State Street Corp. (STT) said it expects to record $400 million
to $450 million in restructuring charges over the next four years,
beginning in the current quarter, when the company will begin to
reduce its work force by 5%.
The institutional money-management company said it would cut
about 1,400 employees through targeted staff reductions, with the
first round of cuts to begin in December. The reduction is expected
to be substantially complete by the end of next year.
The company added it will also lower its occupancy costs, which
have grown in recent years through acquisitions, through early
buyouts, lease terminations, or certain sublease arrangements. In
addition, it plans to take advantage of alternative work
arrangements.
"Amid the current challenging economic conditions, we will
continue to improve our operating environment in the short-term
while ensuring that we have the right structure in place for
long-term growth," said President and Chief Executive Jay
Hooley.
In the current quarter, State Street expects to record about
$160 million to $165 million of the restructuring costs, which
relate primarily to the job cuts and a portion of the real estate
consolidation. By the end of 2014, the company expects the related
annual pretax run-rate savings will be about $575 million to $625
million.
Trust-and-custody banks have seen historically low interest
rates weigh on their results lately, though a rising stock market
has boosted assets under management. In October, State Street
reported third-quarter earnings jumped 65% on strong servicing-fee
revenue growth and cost controls that resulted in a 12% decline in
overhead costs.
State Street's shares fell 26 cents to $42.94 in after-hours
trading.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com