Analyst raises 2009 estimate for State Street

NEW YORK - Shares of State Street Corp. rose Thursday afternoon, as an analyst increased his 2009 earnings estimate and a day after the financial services firm said it would reduce costs by cutting 6 percent of its staff.

State Street shares rose $2.72, or 7.4 percent, to $39.32 in early afternoon trading. Shares have traded between $28.06 and $86.55 during the past year.

Deutsche Bank analyst Mike Mayo on Thursday morning increased his 2009 earnings estimate for the bank to $5.25 per share from $4.95 per share to account for cost savings the bank will receive from reducing its work force.

Analysts polled by Thomson Reuters on average, forecast earnings of $4.69 per share for 2009.

Mayo's change comes based on expected expense reductions ranging between $375 million and $400 million annually as State Street sheds about 6 percent of its global work force by the end of the first quarter.

On Wednesday, State Street said it will cut 1,600 to 1,800 jobs, mostly by consolidating middle and senior management ranks. Most of the cuts will be in North America, with the rest in Europe and the Asia-Pacific region.

The job cuts will lead to an initial charge of $325 million to $350 million, or 51 cents to 55 cents per share, to account for severance, benefits and other costs. Mayo said that charge is likely to be a one-time cost before the cost benefits of a smaller work force are realized.

Mayo maintained a "Hold" rating and $44 price target for the stock.

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