State Street Corp. sold about $11 billion in mortgage-backed securities and other assets, the company announced Thursday.
The sale will reduce earnings by $350 million in the current quarter, State Street said in a statement.
The Group of 20 nations last month endorsed rules, known as Basel III, increasing the level of the highest-quality capital that banks must hold to cushion against losses and avoid a repeat of the financial crisis. After the transaction, State Street’s Tier 1 common capital ratio, the most important regulatory measure of a bank’s financial health, will rise to 8.8% under the new rules, the bank said. The new minimum under the rules is 7%.
State Street’s divestment will improve “capital ratios under evolving regulatory capital standards” and reduce risk from “certain assets,” the company said in the statement.
The company said the sale will reduce net interest income by $375 million in 2011. The company said it continued to forecast 2010 full-year operating profit to be slightly higher than the $3.32 a share reported in 2009.
The sale included U.S. non-agency mortgage-backed securities valued at $4.1 billion and asset-backed securities of $3.7 billion, as well as non-U.S. mortgage-backed and asset-backed securities of $3.1 billion, State Street said.
State Street plans to reinvest the proceeds from the sale mostly in AAA and AA asset-backed and mortgage-backed securities, as well as U.S. Treasuries and agency securities, according to the statement. The sale reduces State Street’s risk-weighted assets to $63.7 billion from $75.6 billion as of Sept. 30.