State Street updates results, comments on outlook
State Street Corp., a Boston firm that provides financial services to institutional investors, said that its unrealized investment portfolio losses improved by $730 million on an after-tax basis as of Jan. 30, compared to Dec. 31.
The company also said that a more conservative first-half reinvestment strategy will reduce 2009 expectations.
Last month, shares of State Street shed more than half their value on a single day, as investors digested the company's warning about $9 billion in potential investment losses and projections for a tougher 2009. To read a Globe story about that, please click here.
State Street issued a press release today that, among other things, updated 2008 results. The intent of the plan detailed today is to address concerns about State Street's pro forma tangible common equity, or TCE, ratio, State Street said.
Some highlights from the company's press release:
* "We have eliminated the 2008 incentive compensation for the five named executive officers and reduced it by approximately 50 percent for the remainder of the company," Ronald E. Logue, State Street's chairman and chief executive, said in a statement. (Logue is shown at left in a Globe file photo.)
* State Street updated its full-year 2008 earnings to reflect the impact of a plan to further strengthen its tangible common equity ratio, or TCE, in light of continued unprecedented market disruption. The 2008 results have been updated to reflect a $278 million pre-tax reduction in 2008 incentive compensation as part of a plan to improve TCE. In 2009, the plan to improve TCE includes reducing the company's quarterly dividend on its common stock to $0.01 per share, a more conservative reinvestment plan affecting assets paying down and maturing in its investment portfolio, actions intended to increase organic capital growth, and a reduction in the size of the company's balance sheet.
* For the fourth quarter of 2008, earnings are $0.54 per share, up from the previously announced $0.15 per share. Return on common shareholders' equity is 8.4 percent in the fourth quarter of 2008, up from the previously announced 2.3 percent.
* As of Jan. 30, 2009, our unrealized after-tax loss on our investment portfolio has improved $730 million, from $6.3 billion at Dec. 31, 2008 to $5.6 billion. Also, the unrealized loss in our conduit assets has improved modestly."
* Logue also said in his statemet: "We are adjusting our outlook for 2009 based on several new factors: a more conservative reinvestment plan affecting assets paying down and maturing in our investment portfolio; we now expect the S & P 500 to average about 900 for the year down from our previous estimate of 1000; and we intend to further restrain expenses in 2009. As a result, we now expect our operating revenue to decline 8 percent to 12 percent from record levels in 2008; our operating earnings per share to decline 12 percent to 16 percent from the updated record level of $5.61 per share in 2008; and our return on common equity to approach the low end of our 14 percent to 17 percent long-term range. At our meeting with investors and analysts later today, we will provide further detail about our TCE improvement plan and our 2009 outlook."
To read today's full press release from State Street, please click here.
(By Chris Reidy, Globe staff)