State Street Corporation - Recent History

Recent History

In 1995, State Street completed its previously announced acquisition of Kansas City, Missouri–based custodian and securities servicer Investors Fiduciary Trust Co. ("IFTC"), which had approximately $130 billion of assets under custody. IFTC was purchased from its owners DST Systems Inc. and Kemper Financial Services Inc. for 5,972,222 shares of State Street stock (worth approximately $161.6 million as of December 31, 1994). The acquisition strengthened State Street's market leadership and increased total assets under custody to $1.8 trillion. The Kansas City office today is a branch of State Street and is State Street's second largest US operation outside of eastern Massachusetts.

In 2003, State Street purchased Deutsche Bank's securities services division for $1.5 billion. This deal made State Street the largest security services firm, surpassing JP Morgan Chase and The Bank of New York Mellon.

On February 5, 2007, State Street announced the nearly $4.5 billion acquisition of Investors Financial Services, parent of principal subsidiary custodian bank Investors Bank & Trust. State Street offered 0.906 shares of its stock for each share of Investors Financial Services common stock. It was a 38 percent premium over the previous closing price of Investors Financial stock. The deal closed on July 2, 2007 and created the world's second largest custodian with approximately $14.1 trillion of assets under custody, second to only The Bank of New York Mellon at $15 trillion.

The company employs 29,895 staff around the world, which is down from 2008 levels after laying off approximately 1,400 employees. This impacted about 6% of global staffing, eastern Massachusetts bearing the bulk of the reductions. The layoffs were instituted despite State Street following suit like some of its competitors and other Wall Street firms with near-shoring efforts (transferring positions to lower cost US cities) and offshoring positions to joint venture operations in cities including Mumbai, Pune and Krakow. The bank claims assets under custody of US$17.9 trillion and assets under management of US$1.7 trillion as of September 30, 2009.

There has been a spate of legal action against State Street, beginning December 2009, when the State of California, on behalf of its pension funds, CaLPERS and CalSTRS, alleged fraud on currency trades handled by the custodian bank. Since then, there has been a list of other suits involving various divisions - securities lending and Erisa actions, as well as further FX-related issues. Many are pending. Other issues relating to pension funds have recently arisen. In October 2011, two executives from State Street Global Markets left the company following a pension fund’s inquiries over the pricing of a fixed-income transition.

The company announced in December 2010 it would be laying off 5% of its workforce and effectively cutting all employees wages by 10% by requiring that all employees work week be raised from the 36.25 hours to 40 hours while being paid the same wages as they did for the 36.25 hours. In March 2011, State street backed away from the 10% wage cut on hourly employees and while requiring the employees to still work the new 40 hour work week but receive their full hourly pay for all hours from March 2011 onward. However, there was no pay adjustment for the 3 month period the pay cut was in effect. There was also no adjustment to salaried employees salaries.

In 2010, State Street completed the acquisition of Mourant International Finance Administration increasing State Street's alternative assets under administration, which include private equity and hedge fund assets of $600 billion. State Street also purchased the Securities Services business line from Intesa Sanpaolo, one of Italy's premier banking groups.

On November 4, 2011, State Street was named among the world's 29 systemic critical banks by the G20. This judgment will force State Street to comply with all aspects of the Basel III accord.

On November 22, 2011, IPIC Group Ltd., a private Delaware-based investment firm, commenced a partial tender offer seeking to replace State Street as Bank of America's largest institutional shareholder.

On February 28, 2012, SSgA entered into a consent order with the Massachusetts Securities Division "in connection to the Division's investigation into SSgA in its role as the Investment Manager of a $1.65 billion hybrid collateralized debt obligation named Carina CDO, Ltd." which resulted in a State-imposed fine of $5 million for the non-disclosure of certain initial investors taking a short position on portions of the Carina CDO. This led to "...a windfall as a result of Carina's default...through its purchase of approximately $142 million worth of Credit Default Swaps referencing Carina's notes."