State Street ( STT) missed Wall Street's fourth-quarter and full-year profit expectations, after taking a previously announced $279 million charge to cover potential legal costs related to mortgage bets. The Boston-based institutional investment giant reported net earnings of $233 million, or 57 cents a share, down from $309 million, or 91 cents a share, in the year-ago period. Fourth-quarter revenue increased to $2.48 billion, from $1.62 billion a year ago. For the full-year, State Street made a profit of $1.26 billion, or $3.45 a share, vs. $1.10 billion, or $3.26 a share in 2006. Revenue grew to $8.34 billion, from $6.11 billion in 2006. Revenue results were aided by State Street's July acquisition of Investors Financial Services. Fourth-quarter results were hampered by a previously disclosed after-tax charge of $279 million, or 71 cents a share, which will be used to establish a $618 million legal defense fund to protect against investors in fixed-income products managed by State Street Global Advisors unhappy with investment losses. "As we explained on our call earlier this month, we expect that by establishing the fourth-quarter reserve to address the legal exposure and other costs associated with the underperformance of certain active fixed-income strategies at State Street Global Advisors, we can address customer concerns and help to put the issue behind us, particularly given the current momentum in our business," Chairman and CEO Ronald Logue said in a statement. Analysts polled by Thomson Financial had expected fourth-quarter earnings of $1.35 a share on revenue of $2.39 million. For the full year, analysts had expected a profit of $4.55 on revenue of $8.24 billion. The bank's return on equity for the quarter increased to 18.7%, from 15.9% in the year-ago period and to 17.7% for the full-year, up from 17.1% in 2006. "Nearly every revenue item on our income statement increased in double digits this year, compared to 2006, resulting in 32% growth in earnings per share on an operating basis," Logue said. "While investment servicing and investment management fees were both strong, revenue from trading services and securities finance benefited from continuing market volatility, particularly in the fixed-income markets in the second half of 2007." On an operating basis, State Street sees 2008 earnings of $1.67 billion, or $4.57 a share, up from $1.16 billion, or $3.46 a share, in 2006. For 2008, the company sees revenue growth on the low end of a range between 14% and 17%. That computes to between $9.51 billion and $9.76 billion. The bank sees 2008 profits toward the low end of between 10% and 15% on an operating basis, which equates to between $5.03 and $5.26 a share. Wall Street's expects a profit of $5.16 a share on revenue of $9.75 billion.