State Street Corp. is cutting approximately 375 positions from its eastern Massachusetts-based staff. The current round of cuts results primarily from efficiencies generated by technology investments, said David Spina, chairman and CEO. However, he also left open the possibility of future cuts.
"As we've indicated recently, we will continue to align people and resources to keep pace with market opportunities and business growth. This will result in periodic reductions, such as the ones we've had to date. But there will be hiring and expansion in growth areas, such as servicing for alternative investments and investment manager outsourcing," Spina said in a statement.
The cuts are not likely to negatively impact the firm, said Gerard Cassidy, managing director of equity research for RBC Capital Markets. "Every company knows that theres fat to be cut, and I think State Street is going to take a layer of fat out," Cassidy said.
Cassidy further explained that earnings expectations based on previous double-digit performance may have driven the company to make the cuts. The companys initiative to boost earnings through expense reductions came last year after Spina took the helm, Cassidy said.
Cassidy also said he did not think the cuts would endanger State Streets ability to grow and meet its clients needs, however.
"I do not believe this company would ever jeopardize long-term strategy or direction of the company for the sake of maintaining double-digit earnings. The first round, they could probably find enough jobs where theyre not going to compromise the quality of the product," Cassidy said.
State Street has estimated that the cost of reductions in severance benefits and other expenses will decrease second-quarter diluted earnings by approximately four cents. Savings will offset costs by the end of the year and will have no impact on full-year earnings. Cassidy estimated that the cuts could save the firm between $15 million and $30 million annually, depending on the actual positions eliminated.