DOW JONES NEWSWIRES
State Street Corp. (STT) updated its 2008 results to reflect
lower incentive pay as part of its plan to improve its tangible
common equity ratio, as the money manager lowered its 2009 outlook
and announced it would slash its quarterly dividend to a nominal 1
cent a share from 24 cents.
State Street's shares were down 7.4% at $22.35 in premarket
trading. The stock is off 39% so far this year.
Chief Executive Ronald E. Logue said, "State Street has among
the highest regulatory capital ratios in the industry; however, we
are implementing a plan to alleviate investor concerns about our
pro forma TCE ratio, if we were to consolidate the asset-backed
commercial paper conduits that we administer."
He said the company cut bonuses for five executives and reduced
bonuses by about half for the rest of the company.
Because it now expects the S&P 500 Index to be lower for
2009, State Street said it expects operating revenue to fall 8% to
12%, compared with last month's projection of flat revenue. It said
it expects operating earnings to decline 12% to 16% from 2008's
restated $5.61 a share and return on equity to be at the low end of
its 14% to 17% range.
State Street said full-year operating earnings now total $5.61 a
share, compared with its previously announced $5.21. Return on
equity, a key profitability measure, was 14.8%, up from its
previous statement of 13.4%. Operating expenses fell because of the
$278 million reduction in compensation expense. Revenue was
unchanged.
The company said the reduction in expenses results in an
increase of its capital and leverage ratios.
Late last month, Fitch Ratings became the last of the major
ratings agencies to cut its long-term issuer default rating on
State Street following revelations of $9.1 billion in unrealized
losses that raised fears of potential pressure to raise
capital.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com