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State Street to lay off 630

Chief executive Joseph L. Hooley said the job cuts were “gut wrenching” in the short term, but also necessary.The Boston Globe/file 2010/Globe Freelance

State Street Corp. said it would lay off 630 employees, or 2 percent of its workforce, including 260 people in Massachusetts, and sounded a cautionary note on the economy even as it reported higher profits.

The Boston-based financial services giant announced the layoffs Friday, along with a 26 percent gain in net income, to $468 million, for the fourth quarter. Chief executive Joseph “Jay” L. Hooley said the company brought in record new business in the quarter but still expects headwinds in 2013.

“We’re working through a difficult patch,’’ Hooley said in an interview. “While a lot of things look better in the environment, there are still constraints. We’re not ready to suggest that we’re back to growth days again. So we’re being prudent and cautious.”


Hooley said the job cuts were “gut wrenching” in the short term. But he believes they are necessary to ensure the company remains “a vital part of not only the global community but of Boston.”

The company’s shares surged nearly 6 percent to $53.36 Friday. State Street stock rose 16.6 percent last year, outpacing a 13.4 percent rise in the Standard & Poor’s 500 index.

State Street employs 12,000 people in Massachusetts and 18,000 more around the world in the business of accounting, recordkeeping, and other services for large investors such as mutual funds and pension funds. In addition, the company directly manages more than $2 trillion in assets.

Bank analyst Nancy Bush in New York said State Street has been under enormous pressure from investors to boost its earnings and keep expenses low.

“What’s been frustrating for investors is, this is a great company, they have great businesses. They are the best and the biggest in this space, and they just have never been able to make that pay off,’’ Bush said. A pattern of expensive corporate acquisitions has complicated State Street’s performance, she said.


While fourth-quarter revenues rose a strong 6 percent, to $2.45 billion, the full year presented relatively sluggish growth — 0.6 percent to $9.65 billion, mainly due to the low interest rate environment. Earnings for the year 2012 climbed 7 percent to $2.02 billion, or $4.20 per share.

Hooley on Friday called the latest round of layoffs part of making a “leaner, more efficient, and more profitable enterprise.” State Street said the layoffs would cost $139 million in 2013.

State Street is one of the Commonwealth’s largest employers. It has cut hundreds of jobs since the financial crisis, when it was struggling with investment portfolio losses and plunging global markets.

Even with recent improvement in the economy and the markets, the company has a conservative outlook for this year, forecasting only a 2 percent rise in the S&P 500 Index. “We’re grinding out of this recession,’’ Hooley said. “But it feels reasonably positive, forward looking.”

Beth Healy can be reached at bhealy@globe.com.