State Street cutting 850 technology jobs, most of them in Bay State
State Street Corp. said yesterday it will cut 850 jobs, including 558 in Massachusetts, as it launches a second major round of layoffs in less than a year.
The Boston financial services giant said all the affected workers are in information technology and described the cuts as part of an “IT transformation,’’ where transactions and data can be processed in less costly ways. State Street manages investments and handles record keeping on trillions of dollars for pensions and other investors; it depends heavily on technology in its business.
“The company is in a transition period right now from a technology standpoint,’’ said Gerard Cassidy, a banking analyst with RBC Capital Markets in Portland, Maine. “It’s the evolution of the business.’’
The cuts come as State Street reported yesterday an 18 percent surge in its second-quarter earnings from a year ago, to $502 million, or $1 per share. Operating expenses, however, also soared, jumping 20 percent to $1.8 billion, due to increases in salaries and benefits, the company said.
Yesterday’s job cut news was the latest in a series of expense-saving moves by State Street, one of the largest employers in Massachusetts, with about 12,600 workers. In November, State Street unveiled a plan to eliminate 1,400 positions this year, including 400 jobs in the Boston area, as part of a plan to save $625 million by the end of 2014. Worldwide, the company employs 29,450 people, 4,000 of them in technology.
In the latest round of job cuts, State Street said it will eliminate 530 positions over the next 18 to 20 months. It will also shift 320 jobs to IBM Corp. and Wipro Technologies, companies to which it already outsources technology work. All of the jobs are in North America, the company said.
State Street spokeswoman Arlene Roberts said the company’s headcount had expanded by nearly 25 percent in the state as a result of corporate acquisitions over the past five years. Despite efforts to scale that back and move its technology toward remote “cloud computing,’’ she said, “We remain committed to Massachusetts as our headquarters state.’’
The company has a history of rolling out layoffs even when its finances appear strong. In late 2008, as it accepted a $2 billion capital infusion from the federal government during the financial crisis, State Street announced plans to cut 1,800 jobs. The company repaid the funds in 2009 and went on to post a $1.6 billion profit in 2010, as markets rebounded.
Even with that success, State Street filed for an $885 million federal tax refund for 2010, after taking a loss on billions of dollars in risky mortgage investments the prior year.
State Street shares closed at $42.02, down 2 percent, after falling more steeply earlier in the day. Investors reacted negatively to management’s explanation of expenses, and continued to show concern about economic woes in Europe, where State Street garners significant business.
Cassidy, the banking analyst, said State Street executives predicted they would be able to charge more for services in the core custody business - accounting and record keeping of assets - in the wake of a scandal over alleged overcharging for foreign exchange trading as well as securities lending. Both are areas where State Street and other giant banks have been accused of padding their prices, to make up for low commodity pricing in custody.
“Now that those products aren’t as profitable, they have to draw the line in the sand on pricing,’’ Cassidy said.
Beth Healy can be reached at email@example.com.