State Street shares fall 11% as it cuts profit outlook

Financial asset custodian halves earnings forecast

March 22, 2003|By BLOOMBERG NEWS

BOSTON - Shares of State Street Corp., the world's largest custodian of assets, took their biggest tumble in almost 10 years yesterday after the company said a prolonged slump in stock prices and lower long-term interest rates will reduce its earnings by about half this quarter.

State Street fell $4.39, or 11 percent, to $34.11 yesterday on the New York Stock Exchange, after tumbling 16 percent to $32.50 earlier in the day. It was the stock's biggest drop since April 1993, when the shares lost 18 percent.

A decline in global investing and low interest rates damped revenue growth at State Street, which on Thursday said its net income will be 27 cents to 29 cents a share this quarter. A year ago, it earned 54 cents. The bank had increased profit for 12 straight quarters, even as the stock market fell the past three years.

"The slowdown in the markets is having a big effect," said William Batcheller, a manager at Armada Funds who helps oversee $1.1 billion of stocks including about 450,000 State Street shares.

Almost 11 million State Street shares changed hands, five times the 2.1 million average daily volume in the past three months.

State Street is the second money manager to trim profit forecasts in the past week, after Alliance Capital Management Holding LP. Analysts have lowered estimates for other firms, as investors pulled money from stock funds. Last month, investors withdrew $8 billion from U.S. equity funds, Lipper Inc. said.

State Street had $6.2 trillion in assets under custody and $763 billion under management at the end of 2002. The $1.5 billion purchase of Deutsche Bank AG's securities-lending and record-keeping businesses, completed in January, added about $2.2 trillion in assets under custody and 3,200 employees in 82 markets, including Germany, Ireland and Scotland.

Chief Executive Officer David A. Spina said the bank will have to cut more jobs than the 1,000 already slated to be eliminated because of the acquisition.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.