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