State Street Bank

(STT) - Get Report

reported a greater-than-expected 12% decline in third-quarter earnings on Tuesday, citing "less favorable market conditions."

The Boston-based asset manager and bank processor earned $177 million, or 52 cents a share, compared with $202 million, or 60 cents a share, in the year-ago period.

On an operating basis, the bank earned 55 cents a share, compared with 65 cents a share a year earlier. Wall Street analysts, basing their estimates on the operating figure, had expected State Street to earn 65 cents in the quarter, according to Thomson Financial.

The bank also fell far short on the revenue line, generating $1.2 billion in operating revenue, compared with the analyst estimate of $1.5 billion.

Bank executives blamed the poor performance on sharply lower revenue from foreign exchange services and brokerage and securities lending.

"I am very disappointed with our results this quarter," said Ron Logue, State Street chairman and chief executive, in a prepared statement.

The bank also announced a cost-saving measure that will eliminate 425 jobs and save $50 million a year. The job cuts will result in a fourth-quarter charge of $25 million.

State Street shares begin trading at $43.85.