Third largest custody bank, State Street Corp., reported an 84% drop in Q4 profits - from last year's $498 million to $81 million.  Job cut costs and the sale of securities weighed in heavily.  Interestingly enough, some other critical numbers looked strong in the 4th quarter:  Operating revenue rose 9.6% while Expenses rose 4.4%;  Assets Under Management (AUM) rose 3% to $2 trillion;  and, Assets Under Custody jumped 15% to a record $15.9 trillion.

    Job Cuts, MBS/ABS Sales.   CEO Joseph Hooley is eliminating 1,400 jobs, or 5% of the workforce, as record-low interest rates reduced profits from investing and securities lending.  The firings will save as much as $625 million before taxes by the end of 2014, while triggering $450 million in restructuring costs over 4 years. 

Back on 12/9, State Street reported it had sold $11 billion of MBS and other ABS securities - and replaced them with Treasuries and other safer bonds.  This increased the bank's capital ratios and helped it comply with the Basel III international banking rules agreed to last year.  This "funding effort" cost some $350 million in the 4th quarter.  State Street also completed two European deals in 2010 that added to earnings.   [Bloomberg, 1/19]