State Street (STT:US) Corp., the third- largest custody bank, said Edward Resch will retire next year as chief financial officer after more than a decade in the role.
Resch, 60, will step down after a successor has been found, Boston-based State Street said yesterday in a statement. Resch joined State Street in September 2002 after serving as CFO at Jersey City, New Jersey-based Pershing LLC.
“He did a solid job as CFO, but this is not a job where you win popularity contests,” Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview.
State Street’s shares have trailed those of rivals Bank of New York Mellon Corp (BK:US). and Northern Trust Corp. (NTRS:US) over the past year as the company struggled to boost profit amid record low interest rates. The firm came under pressure from investor Nelson Peltz in October 2011 to increase profitability, make a clearer commitment to cost-cutting, put shareholder returns ahead of acquisitions and consider selling its money-management unit.
State Street has risen (STT:US) 18 percent in the past year, compared with a 27 percent gain by BNY Mellon and a 29 percent increase for Chicago-based Northern Trust.
“Ed has been our CFO during one of the most challenging times for our industry,” Chief Executive Officer Joseph Hooley said in the statement. “We are fortunate to have benefited from his unwavering dedication for the past 10 years.”
Four large investors, frustrated with the company’s performance, have pushed State Street’s board of directors to replace Hooley or Resch, the Financial Times reported Oct. 15 without identifying any sources.
Hooley has worked to cut costs, in part by eliminating 2,250 jobs in the past two years. In recent months, he placed more emphasis on returning capital to shareholders through stock repurchases and dividends. The company will be “very cautious” considering acquisitions in the future, Hooley said in October.
State Street and its competitors have been hurt by low interest rates since the Federal Reserve cut its benchmark lending rate to close to zero in 2008 in an effort to spur economic growth.
Low interest rates hurt custody banks by reducing the return they make on their own investments and lending. They have also forced State Street to waive some fees on money-market funds to keep client returns above zero.
The company will conduct a “comprehensive internal and external search” for a successor, according to yesterday’s statement.
Resch earned $8.1 million in total compensation in 2011, according to a regulatory filing.
State Street oversaw $17.3 trillion in custody assets as of Sept. 30, and $2.1 trillion in investment assets.
Custody banks keep records, track performance and lend securities for institutional investors including mutual funds, pension funds and hedge funds. State Street also manages investments for individuals and institutions.
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