BOSTON (Reuters) - State Street Corp , a leading institutional money manager, said quarterly earnings fell 71 percent and unrealized losses rose in its commercial paper program and investment portfolio, sending its shares down 37 percent in premarket trading.
"These results were very disappointing," RBC Capital analyst Gerard Cassidy said, adding that investors were clearly "spooked" by the higher unrealized losses and the company's weak outlook for 2009.
Investors have long worried about State Street's growing unrealized losses and whether the company would have to write them off.
Net income in the fourth quarter was $65 million, or 15 cents per share, down from $223 million, or 57 cents per share, a year earlier. The numbers include expenses to cut its workforce and prop up ailing funds.
On an operating basis, earnings were $511 million, or $1.18 per share, down from $540 million, or $1.38 per share, a year earlier.
The company said after-tax, unrealized mark-to-market losses in its investment portfolio increased to $6.3 billion, up $3.0 billion from September 30.
Unrealized losses in its asset-backed commercial paper program increased to $3.6 billion, rising $1.4 billion from September 30.
As of January 16, unrealized after-tax losses in the investment portfolio had narrowed to $5.9 billion, the company said.
In a regulatory filing on January 16, the company said it would take a material charge to earnings if all or a portion of the unrealized losses were determined to be other-than-temporarily-impaired.
In premarket trading State Street shares stood at $22.75, down from a Friday close at $36.35. At one point the shares hit their lowest level since 1997.
Worrying investors even further was the company's outlook for 2009. Chairman and Chief Executive Officer Ron Logue said 2009 revenue is expected to be flat with 2008's record results, falling short of the company's long-term goal of 8 percent to 12 percent growth. Operating earnings are also expected to be flat, below the long-term goal of 10 percent to 15 percent growth.
Quarterly revenue rose to $2.7 billion from $2.5 billion a year earlier.
Assets under management stood at $1.44 trillion, down 27 percent from a year earlier. Custody assets stood at $12.04 trillion, down 21 percent.
(Reporting by Svea Herbst-Bayliss; Editing by Derek Caney and John Wallace)
