State Street:ONE OF the Republic's biggest financial services employers has set aside $200 million to cover potential liabilities from the bankruptcy of US investment bank Lehman Brothers.
US-based State Street, which employs over 2,000 people in fund administration in the Republic, had a number of repurchase agreements with Lehman, which it secured by holding mortgages as collateral.
The group's chairman and chief executive, Ronald E Logue, said yesterday that State Street valued this collateral following Lehman's bankruptcy last month and "established a reserve of $200 million to address our estimated net exposure on indemnification obligations relating to these agreements".
The bank is one of nine institutions selected by the US Treasury to operate its programme of buying shares in troubled banks in a bid to tackle the global financial crisis.
State Street yesterday reported net income of $477 million for the three months ended September 30th, compared with $358 during the same period last year. Diluted earnings per share were 91 US cent this year as against $1.09 in 2007. The bank had fee revenues of $1.9 billion during the quarter and interest revenue of $615.
It generated another $8 million in net interest revenue from acting as an intermediary for the US Federal Reserve Bank's commercial paper money market liquidity facility (AMLF), a scheme that allows banks with exposure to commercial papers to boost liquidity by borrowing from the US central bank.
The sale of its interest in joint venture CitiStreet to Citi Group added $350 million to revenues. At the same time, it had a $98 million charge from a reduction in net interest related to sale-in, lease-out transactions.
This left it with reported revenues of €2.77 billion for the three-month period, compared with €2.24 billion for the same quarter in 2006. Stripping out the charges and exceptional gains, operating revenues for the period were €2.54 billion in the quarter, as against €2.26 billion last year.
On the same basis, operating income was $538 million in the third quarter of 2007, compared with $449 last year.
