Program Includes Enhancements to Business Operations and Information
Technology
Systems and Targeted Cost Initiatives
Expects to Achieve Annual Pre-Tax Run-Rate Expense Savings from these
Actions
of $575 Million to $625 Million by the end of 2014
and
to Record Pre-Tax Restructuring Costs of $400 Million to $450 Million
Over
the Four-Year Period
$160 Million to $165 Million of the
Related Pre-Tax Restructuring Charge to be
Recorded in Q4
2010
BOSTON--(BUSINESS WIRE)--
State Street Corporation (NYSE:STT) announced today a planned global
multi-year program designed to enhance service excellence and
innovation, deliver increased efficiencies in its operating model and
position the Company for accelerated growth. The program will begin
immediately and includes operational and information technology
enhancements and targeted cost initiatives, including a reduction in
force and actions to lower occupancy costs.
To implement these actions, the company expects to recognize
restructuring costs of approximately $400 million to $450 million over
four years, beginning in the fourth quarter of 2010. In the fourth
quarter of 2010, the Company will record approximately $160 million to
$165 million of these restructuring costs, which relate primarily to a
reduction in force of approximately 1,400 employees and a portion of a
planned real estate consolidation. Excluding restructuring charges, the
Company anticipates that benefits from the fourth-quarter actions and
from the program will offset its 2011 incremental costs and result in a
slight pre-tax cost savings related to the program in 2011. By the end
of 2014, the Company expects the related annual pre-tax run-rate savings
will be approximately $575 million to $625 million.
“I am confident that this multi-year plan will transform our operating
model and enable State Street to continue its industry leadership in
service to clients, innovation and operational excellence,” said Jay
Hooley, president and chief executive officer of State Street. “With
continued momentum in our core businesses, our history of successful
acquisitions and our strong global presence, we are in an excellent
position to benefit from leveraging our scale and capacity as well as
advancing our record of technology and industry-leading product
development.”
Over the past several years, State Street has expanded its global
presence through organic growth and acquisitions. In 2010, State Street
completed its acquisitions of Intesa Sanpaolo’s securities services
business and Mourant International Finance Administration, and recently
announced its agreement to acquire Bank of Ireland Asset Management. The
company’s stated goal is to double its non-US revenues over the
five-year period ending in 2014.
Transformation of Business Operations and Information Technology
In parallel with its global growth, State Street has implemented
programs to transform business processes and create efficiencies across
the company. Initiatives that have already been successfully implemented
include utilizing Lean methodologies, establishing centers of excellence
to align core functions with client needs, and leveraging the company’s
global scale to deliver continuous 24/7 operations and client service.
As part of the multi-year program announced today, State Street will
broaden and accelerate these successful initiatives across the
organization.
State Street will also build on its strong technology platforms with
sustained investments that will accelerate State Street’s development of
leading-edge solutions for its clients. The Company is investing in
powerful technologies, such as private processing clouds, which vastly
increase global computing capabilities, and is also developing new
methods and tools to accelerate the pace of innovation and the
introduction of new services and solutions. State Street’s focus with
these initiatives is to continually improve its excellent client service
and to provide a competitive advantage for its clients.
Targeted Cost Initiatives
In addition to the cost savings expected from the planned business
operations and information technology transformation, State Street will
also focus on leveraging its scale, business process improvements and
the capacity it has built into the organization to deliver long-term
structural cost benefits. These actions will include targeted staff
reductions. The first reduction will be implemented in December 2010 and
be substantially completed by the end of 2011, impacting approximately
1,400 employees or 5 percent of State Street’s workforce. Recognizing
the contributions of the impacted employees, State Street will provide
appropriate separation packages including outplacement services.
To lower its occupancy costs, which have grown in recent years through
acquisitions, State Street will exercise early buy-outs, lease
terminations, or certain sublease arrangements. In addition, State
Street will take advantage of alternative work arrangements.
Hooley concluded, “The strength of our business model has been proven
over time through economic cycles. Amid the current challenging economic
conditions, we will continue to improve our operating environment in the
short-term while ensuring that we have the right structure in place for
long-term growth. The combination of initiatives that we are focused on
with this program will help State Street continue to build upon its
market-leading position.”
State Street Corporation (NYSE:STT) is one of the world’s leading
providers of financial services to institutional investors, including
investment management, investment research and trading, and investment
servicing. With $20.2 trillion in assets under custody and
administration and $1.9 trillion in assets under management at September
30, 2010, State Street operates in 25 countries and more than 100
geographic markets worldwide. For more information, visit State Street’s
web site at www.statestreet.com.
Forward-Looking Statements
This news release contains forward-looking statements as defined by
United States securities laws, including statements about our planned
global multi-year program designed to enhance service excellence and
innovation, deliver increased efficiencies in our operating model and
position us for accelerated growth, related operational, information
technology, reduction in force and real estate optimization initiatives
and the costs and financial and other effects associated with such
related actions and initiatives, as well as relating to our goals and
expectations regarding our business, financial condition, results of
operations and strategies, the financial and market outlook,
governmental and regulatory initiatives and developments, and the
business environment. Forward-looking statements are often identified by
such forward-looking terminology as "plan," "expect," "look," "believe,"
"anticipate," "estimate," "seek," "may," "will," "trend," "target,” and
"goal," or similar statements or variations of such terms. 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 our expectations or beliefs as of any date subsequent to
November 30, 2010.
Important factors that may affect future results and outcomes include,
but are not limited to:
-
the finalization and execution of our planned global multi-year
program designed to enhance service excellence and innovation, deliver
increased efficiencies in our operating model and position us for
accelerated growth, including our ability to implement programs to
transform and improve technology and business processes and create
efficiencies, to develop constructive vendor, outsourcing and other
third-party relationships and to promote other business model
enhancement and cost savings initiatives;
-
increases in the volatility of our GAAP-basis and operating-basis
earnings resulting from a change in our estimate of the charges or
expenses necessary to execute our planned global multi-year program
announced today and the resulting savings from such program;
-
changes in law or regulation that may adversely affect our, our
clients’ or our counterparties’ business activities and the products
or services that we sell, including additional or increased taxes or
assessments thereon, capital adequacy requirements and changes that
expose us to risks related to compliance;
-
financial market disruptions and the economic recession, whether in
the U.S. or internationally, and monetary and other governmental
actions, including regulation, taxes and fees, designed to address or
otherwise be responsive to such disruptions and recession, including
actions taken in the U.S. and internationally to address the financial
and economic disruptions that began in 2007;
-
increases in the volatility of, or declines in the levels of, our net
interest revenue, changes in the composition of the assets on our
consolidated balance sheet and the possibility that we may be required
to change the manner in which we fund those assets;
-
the financial strength and continuing viability of the counterparties
with which we or our clients do business and to which we have
investment, credit 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 our clients;
-
the credit quality, credit agency ratings, and fair values of the
securities in our 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 in
our consolidated statement of income;
-
the maintenance of credit agency ratings for our debt and depository
obligations as well as the level of credibility of credit agency
ratings;
-
the risks that acquired businesses will not be integrated
successfully, or that the integration will take longer than
anticipated, that expected synergies will not be achieved or
unexpected disynergies will be experienced, that client and deposit
retention goals will not be met, that other regulatory or operational
challenges will be experienced and that disruptions from the
transaction will harm relationships with clients, employees or
regulators;
-
the ability to complete acquisitions, divestitures and joint ventures,
including the ability to obtain regulatory approvals, the ability to
arrange financing as required, and the ability to satisfy other
closing conditions;
-
the performance and demand for the products and services we offer,
including the level and timing of redemptions and withdrawals from our
collateral pools and other collective investment products;
-
the possibility of our clients incurring substantial losses in
investment pools where we act as agent, and the possibility of further
general reductions in the valuation of assets;
-
our ability to attract deposits and other low-cost, short-term funding;
-
potential changes to the competitive environment, including changes
due to the effects of consolidation and perceptions of State Street as
a suitable service provider or counterparty;
-
the level and volatility of interest rates and the performance and
volatility of securities, credit, currency and other markets in the
U.S. and internationally;
-
our ability to measure the fair value of the investment securities on
our consolidated balance sheet;
-
the results of litigation, government investigations and similar
disputes or proceedings;
-
our ability to control operating risks, information technology systems
risks and outsourcing risks, and our ability to protect our
intellectual property rights, the possibility of errors in the
quantitative models we use to manage our business and the possibility
that our controls will fail or be circumvented;
-
adverse publicity or other reputational harm;
-
our ability to grow revenue, attract, retain and compensate highly
skilled people, control expenses and attract the capital necessary to
achieve our business goals and comply with regulatory requirements;
-
the potential for new products and services to impose additional costs
on us and expose us to increased operational risk;
-
changes in accounting standards and practices; and
-
changes in the interpretation of existing tax laws by U.S. and
non-U.S. tax authorities that affect 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 our 2009 Annual Report on Form 10-K, and our subsequent SEC
filings. We encourage investors to read these filings, particularly the
sections on risk factors, for additional information with respect to any
forward-looking statements and prior to making any investment decision.
The forward-looking statements contained in this presentation speak only
as of the date hereof, November 30, 2010, and we do not undertake
efforts to revise those forward-looking statements to reflect events
after that date.
Source: State Street Corporation
Contact:
State Street Corporation
Edward J. Resch, 617-664-1110
or
Investors:
Kelley
MacDonald, 617-664-3477
or
Media:
Hannah Grove,
617-664-3377