State Street sinks to a loss on writedown

US BANK State Street reported a $3.3bn (&pound;2bn) second-quarter loss yesterday as it suffered hefty writedowns on the value of some of its investments.<br /><br />The loss of $7.12 per share contrasted sharply with net income of $548m, or $1.35 per share, in the same quarter in the previous year.<br /><br />But State Street&rsquo;s reversal of fortunes was largely down to a hit of $6.1bn taken on unrealised losses in its asset-backed commercial paper programmes, known as conduits.<br /><br />The decision to take the loss on to its balance sheet during the second quarter brought to an end uncertainty over when the bank would choose to do so.<br /><br />State Street also incurred charges on the $2bn it took from the US government&rsquo;s Troubled Asset Relief Programme (Tarp), after repaying the money earlier this month.<br /><br />On an operating basis, the bank, which is one of the world&rsquo;s largest institutional investors, booked a profit of $1.04 per share, beating an analysts&rsquo; consensus forecast of $0.99.<br /><br />The company said its ability to withstand further shocks to the financial system had improved, after its tangible common equity (TCE) ratio rose to five per cent from 2.2 per cent at the end of the first quarter.<br /><br />Chairman and chief executive Ronald Logue said he expected TCE to reach 6.5 per cent by the end of the year.<br /><br />He added that the firm&rsquo;s strong capital position would allow it to consider making acquisitions, while dividends could also be hiked following a 96 per cent cut earlier in the year.<br /><br />Investment management fees recovered 6.6 per cent from the first quarter while servicing fees were up 3.8 per cent, although both were considerably lower than in the same period last year.