State Street just became the latest financial giant to announce layoffs. On Wednesday the Boston-based bank revealed that it will cut its workforce by about six percent, between 1,600 and 1,800 positions, mostly by the end of March 2009.
A spokeswoman could not immediately be reached for comment on whether or not State Street Global Advisors will be affected by the cuts. (The release specifically says that the cuts "will largely be achieved by consolidating middle and senior management ranks.")
State Street expects the cuts to cost between $325 million and $350 million initially while saving the firm $375 million to $400 million annually.
Company Press Release
BOSTON, Dec 03, 2008 (BUSINESS WIRE) -- State Street Corporation announced today a plan to reduce its operating costs and support the company's long-term growth while aligning the organization to meet the challenges and opportunities presented by the current market environment.
To reduce its operating cost base, the company is initiating a reduction in force of approximately 6 percent of its global workforce. The reductions of approximately 1,600 to 1,800 positions will occur principally between now and the end of the first quarter of 2009. In order to maintain customer service, the reductions will largely be achieved by consolidating middle and senior management ranks. In line with State Street's global growth, approximately two-thirds of the reductions will occur within North America with the remainder in Europe and the Asia-Pacific region.
"It is important for State Street to continue to deliver consistent earnings growth, particularly during this difficult environment," said Ronald E. Logue, chairman and CEO of State Street. "Taking this action increases our ability to do so."
In connection with severance, benefits and other costs, the company expects to record total pre-tax charges of approximately $325 million to $350 million or $0.51 to $0.55 per share. The action is expected to generate approximately $375 million to $400 million in annualized savings. For 2008, the company continues to expect growth in operating earnings per share to be approaching the high end of its established range of 10 to 15 percent; growth in operating revenue to be above the high end of its 14 to 17 percent range, and operating return on equity to approach the high end of its 14 to 17 percent range. Operating basis results for 2008 exclude the effects of the above referenced charge and other non-operating costs referenced in the company's SEC filings. State Street continues to expect growth in operating earnings per share for 2009 to be approaching the low end of its 10 to 15 percent range.
State Street Corporation is the world's leading provider of financial services to institutional investors, including investment servicing, investment management, and investment research and trading. With $14 trillion in assets under custody and $1.7 trillion in assets under management at September 30, 2008, State Street operates in 26 countries and more than 100 geographic markets worldwide. For more information, visit State Street's website at www.statestreet.com.
USE OF NON-GAAP FINANCIAL MEASURES
State Street reports its financial performance in accordance with accounting principles generally accepted in the United States, referred to as "GAAP". State Street also separately measures and compares its financial performance on an operating basis, which reflects revenue from non-taxable sources on a fully taxable-equivalent basis and excludes the impact of revenue and expenses outside of the normal course of its business. State Street reviews its results on an operating basis, as these results, in addition to results presented in accordance with GAAP, support meaningful comparisons from period to period and the analysis of comparable financial trends with respect to State Street's normal ongoing business operations. Operating-basis results for 2008 will exclude the effect of expected charges related to the reduction in force discussed above and other effects, including, for the first nine months of 2008 and 2007, those more fully described in our press release announcing our third quarter 2008 earnings issued on October 15, 2008. We refer you to that press release for additional information about our operating-basis results. The press release is available on our website at www.statestreet.com/stockholder and in our Current Report on Form 8-K filed with the SEC on October 15, 2008 and available at www.sec.gov.
This news announcement contains forward-looking statements as defined by United States securities laws, including statements about State Street's goals and expectations regarding its business, financial condition, results of operations and strategies, the financial and market outlook, governmental and regulatory initiatives and developments and the business environment. These statements are not guarantees of future performance, are inherently uncertain, are based on current assumptions that are difficult to predict and involve a number of risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed in those statements, and those statements should not be relied upon as representing State Street's expectations or beliefs as of any date subsequent to the date of this release.
Important factors that may affect future results and outcomes include:
-- the finalization and execution of State Street's plans designed to reduce its operating costs and support the company's long-term growth while aligning the organization to meet the challenges and opportunities presented by the current market environment
-- the financial strength of the counterparties with which State Street or its clients does business and with whom State Street has investment or financial exposure;
-- the liquidity of the U.S. and International securities markets, particularly the markets for fixed-income securities, and the liquidity requirements of State Street's customers;
-- potential changes to the competitive environment due to the effects of consolidation, regulation and perceptions of State Street as a suitable service provider or counterparty;
-- the level and volatility of interest rates, particularly in the U.S., Europe and the Asia/Pacific region; the performance and volatility of securities, credit, currency and other markets in the U.S. and internationally;
-- economic conditions and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets in the U.S. and internationally;
-- State Street's ability to measure the fair value of securities in its investment securities portfolio and in the asset-backed commercial paper conduits it sponsors, particularly given current market conditions for many of those securities;
-- the credit quality and credit agency ratings of the securities in State Street's investment securities portfolio, a deterioration or downgrade of which could lead to other-than-temporary impairment of the respective securities and the recognition of an impairment loss, the maintenance of the credit agency ratings for State Street's own debt obligations as well as the level of credibility of credit agency ratings;
-- State Street's ability to attract non-interest bearing deposits and other low-cost funds;
-- the possibility that changes to accounting rules or in market conditions or asset performance may require any off-balance sheet activities, including State Street's asset-backed commercial paper conduits, to be consolidated into State Street's financial statements, requiring recognition of associated losses, if any;
-- the results of litigation and similar disputes and, in particular, the effect that current or potential litigation may have on its reputation and that of State Street Global Advisors ("SSgA") and State Street's ability to attract and retain customers; the possibility that the ultimate costs of the legal exposure associated with certain of SSgA's actively managed fixed-income strategies may exceed or be below the level of the related reserve, in view of the uncertainties of the timing and outcome of litigation, and the amounts involved;
-- the possibility of further developments of the nature that previously gave rise to the legal exposure associated with certain of SSgA's actively managed fixed-income and other investment strategies;
-- State Street's ability to integrate acquisitions into its business, including the acquisition of Investors Financial;
-- the performance and demand for the products and services State Street offers, including the level and timing of withdrawals from our collective investment products;
-- the enactment of legislation and changes in regulation and enforcement that impact State Street and its customers, as well as the effects of legal and regulatory proceedings, including litigation;
-- State Street's ability to continue to grow revenue, control expenses and attract the capital necessary to achieve its business goals and comply with regulatory requirements;
-- State Street's ability to navigate systemic risks and control operating risks;
-- State Street's ability to obtain quality and timely services from third parties with which it contracts;
-- trends in the globalization of investment activity and the growth on a worldwide basis in financial assets and the resulting sovereign and monetary policy risks;
-- trends in governmental and corporate pension plans and savings rates;
-- changes in accounting standards and practices, including changes in the interpretation of existing standards, that impact State Street's consolidated financial statements; and
-- changes in tax legislation and in the interpretation of existing tax laws by U.S. and non-U.S. tax authorities that impact the amount of taxes due.
Other important factors that could cause actual results to differ materially from those indicated by any forward-looking statements are set forth in State Street's 2007 Annual Report on Form 10-K and its subsequent SEC filings, including, in particular, its Current Report on Form 8-K dated October 15, 2008. State Street encourages investors to read these filings, particularly the sections on Risk Factors, and its subsequent SEC filings for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this press release speak only as of the date hereof, December 3, 2008, and State Street does not undertake efforts to revise those forward-looking statements to reflect events after this date.