Boston-based State Street Corp. said on Tuesday that its second quarter earnings rose nearly 18 percent, driven by higher revenue from fees for the trust bank’s investment services. But its expenses from operations rose nearly 20 percent, and the company said that it plans to eliminate 850 jobs as part of a restructuring of its information technology operations.
The 850 jobs represent nearly 3 percent of State Street’s total work force of 29,450, which is spread across 26 countries.
State Street reported net income available to common shareholders of $502 million, or $1 per share, in the April-June period, up from $427 million, 87 cents per share, in the same quarter a year ago.
Excluding certain items, State Street’s operating profit was 96 cents per share. That matched the consensus forecast of analysts surveyed by FactSet.
Revenue rose 8 percent to $2.49 billion from $2.304 billion, topping analysts’ expectations for nearly $2.41 billion.
Fee revenue rose 12 percent to $1.89 billion. State Street provides accounting, brokerage and other services to mutual funds, retirement plans, insurance companies and other customers. It also manages assets through its investment arm, State Street Global Advisors.
The company’s biggest revenue component, servicing fees, rose nearly 16 percent, while investment management fee revenue jumped 24 percent and securities finance revenue climbed nearly 26 percent. Trading services revenue slipped nearly 5 percent, consistent with declines at rivals that have also seen trading activity fall off as the stock market ended the second quarter slightly down.
Expenses from operations rose to nearly $1.76 billion from $1.49 billion, as the biggest expense line, salaries and employee benefits, jumped nearly 22 percent.
"Decent revenue growth did not show up on the bottom line due to higher-than-expected expenses," Jefferies & Co. analyst Ken Usdin said in a note to investors.
After releasing its second quarter results, State Street separately announced plans to shift about 320 of its information technology positions to IBM Corp. and Wipro Technologies as part of an initiative announced in November. An additional 530 IT jobs at State Street are being eliminated over the next 18 to 20 months. Nearly all the affected employees are in North America, and do not directly work with clients. They will receive severance and help finding new jobs.
Overall, State Street currently employs about 4,000 IT workers.
The cuts are in addition to the elimination of about 1,400 jobs that State Street announced last November, involving about 5 percent of its work force, as part of a massive reorganization. Most of those cuts have been completed, spokeswoman Arlene Roberts said.
State Street’s quarterly results were also hurt by a 13 percent decline in net interest revenue, to $572 million. With interest rates low, bank profits have been squeezed because the difference between what they pay depositors and what they make from investments and lending has narrowed.
But State Street’s core business remained strong, as total assets under custody and administration were $22.76 trillion as of June 30, up nearly 20 percent from a year ago.
Assets under management totaled nearly $2.12 trillion, up 15 percent. (AP)
