and margin expansion. I am confident that our strategy represents a significant opportunity to deliver growth, drive innovation and enhance shareholder value."
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