(Bloomberg) -- State Street, the world’s second-largest custody bank, said it’s firing 600 employees globally to accelerate cost reductions after the stock market slump will probably make its goal for fee revenue growth unattainable this year.

The bank took a $75 million pretax charge in the third quarter in connection with the layoffs, which will result in a headcount reduction of 200 on a net basis. State Street said it may not reach a target to increase fee revenue by 4% to 7% on an operating basis this year, after a slump in global stock markets, particularly emerging markets, eroded assets.

“In light of the continued challenging environment we are accelerating the next phase of our transformation program to create cost efficiencies,” CEO Joseph Hooley said in a statement on Friday in Boston. “We’re balancing investing in our business with managing against macroeconomic challenges and elevated regulatory costs.”

State Street is accelerating cost cuts after an almost 10% decline in global stock markets last quarter hurt assets and fees for overseeing them, compounding the impact of low interest rate that have plagued custody banks since the financial crisis. Assets under management decreased 7.2% in the third quarter to $2.2 trillion, as clients pulled a net $29 billion and market and currency swings erased $142 billion.

Assets under custody and administration fell 4.8% in the three months, to $27.3 trillion, leaving State Street behind Bank of New York Mellon Corp.’s $27.5 trillion. Net income in the three months through September was little changed at $543 million, compared with $542 million a year earlier.

REVENUE DRAG

State Street stock declined 12% this year through yesterday, compared with a 2.7% gain for BNY Mellon, the largest custody bank.

“The drop in market valuations over the last couple of months has created a 3 to 4% drag on their revenues as asset management and custody was marked down to lower levels,” said Marty Mosby, an analyst with Vining Sparks.

Custody banks keep records, track performance and lend securities for institutional investors includingmutual funds, pension funds and hedge funds. State Street and BNY Mellon also manage money for investors.

BNY Mellon this week reported a 23% decline in third-quarter profit. CEO Gerald Hassell told analysts that the revenue environment is “exceedingly challenging,” and it’s “critical for us to keep driving efficiencies and to reduce corporate overhead.”

‘MORE CHALLENGING’

State Street said today it will be “more challenging” to achieve a previously communicated target for fee revenue growth to outpace expense growth on an operating basis. Revenue on an operating basis fell 1.2% in the third quarter from the prior year, to $2.65 billion, and fee revenue rose 1% to $2.12 billion.

In addition to headwinds from lower stocks and a stronger dollar, State Street has been facing higher compliance costs along with low interest rates that crimp income from lending and investing. The firm, a pioneer in ETFs, is seeking to rejuvenate its asset-management business after its active strategies shrunk and its ETFs lost ground to BlackRock and Vanguard.

State Street has been adding currency-hedged ETFs to compete with similar offerings from rivals including WisdomTree Investments. It’s also expanding hedge funds and alternative investment strategies that can be offered to individual investors, Ronald O’Hanley, who took over this year as head of the asset management unit, said in a June interview.

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