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Rating:Big State Street Investors Want Hooley or Resch Gone Not Rated 5.0 Email Routing List Email & Route  Print Print
Tuesday, October 16, 2012

Big State Street Investors Want Hooley or Resch Gone

News summary by MFWire's editors

Jay Hooley should have more on his mind this morning than just State Street's [profile] earnings report as he preps for his regular quarterly conference call. The Boston-based asset manager reported its quarterly numbers Tuesday, handily topping analyst estimates. That news comes as the Financial Times reports that four large institutional shareholders are pressing for Hooley's ouster. They are also targeting CFO Edward Resch.

The paper did not identify which investors made the request for "new blood" in the form of either a new CEO or CFO. It only revealed that the quartet of shareholders all rank in the top ten owners of State Street and that together they own 10 percent of the company.

"There is nobody in that business who is bigger than the brand name. Somebody has to be responsible," is the bottom line for one publicity-shy institutional investor.

"Just cut your bonus pool to get to the target," the paper quotes one "longstanding shareholder" as telling it. That shareholder said that Hooley gets "one more chance" while Resch's "credibility is quite low."

The investors are likely disappointed by State Street's valuation. The Boston giant is known for its low-margin custody and fund administration business where it holds more than $22 trillion of client assets.

However, it also has a large asset management arm with $1.9 trillion of AUM. Much of that business is in low margin index products.

State Street's revenues were $9.5 billion in 2012 and its market cap is a tad shy of $20 billion. Meanwhile, rival BlackRock shares trade hands at 3.6 times revenue, nearly twice the ratio of those of State Street.

A major issue that the shareholders feel is holding back the stock is the inability of the top brass at State Street to clearly communicate its capital situation in the face of new regulations. The paper does point out that State Street is one of the best capitalized banks in the United States.

Still, the news this morning was good. For the quarter State Street reported $654 million of net profit. That translates into $1.36 per share, well above the 96 cents analysts were looking for.

Meanwhile, operating revenue dipped 3 percent to $2.36 billion.  

Edited by: Sean Hanna, Editor in Chief

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