Published October 15, 2012
BOSTON – Some of State Street Corp's largest shareholders want to oust Chief Executive Jay Hooley, the Financial Times reported on Monday.
The newspaper said four of Boston-based State Street's 10 largest shareholders are growing frustrated with the company's stock price and pace of cost cutting. The names of the disgruntled shareholders were not disclosed in the FT story.
The FT said some of the investors want either Hooley or Chief Financial Officer Ed Resch to be replaced with "new blood."
Last year, activist investor Nelson Pelz of Trian Fund Management LP issued a white paper that criticized State Street's compensation practices and said the company should sell its asset management arm.
State Street reports third-quarter financial results on Tuesday and shareholders will be looking closely at the company's compensation ratio, which can appear bloated when revenue is flat or down.
In the second quarter, State Street's compensation and benefit expense was 38.8 percent of total operating revenue, down from 44.3 percent of operating revenue in the previous quarter, Brad Hintz, an analyst at Bernstein Research, said last week in a research note. But State Street's top executives have warned that it could be difficult to keep that ratio under 40 percent if revenue is flat in the second half of 2012.
State Street also is battling declines in foreign exchange trading revenue and ultra-low interest rates, which have hurt its lending margins. Hintz added that he expects State Street to report an 8 percent year-over-year decline in total fees for the third quarter.
"Despite the challenging operating environment, we are confident in the resiliency of our business and proud of our track record," State Street said in a statement. The bank also has been working to cut costs amid a tough market for boosting revenue.
Shares of State Street are up 23 percent over the past 12 months, outpacing the 17.6 percent gain on the S&P 500 Index. But over the past five years, the stock is off 40 percent while the S&P 500 is down only 7.8 percent.
At the end of June, State Street's largest shareholders included American Funds, MFS Investment Management, Vanguard Group, Fidelity Investments, Trian Fund Management and Viking Global Investors LP, according to Thomson Reuters data.
(Reporting By Tim McLaughlin; Editing by Steve Orlofsky)