State Street ready for $550 million in savings with digital upgrade

Beacon is part of State Street’s five-year plan to digitally interconnect all of the custodian's systems.

By Joe Parsons

State Street expects to see around $550 million in savings by mid-2019 after it connects all of its business to its digital platform, Beacon.

The Boston-based global custodian said in its fourth quarter earnings that it realised $150 million in savings during 2017 through Beacon, however it also incurred restructuring costs of $133 million related to the platform.

“I am pleased that we have already exceeded our Beacon target to achieve an operating-basis pre-tax margin of 31% by 2018, and generated 210 basis points of positive fee operating leverage in 2017,” said Jay Hooley, chairman and CEO, State Street.

“Our business is well-positioned for growth in 2018 including the further advancement and benefits from Beacon. We now expect to realise Beacon’s financial objectives by the middle of 2019.”

Beacon is part of State Street’s five-year plan to digitally interconnect all of the company’s systems, cut costs, and give it the ability to create and provide real-time data for global clients.

State Street reporter $33.1 trillion in assets under custody/administration (AUC/A) in the fourth quarter, up 15% year-on-year, and plans to install $350 billion in remaining assets. Asset servicing fees totaled around $1.4 billion during the quarter, up 2%. 

Securities finance revenues also increased 8% in the quarter to $146 million, driven by higher client volumes from its agency and enhanced custody businesses.

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