State Street’s cautious outlook hits share price

City A.M. Reporter
STATE Street’s shares fell over eight per cent yesterday, as the firm posted a sharp rise in fourth quarter results but warned it was ramping up its cost cutting plan to compensate for clients taking less risk.

State Street, one of the world’s biggest service providers for institutional investors, said income available to common shareholders was $371m (£240m), compared with $81m a year ago. Year-ago results included charges for restructuring and repositioning an asset portfolio.

Fourth-quarter results, which slightly missed analyst forecasts, included a pre-tax charge of $120m, mostly related to State Street’s withdrawal from its fixed-income trading initiative.

State Street said revenue rose 13 per cent on last year to $2.32bn. But it dropped five per cent from the third quarter as shaky global markets sidelined some clients adverse to risk.

And servicing fees fell one per cent to $1.06bn, further suggesting that clients are shying away from risk. Investment management fees fell nine per cent, and trading service revenue tumbled 12 per cent on a year ago.

State Street chief executive Jay Hooley said he expects weakness in global capital markets to continue.

Compensation and employee benefit costs were $872m in the fourth quarter, down 10 per cent from the previous three months.