Updated from 8:44 a.m. EST
State Street(STT Quote) surged nearly 8% after investors shrugged off the bank's announcement of a $279 million fourth-quarter charge and the departure of a top executive as subprime investment losses mount.
The Boston-based institutional investment giant says it will take an after-tax charge of $279 million, or 71 cents a share, to cover potential legal costs related to losses from its mortgage-backed investments. State Street plans to create a $618 million legal defense fund as a result of the investment losses. The company also says William Hunt, the CEO of State Street Global Advisors, has resigned and James Phalen has taken over as interim chief of the investment management arm.
"We have reviewed the actively managed fixed-income strategies at [State Street Global Advisors] that contained investments backed by subprime mortgages. Based on our review and discussions with certain customers who were invested in these strategies, we have established this reserve to address legal exposure and other costs relating to these strategies," State Street CEO Ron Logue said in a press release. ...
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