State Street Corp. Chief Executive Ronald Logue, who helped grow the company into one of the world’s biggest institutional money managers, said on he plans to retire on March 1.
The news yesterday — announced two days after the 217-year-old company cut its full-year outlook, sending its shares down almost 10 percent – took many financial analysts by surprise.
Logue, who will be 64 when he steps down, will be succeeded by Jay Hooley, State Street’s president and chief operating officer, the company said in a press release.
"It is a well-planned and orderly succession," spokeswoman Carolyn Cichon said.
Logue took over the top job from David Spina in July 2004, after Spina unexpectedly retired.
A Boston native who joined State Street in 1990, Logue was credited with reviving State Street’s businesses and oversaw key acquisitions including the purchase of cross-town rival Investors Financial Services Corp for $4.2 billion.
But he was also closely tied to the company’s decision to move into riskier assets and was one of eight top banking executives called to Washington in February. At the hearing, lawmakers called into question the payouts of large bonuses and bad management decisions that contributed to the financial meltdown.
State Street received $2 billion in federal aid – the smallest amount among the banks asked to testify before Congress this year.
"Ron Logue has done a lot of good things for the organization and really took them to the next level," said RBC Capital Markets analyst Gerard Cassidy. "But the financial crisis was brutal for the company and it was brutal for him and he probably said it is time to go," Cassidy added.
In recent months Logue oversaw layoffs, slashed the dividend, dramatically pared back bonuses and raised capital.
Two days ago he declared the company’s core business of managing money for investors and providing services like accounting to hedge funds and mutual funds "strong and growing." State Street has $1.7 trillion in assets under management and $17.9 trillion in assets under custody.
"The key for me is to put one foot in front of the other and concentrate on watching expenses very carefully and trying to grow market share," Logue told Reuters in an interview on Tuesday.
But the company still faces a number of legal headaches, including most recently a lawsuit brought by California’s attorney general that seeks to recover millions of dollars in alleged overcharges to pension funds for executing foreign currency trades. State Street denies the charges.
In August, State Street warned that its legal reserve may not be enough to cover claims and potential penalties related to fixed-income investments that included subprime mortgages. But on Tuesday Logue said no change was being made to the reserve in the third quarter.
When Logue retires he stands to take with him $25.3 million of accumulated pension benefits as of Dec. 31, 2008, according to a filing made in April. He also had about $3 million of unvested stock awards, the proxy filing shows.
Logue’s announcement is the latest in a string of high-profile departures at financial firms and some analysts said more may be coming. Several weeks ago Bank of America chief executive Kenneth Lewis said he would retire this year.
"These companies are coming out of a crisis and executives are saying we accomplished our goals," said Marty Mosby senior analyst at FTN Equity Capital Markets. "Now more and more of the executives may say ‘I am ready to do something else.’"
