DOW JONES NEWSWIRES
State Street Corp. (STT) on Monday announced plans to sell more
than $1 billion in stock and notes as the money manager cut its
2009 forecast and said it recorded a $3.7 billion loss from
asset-backed commercial paper conduits.
The unrealized mark-to-market losses on the assets, which had a
book value of $22.7 billion as of Friday, were the result of State
Street consolidating the conduits onto the company's balance sheet.
Based on prepayment assumptions, the assets should generate some
$475 million in pretax interest revenue this year.
The move slashed the capital levels for State Street, prompting
the stock and note sale. The company said its ratio for tangible
common equity, which measures how much of a bank's hard assets its
common shareholders actually own, would have fallen from 5.9% to
2.2% as of March 31 because of the ABCP move. With the stock
offering - with an assumed $1.45 billion in proceeds - that lowered
rate would be boosted to 3.4%.
The company didn't disclose how much in stock or notes it
planned to sell other than using the $1.45 billion figure for as an
estimate on how its tangible common equity would be boosted by a
sale. State Street's market capitalization is about $17 billion.
Its shares fell 4% premarket to $36.99.
In light of the conduit move and the planned stock-and-note
sale, State Street projected 2009 earnings of $4.25 to $4.50 a
share, with revenue down 12%. The forecast excludes the ABCP loss
but includes the resulting interest revenue that is expected to be
offset by the offerings' impact and the possible re-establishment
of incentive compensation.
The company last month projected revenue falling 8% to 12% and
per-share earnings dropping 12% to 16% from last year's $5.21 a
share.
State Street wasn't told it needed to raise capital levels by
the Treasury following the government's recent stress tests. The
company reiterated Monday it plans to repay the $2 billion capital
infusion it received last fall as soon as possible.
-By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136;
kevin.kingsbury@dowjones.com