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State Street Cuts Jobs Amid Challenging Operating Backdrop

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State Street (STT - Free Report) has slashed roughly 250 jobs in information technology unit. This is part of the company’s cost saving efforts, wherein it plans to eliminate high cost location headcount by 2,300 in aggregate by 2019-end.

State Street spokesman Brendan Paul said, “Today’s moves streamline our IT organization and removes unnecessary layers that get in the way of our overall success. With these changes we will ensure our culture of innovation is more readily focused on delivering against our strategic objectives in the near and long term.”

State Street has been undertaking measures to manage expenses amid a challenging tough operating backdrop, which is hurting revenue growth. The company targets to generate nearly $400 million in cost savings.

State Street’s initiatives to automate operations are also leading to job cuts. In July, during the second-quarter earnings call, Chief Financial Officer Eric Aboaf had commented that the company has started ensuring that “automation is consistently used.” He had further added, “Once you do that, you actually need fewer people in the mix, and you actually deliver better and higher-level services.”

In January, State Street had announced plans to slash 1,500 jobs this year. But during the first six months of 2019, the company recorded high cost location headcount reductions of more than 1,800, exceeding the target. So, management revised the target in July.

Further, the company has stopped hiring, with exceptions in lower cost regions including India, China and Poland. State Street has added more than 5,000 employees in these regions over the past couple of years.

In separate news that came last week, in an investors’ conference, management projected net interest income (NII) for the third quarter to be flattish on a sequential basis. Earlier, the company anticipated NII to be down in the range of 1-3%.

This positive development cheered investors. Also, over the past three months, State Street’s shares have rallied 12.1%, outperforming the industry’s rise of 7.9%.

Currently, State Street carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

State Street is not the only financial firm which is cutting workforce. Several global banks, including Barclays (BCS - Free Report) , Schwab (SCHW - Free Report) , Deutsche Bank, HSBC Holdings and Citigroup (C - Free Report) have been taking measures to reduce workforce in less profitable divisions.

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