State Street Profit Drops, Job Cuts Coming By Svea Herbst-Bayliss BOSTON (Reuters) - State Street Corp., the world's biggest institutional asset manager, on Tuesday said third-quarter profit fell 12 percent amid lower revenue and higher expenses, sending its shares tumbling. The Boston-based firm, which holds trillions of dollars in securities in custody and calculates the bulk of mutual fund prices printed in newspapers, also said it would lay off 2 percent of its work force, cutting 425 jobs, as part of a reorganization designed to save $50 million. State Street, whose shares were down more than 6 percent, rejected speculation that it might become a takeover target, saying it plans to remain independent. Third-quarter net income, including $16 million in merger and integration costs, dropped to $177 million, or 52 cents per diluted share, from $202 million, or 60 cents, a year earlier. Operating earnings, which exclude merger and integration costs, dropped to 55 cents per diluted share from 65 cents a year earlier. Analysts, on average, had expected 65 cents per share, according to Reuters Estimates. "No one had expected them to miss earnings by this much," said Richard Bove, an analyst at Punk Ziegel & Co." Shares of State Street were down more than 6 percent and were the biggest contributor to a 0.55 percent drop in the Standard & Poor's 500 index in midday trading. Financial services stocks were down almost uniformly. State Street Chief Executive Ron Logue, promoted to the job this summer when David Spina unexpectedly resigned, blamed slow trading in currency markets and the Federal Reserve's quick-paced interest rate hikes for the slimmer profits. Logue, in an interview with Reuters, described third-quarter conditions as the worst he has seen and said a 26 percent drop in foreign exchange trading revenue and a 21 percent decline in securities lending fees -- money a firm earns for loaning out securities -- outweighed higher revenue from management fees. Total operating revenue rose to $1.2 billion from $1.1 billion in the year-earlier quarter but were down from $1.3 billion in the 2004 second quarter. Operating expenses jumped 14 percent from a year earlier to $890 million, fueled in part by higher salaries and employee benefits, but were down 5 percent from the second quarter.     Continued ... Quelle "State Street Profit Drops, Job Cuts Coming" : reuters.com Main page for "State Street Profit Drops, Job Cuts Coming"