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State Street to cut 400 Mass. jobs

Firm seeks to boost its competitiveness

LOOKING AHEAD State Street chief executive Jay Hooley said the changes were meant to give the company a greater sense of urgency. LOOKING AHEAD
State Street chief executive Jay Hooley said the changes were meant to give the company a greater sense of urgency.
By Beth Healy
Globe Staff / December 1, 2010

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State Street Corp. yesterday unveiled a massive cost-cutting plan in which it will soon eliminate 1,400 positions, including 400 jobs in Massachusetts.

The layoffs will start this month and continue through next year, and will total about 5 percent of its workforce. The job cuts, especially on so large a scale, were a surprising turn for State Street, which had recently reported large increases in revenues and profits after enduring the worst of the financial crisis.

The largest provider of services to the financial and investment industry, State Street is one of Boston’s biggest employers, with 12,600 people here, and 29,000 worldwide. But after a decade of growth, and three companies acquired in the past 18 months, executives said it was time to reduce costs broadly across the sprawling organization.

The company said it expects to slash expenses by as much as $625 million by the end of 2014, through the layoffs, real estate consolidations, and other measures. The company also said it will spend more on technology.

In an e-mail to employees yester day, State Street chief executive Jay Hooley said the changes were meant to infuse the company with a greater sense of urgency. “This sense of urgency has never been more critical as the aftermath of the recent financial crisis presents a unique window of opportunity for innovation and leadership,’’ Hooley wrote. “It’s important that we seize this opportunity ahead of our competitors.’’

The company had cut 2,200 positions in 2008 and 2009, in response to the global market turmoil that spurred layoffs across the financial industry. State Street has also suffered from self-inflicted wounds. Problems in its investment portfolios several years ago led to government investigations and lawsuits from investors and customers. Earlier this year, it agreed to pay $663 million in refunds to clients and settle charges with federal securities regulators that it misled investors about a bond fund that loaded up on subprime mortgage investments and ultimately lost millions.

But as investment markets have rebounded this year, the job picture at financial firms has stabilized.

Gerard Cassidy, an analyst at RBC Capital Markets in Portland, said State Street’s layoff news was unexpected, given how its financial performance had improved. “It’s not being done because there are problems,’’ he said. “It’s just a very competitive business.’’

In October, the company reported that revenues for the third quarter had grown 3 percent, to $2.3 billion, from the same period in 2009, and its net profit of $546 million in the third quarter was up 67 percent.

It continues to bring in new business, both from the mutual funds and hedge funds whose investment holdings and trades it tallies, and from the pension and investment funds that hire State Street to manage their investments. State Street is one of the world’s largest money handlers, with $20.2 trillion under custody and $1.9 trillion in assets under management.

Though it has a major presence in the United States, State Street has been aggressively targeting new business overseas. Its stated goal is to double revenues from international operations by 2014. It is currently acquiring the asset management business of the Bank of Ireland and recently completed the acquisition of the securities servicing business of one of Italy’s largest banking groups, Intesa Sanpaolo.

Mark Zandi, chief economist at Moody’s Analytics, a forecasting firm, did not see State Street’s cutback as a harbinger of things to come in the investment industry, a pillar of Boston’s economy.

“I don’t anticipate any significant further declines in financial services jobs,’’ he said. Even with regulatory changes requiring some banks and investment firms to change their structure, Zandi said, he expects banks, Wall Street firms, and mutual funds to be actively hiring within a year.

Hooley announced these grim end-of-year job cuts to a company he has run only since March. His internal e-mail said the decision “was not one we took lightly and is the result of a great deal of deliberation and discussion.’’ The company said it would provide “appropriate separation packages’’ and outplacement services to the affected employees.

Hooley’s predecessor, Ronald Logue, oversaw the company’s last layoff, as well the federal bailout State Street was required to take in 2008. The company, part of the original group of banks tapped to receive federal infusions to bolster global markets, repaid the government’s $2 billion in July 2009.

Beth Healy can be reached at bhealy@globe.com.


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