State Street (STT) to Cut Jobs, Incur Repositioning Charge in Q4
State Street STT is joining the list of lenders that are slashing jobs. The company is set to trim around 4% or 1,500 of its workforce as part of its “multiyear transformation journey to drive increased productivity and create efficiencies.”
As a result, STT is expected to incur $175-$200 million as repositioning charge in the fourth quarter of 2023. These details were revealed by Eric Aboaf, the company’s vice chairman and chief financial officer, at the Goldman Sachs U.S. Financial Services Conference last week.
Though the company added employees “in distinct areas and business functions,” now, given the challenging backdrop and for the long-term success of the business, it is streamlining its operations. Nonetheless, the company is planning to redeploy employees “internally in order to limit the impact of the reductions.”
Also, STT is striving to expand businesses in areas where there is scope to further strengthen its market share and product offerings. Some of the businesses that look promising are its Alpha platform, private markets capabilities and core custody capabilities.
Additionally, last week, State Street announced its plan to assume full ownership of its joint venture (JV) with India’s HCLTech. The consolidation, expected to be completed in the second quarter of 2024, is part of the company's ongoing transformation and productivity initiatives to optimize its global operations. In the third quarter of 2023, the company assumed the full ownership of another India JV from the Atos Group.
These moves bring capabilities and expertise in-house, and are expected to seamlessly integrate themselves into State Street's global operating model. The streamlined operating model will foster greater efficiency and global scale, positioning the company as a leading player in the financial services sector.
STT is undertaking several other measures and looking into its business model to improve operating efficiency. These transformation and productivity initiatives are expected to help it save costs next year.
Over the past three months, shares of State Street have gained 4.7%, underperforming the industry’s rally of 9.7%.
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Currently, STT carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Other Banks That Cut Jobs to Save Costs
Wells Fargo’s WFC CEO, Charlie Scharf, at the same conference, stated that the company is expected to incur $750 million to less than $1 billion as severance expenses in the fourth quarter of 2023.
The exact number of job cuts was not mentioned. The elimination of job positions will reduce expenses at WFC amid a tough operating backdrop for revenue growth. Elucidating on the job cuts, Scharf added, “We're focused on efficiency, we're focused on just our processes, and how we can eliminate duplication and simplify the company.”
Additionally, Citigroup C has commenced the elimination of various job positions as part of its major organizational overhaul process.
C’s press release stated, “Today we shared with our colleagues the next layer of changes across many of our businesses and functions as we continue to align Citi’s organizational structure with our new, simplified operating model. As we’ve acknowledged, the actions we’re taking to reorganize the firm involve some difficult, consequential decisions, but we believe they are the right steps to align our structure with our strategy and ensure we consistently deliver excellence to our clients”.
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