BOSTON - STATE Street Corp, one of the world's biggest institutional money managers, said on Wednesday it plans to lay off as many as 1,800 people, or 6 per cent of its staff, in the first three months of 2009.

The layoffs will cost the company between US$325 million (S$495.8 million) and US$350 million, but will ultimately translate into annual savings of as much as US$400 million, the company said.

State Street, which also earns fees for providing investors with a range of services that include calculating the bulk of mutual fund prices printed in newspapers, will reduce its staff by consolidating middle and senior management ranks. The bulk of layoffs are expected in North America.

State Street Chairman and Chief Executive Ronald Logue said the cuts will allow the company to continue delivering consistent earnings growth.

The company, which reported a 33 per cent gain in third-quarter earnings of US$477 million, or US$1.09 a share, said it expects operating earnings for the full year to be at the high end of a range between 10 per cent and 15 per cent.

Next year, it sees operating earnings at the low end of that range, the company said.

State Street has already told investors it may have to take a charge in the fourth quarter and has set aside US$450 million before taxes this quarter if it decides to assist some funds managed at its State Stet Global Advisors unit.

The cost for the layoffs will likely translate into a charge of between 51 cents and 55 cents a share.

Investors have long expressed concern about unrealised losses that State Street has in its off-balance sheet commercial paper, or conduit programme.

State Street's share price closed down 1 per cent at US$36.60 on the New York Stock Exchange on Wednesday, leaving it down 55 per cent since January. That's slightly more than the 53 per cent drop in the 16-member Standard & Poor's Supercomposite Asset Management & Custody Banks Index.