State Street has launched a restructuring initiative that includes a reduction in force of 1,400 employees and a consolidation of real estate across its global network in Q4 2010.
This quarter, the move will cost the company $160 million to $165 million but result in slight pre-tax savings in 2011, State Street says. It also says the restructuring will cost $400 million to $450 million, yet result in $575 million to $625 million in pre-tax run-rate savings, over the next 4 years.
State Street says it will exercise early buyouts, lease terminations or certain sublease arrangements to pare down its office space, but it has not said how the consolidation will affect the structure of its global network. The layoffs, which likely will be completed by the end of 2011, amount to 5% of State Streets workforce; the company says it will provide appropriate separation packages, including outplacement services to laid off employees.
The restructuring follows State Streets acquisitions over the last several years of Intesa Sanpaolos securities services business and Mourant International Finance Administration, as well as the recently announced acquisition of Bank of Ireland Asset Management. The companys stated goal is to double its non-US revenues over the 5-year period ending in 2014.
I am confident that this multi-year plan will transform our operating model and enable State Street to continue its industry leadership in service to clients, innovation and operational excellence, says Jay Hooley, president and CEO of State Street. With continued momentum in our core businesses, our history of successful acquisitions and our strong global presence, we are in an excellent position to benefit from leveraging our scale and capacity as well as advancing our record of technology and industry-leading product development.
As part of the restructuring plan, State Street says it will enhance its focus on IT platforms and client solutions; it is also utilizing Lean methodologies, establishing centers of excellence to align core functions with client needs, and leveraging the companys global scale to deliver continuous 24/7 operations and client service.
Hooley adds: The strength of our business model has been proven over time through economic cycles. Amid the current challenging economic conditions, we will continue to improve our operating environment in the short-term while ensuring that we have the right structure in place for long-term growth. The combination of initiatives that we are focused on with this program will help State Street continue to build upon its market-leading position.