Magazine article American Banker

State Street Cutback Plan Impresses Piper Jaffray

Magazine article American Banker

State Street Cutback Plan Impresses Piper Jaffray

Article excerpt

State Street Corp.'s blueprint for cutting costs in the face of declining revenues won it an upgrade Friday from Andrew B. Collins, an analyst with U.S. Bancorp Piper Jaffray.

On Thursday the Boston-based trust and processing bank offered details on a previously announced plan to shore up profits, which have been weakened by ongoing market volatility.

It said it would cut up to 1,800 employees, or 10% of its work force, in addition to the 1,000 layoffs that were earmarked following its Jan. 31 acquisition of Deutsche Bank AG's global securities servicing business. State Street said the latest job cuts would result in a pretax charge of between $125 million and $175 million and slice into its second-quarter diluted earnings per share by approximately 25 cents to 35 cents.

State Street, which is scheduled to release its first-quarter earnings Tuesday, plans to reduce its operating expenses by about $125 million for the remainder of the year.

Mr. Collins, who raised his rating on State Street to "market perform" from "underperform," noted that it is "pretty much ensuring (it will hit its) numbers for this year and next with this significant reduction in expenses." He also raised his 2003 per-share earnings estimate for State Street by 15 cents, to $2.15, and his 2004 estimate by 10 cents, to $2.50.

State Street had warned on March 20 that these cuts were on the way, and it lowered its first-quarter guidance for analysts, saying operating earnings would be 10% to 13% lower than last year, when it earned 54 cents a share. …

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