The company is ranked 316th on the Fortune 500 as of 2022.[10] The company is on the list of the banks that are too big to fail published by the Financial Stability Board.[11] It is rated by Visual Capitalist as the third U.S. bank by uninsured deposits, with 91.2% of deposits being uninsured.[12]
The company is named after State Street in Boston, which was known as the "Great Street to the Sea" in the 18th century as Boston became a flourishing maritime capital. The company's logo formerly included a clipper ship to reflect the maritime industry in Boston during this time.
Current operations
Investment servicing: State Street Global Services
State Street Bank and Trust Company, also known as State Street Global Services, is the securities services division of State Street that provides asset owners and managers with securities services (e.g. custody, corporate actions), fund accounting (pricing and valuation), and administration (financial reporting, tax, compliance, and legal) services. Global Services handles assets from many classes, including stocks, derivatives, exchange-traded funds, fixed income assets, private equity, and real estate. Global Services also provides outsourcing for operations activities and handles US$10.2 trillion of middle-office assets.[1]
Investment management: State Street Global Advisors
The company traces its roots to Union Bank, which received a charter in 1792 from Massachusetts Governor John Hancock. It was the third bank to be chartered in Boston and its office was at the corner of State and Exchange Streets.[17][18] In 1865, Union Bank received a national charter and became the National Union Bank of Boston. The bank later built a headquarters at Washington and State streets.[19]
State Street Deposit & Trust Co opened in July 1891. The name was shortened to State Street Trust Company in 1897. It became the custodian of the first U.S. mutual fund in 1924, the Massachusetts Investors Trust (now MFS Investment Management).[18]
20th century
State Street and National Union merged in October 1925.[17] The merged bank took the State Street name, but National Union was the nominal survivor, and it operated under National Union's charter, thus giving the current entity its rank among the oldest banks in the United States.
The company merged with Second National Bank in 1955 and with the Rockland-Atlas National Bank in 1961.[20][21]
In 1966, the company completed construction of the State Street Bank Building, a new headquarters building, the first high-rise office tower in downtown Boston.
In 1972, the company opened its first international office in Munich.
In 1973, as a 50/50 joint venture with DST Systems, the company formed Boston Financial Data Services, a provider of shareholder record-keeping, intermediary and investor services, and regulatory compliance. More than 100 top staff from IBM were hired by State Street as it set about implementing IBM mainframe computer systems.
In 1975, William Edgerly became president and chief executive officer of the bank and shifted the company's strategy from commercial banking to investments and securities processing.[18]
By 1992, most of State Street's revenue came from fees for holding securities, settling trades, keeping records, and performing accounting.[18] In 1994, the company formed State Street Global Advisors, a global asset management business.
In 1995, State Street acquired Investors Fiduciary Trust of Kansas City for $162 million from DST Systems and Kemper Financial Services.[22][23] In 1996, Bank of New York acquired the unit investment trust servicing business of Investors Fiduciary Trust Co., Kansas City, Mo.[24]
In 1997, State Street setup its office in Singapore.[25]
In 1990, State Street Bank Luxembourg was founded, and as of 2018[update] is the largest player in the country's fund industry by assets.[27]
In 2003, the company acquired the securities services division of Deutsche Bank for $1.5 billion.[28] The company also sold its corporate trust business to U.S. Bancorp for $725 million.[29] Also in 2003, State Street sold its private asset management business to U.S. Trust.[30]
In 2010, the company acquired Mourant International Finance Administration.[33] It also acquired the securities services group of Intesa Sanpaolo for $1.87 billion.[34] In December 2010, the company announced that it would be retrenching 5% of its workforce and effectively reducing the hourly wages of remaining employees by 10% via increased standard work hours.[35]
In November 2011, the company was named as amongst the world's 29 systemic banks.[36]
In 2012, the company acquired Goldman Sachs Administration Services, a hedge fund administrator, for $550 million.[37]
In November 2014, the company sold SSARIS Advisors, its hedge fund unit, to senior management.[38]
In 2016, State Street launched a program called Beacon, focused on cutting costs and improving reporting technology.[39] Their main focus was to shrink their US workforce in order to bolster profits in excess of $2.5 billion (2018 figures).[citation needed] Also in 2016, the company acquired the asset management business of General Electric.[40]
In 2017, the company announced that Jay Hooley, the chief executive officer of the company, would retire, to be succeeded by Ronald P. O’Hanley, then vice chairman, president and CEO of State Street Global Advisors.[41]
In 2018, State Street completed its acquisition of Charles River Development, a Burlington, Massachusetts provider of investment management software.[42] The deal closed October 1, 2018, at a cost of approximately $2.6 billion that will be financed by the suspension of share repurchases and the issuing of common and preferred equity.[43] News of the acquisition led to a drop in State Street shares of nearly 10% with share prices remaining flat since the purchase.[44]
In January 2019, State Street announced that it planned to lay off 1,500 employees, increasing the number to 2,300 in July.[45] During that period, the company shifted their workforce from the United States to countries like China, India and Poland and operated under a hiring freeze.[45] The increased overseas hiring resulted in a net gain of employment of over 3,000.[46][47]
In September 2021, State Street agreed to buy Brown Brothers Harriman & Co.'s investor-services business for $3.5 billion in cash.[48] Following continued scrutiny in receiving regulatory approvals, the deal was mutually agreed to be dropped in November 2022.[49]
Controversies
Currency trade fraud
In 2009, California alleged on behalf of its pension funds CalPERS and CalSTRS that State Street had committed fraud on currency trades handled by the custodian bank.[50][51]
Non-disclosure of short position
On February 28, 2012, State Street Global Advisors entered into a consent order with the Massachusetts Securities Division. The Division was investigating the firm's role as the investment manager of a $1.65 billion (USD) hybrid collateralized debt obligation. The investigation resulted in a fine of $5 million (USD) for the non-disclosure of certain initial investors taking a short position on portions of the CDO.[52]
Shareholder complaints
During the May 2012 annual shareholders meeting, chairman and chief executive Jay Hooley was shouted down on numerous occasions by protesters in relation to the outsourcing and other grievances.[53]
Undisclosed commissions
On January 18, 2017, State Street agreed to pay $64.6 million to resolve U.S. investigations into what prosecutors said was a scheme to defraud six clients through secret commissions on billions of dollars of trades.[54][55]
Fearless Girl statue
In March 2017, State Street Global Advisors commissioned a statue called Fearless Girl by Kristen Visbal and placed it temporarily in the Financial District, Manhattan, in front of the Wall Street icon Charging Bull. The statue is an advertisement for an index fund which comprises gender diverse companies that have a higher percentage of women among their senior leadership.[56] While some have seen it as an encouragement of women in business, some women criticized the statue as "corporate feminism" that violated their own feminist principles.[57][58][59][60] In October 2017, the company paid $5 million to settle a lawsuit charging that it had paid certain female and black executives less than their male and white peers.[61]
Climate change
State Street announced in January 2020 that State Street Global Advisors will vote against directors of companies in major stock indices that do not meet targets for environmental, social, and governance changes.[62] According to Morningstar Proxy Data, State Street, "supported a majority of the climate-related disclosure requests that shareholders placed on the ballot," during the 2020 proxy season.[63]
^"Semi-Annual Report". SEC.gov. December 31, 2000. State Street Kansas City ("SSKC") (formerly Investors Fiduciary Trust Company) and State Street Boston ("SSB")
