STT State Street Corporation

By Lisa Beilfuss 

State Street Corp. on Friday said it would slash jobs as the trust bank reported choppy markets bit into its bottom line in the third quarter.

Shares fell 2.6% in early trading, pushing the stock's year-to-date loss to 14%.

Chief Executive Joseph Hooley said the results--which included a flat profit and a decline in assets--reflect the global decline in equity valuations, particularly in emerging economies, combined with prolonged low interest rates and a strong U.S. dollar.

Markets were especially volatile in the quarter, rattled by renewed concerns about the economy's health Earlier this week, fellow trust bank Bank of New York Mellon similarly pointed to unfavorable market conditions for its third-quarter profit decline, and several large money managers said they were bruised by market declines and investor outflows.

State Street's asset servicing and investment management businesses are highly dependent on overall market performance, and both were hurt by weakness and volatility throughout global equity markets during the quarter, said Edward Jones analyst James Shanahan.

But core business trends were also disappointing, Mr. Shanahan said, as new business wins were softer than expected and as the bank continued to see investment outflows.

Pointing to the continued challenging environment, Mr. Hooley said State Street is accelerating its cost-cutting plan. During the quarter, the firm took a $75 million severance charge stemming from layoffs, and State Street said it plans to cut between 200 to 600 jobs globally. The company expects to save $50 million after the layoffs are completed by the end of next year.

In all for the quarter, State Street reported a profit of $543 million, little changed from a year earlier. Per-share earnings rose to $1.32 from $1.26 as the company reduced its shares outstanding by 4.1%.

On an operating basis, which excludes severance costs and a real estate gain, among other items, earnings dropped to $1.16 a share from $1.35. Revenue inched up to $2.62 billion from $2.61 billion. Operating revenue, meanwhile, was $2.65 billion.

Analysts projected $1.23 in per-share operating earnings on $2.67 billion in operating revenue, according to Thomson Reuters.

Assets under custody and administration declined 4.2% to $27.27 trillion, while assets under management dropped 9% to $2.20 trillion. Fee revenue rose 4.8% to $2.11 billion.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

October 23, 2015 10:05 ET (14:05 GMT)

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