State Street Corp., the third-largest custody bank, said it will cut 1,400 jobs beginning this week and trim real estate costs as interest rates near zero erode profit.
The measures, which will pare State Street's workforce by 5%, are part of an effort to save as much as $625 million a year by the end of 2014, the Boston company said Tuesday. State Street said it will book restructuring expenses of up to $450 million before taxes over four years.
"They're feeling the effect of the low interest rate environment, and they want to show investors they will manage expenses as astutely as they can," Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine, said in a telephone interview.
Chief Executive Officer Joseph "Jay" Hooley, who took over in March, has set a long-term goal of increasing earnings by 10%, to 15% a year. With record-low interest rates eroding what the bank earns from lending and investing, State Street has made acquisitions to boost profit.
The company, which employs about 28,000 worldwide, eliminated 1,700 jobs in the first quarter of 2009, when it also cut bonuses and reduced its quarterly dividend, from 24 cents a share, to a penny.
