BOSTON – State Street Corp. is eliminating 400 jobs, about 1.4 percent of its workforce, in a fourth round of cuts since 2010 as the third-largest custody bank seeks to reduce expenses to combat the impact of low interest rates.
The measure, on top of 2,900 job cuts since November 2010, will result in $22 million in savings in 2014 and $40 million annually from 2015, the Boston-based company said Friday. Severance expenses of $72 million pushed first-quarter net income 22 percent lower to $356 million, or 81 cents a share, State Street said.
“The environment for the custody banks is continuing to take out revenue and they just can’t really continue to wait on interest rates to go higher,” Marty Mosby, an analyst with Guggenheim Securities LLC in Hernando, Miss., said in a telephone interview. “State Street started this process about a year ahead of everyone else, and so they got to the end of their previous initiatives ahead of the others.”
State Street has relied over the past three years on a combination of cost cutting and global equity-market gains to overcome the negative impact of low interest rates. The U.S. Federal Reserve has held its benchmark interest rate at zero to 0.25 percent since December 2008 in an attempt to stimulate borrowing and economic growth. Low rates hurt the ability of custody banks to earn money on lending and investing activities.
Excluding some costs such as the severance expenses, State Street’s operating basis net income was 99 cents a share, missing the $1 a share estimate of 20 analysts surveyed by Bloomberg.
State Street declined 3 percent to $63.79 at 11:45 a.m. in New York trading. The shares had slumped 10 percent this year through Thursday, the most among the three biggest U.S. custody banks. BNY Mellon declined 3.8 percent this year through the same period and Northern Trust fell 2.7 percent.