Finance and Economic

Accounting firm Watkins Meegan LLC has hired the managing partner of Sturn Wagner Lombardo & Co. LLC, a dissolving Annapolis accounting and consulting firm.

Kurt Sturn, founder of Sturn Wagner Lobardo, will join Bethesda-based Watkins Meegan Jan. 1 and will bring his entire book of business and five to 10 other professional employees with him, said Sean Roddy, chief operating officer of Watkins Meegan, which already has an Annapolis office with about 15 employees.

The deal is part of a new acquisition strategy for Watkins Meegan, the second-largest locally-based accounting firm in the Washington area with about 240 employees and four offices.

“We’re hoping to double over the next five years,” Roddy said.

Over the last five years, the firm has grown its staff 33 percent, according to the Washington Business Journal list of accounting firms — all of it organic.

The firm also is talking to a few potential acquisition targets, Roddy said.

With the current deal, Sturn approached Watkins Meegan, saying he and his partners were going in different directions and were thinking about dissolving, Roddy said.

The firm signed a deal with Sturn last week and is still in negotiations to bring on some of the other accountants that worked under him.

“I am both proud and confident that this merger brings together the best and brightest to serve the Annapolis business community and provide it with the resources of exceptionally trained professionals,” Sturn said in a statement.

Sturn Wagner Lobardo was founded in 1990 and began dissolving several weeks ago. As of a couple of years ago, it had about 33 accountants, though that has been reduced to about 20, Roddy said.

It has offices in Annapolis, Baltimore and Washington, according to its Web site.

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More doctors are dropping their private practices, choosing to go to work behind bars treating murderers, rapists and other hardened criminals.

Better pay, better hours, retirement benefits and free malpractice insurance are just a few of the reasons why physicians are picking prisoners over civilian patients.

In 2009, private contractor Prison Health Services (PHS) saw a 77% increase over 2008 in the number of respondents applying for job opportunities.

At the University of Massachusetts Medical School, this year 22 of 150 new students chose the correctional health care clerkship as their first choice, more than double the typical response.

"Students are looking for an employer who offers flexible work hours and a steady paycheck. Correctional health care offers both," said Dr. Michelle Staples-Horne, medical director for the Georgia Department of Juvenile Justice, adding that doctors who have stayed with a government agency long enough also benefit from pension plans.

Typically a salaried job with steady work hours, correctional physicians can earn starting salaries of around $140,000, according to Staples-Horne, roughly the same as the average school loan for graduating med students.

A dangerous job?

Dr. Kurt Johnson dumped his practice and became a jailhouse doctor in November. Johnson operated a solo practice in Laramie, Wyo., for six years. Two years ago he started working part time for Brentwood, Tenn.-based PHS, a division of America Service Group (ASGR), which provides doctors, nurses and other health care professionals to detention centers around the country.

"I never thought of correctional health care as a career. It wasn’t even on my radar in [medical school] training," said Johnson, now a regional medical director for PHS.

At his private practice he had to cram in dozens of patients daily, sometimes for only five minutes, just to earn enough to cover his overhead expenses.

He was constantly filing insurance paperwork, and malpractice insurance was eating into his income.

With correctional health care, Johnson has a steady paycheck of about $175,000 — roughly 20% more than he made in private practice.

"Since I was a PHS employee, my malpractice insurance was covered through them. I felt like they had my back," he said.

But he’s still getting used to the sound of the prison doors slamming shut. "It’s an impressive sound. It gives me goose bumps at times wired payday loan."

He has treated death row inmates. "It’s intimidating," he admits, but says he’s never felt physically threatened by his patients.

Staples-Horne agrees that doctors typically didn’t consider prison to be an ideal or safe setting to practice medicine. She admits that there is risk, but points out that most doctors don’t have the benefit of high security that prisons provide.

"Doctors are often safer in this setting than in an emergency room when you don’t know any thing about the person coming in," she said. "You don’t know if they have a weapon, if they are violent or aggressive."

Doctors say the medical problems affecting inmates can range from simple ailments to serious, chronic problems such as drug and alcohol addiction, heart disease, cancer and AIDS.

Health care on the inside

Dr. Ryan Herrington is a regional medical director with Correctional Medical Services, a St. Louis-based contracted health care provider.

Herrington, a general physician, closed his private practice in Ohio and started working full time in the prison system in April. Anecdotally, Herrington said there is growing interest among doctors seeking opportunity in the corrections environment.

He feels he now has "the financial stability that was harder to attain in private practice."

But Herrington said his own interest in public health also influenced his decision. "These patients have problems that are complex," Herrington said. "They have gone through a tremendous period of time with no health care prior to incarceration."

PHS’s Dr. Johnson is mostly happy with his decision. His prison work allows him to spend more time with his wife and three children. In fact, he credits his patients for making him a better doctor.

"I’m trying to make this a career," said Johnson. "So I’ve also honed my BS detector quite a bit. Now I know when they’re trying to get one over me."

Are you stuck in a lousy 401(k) plan at work but want help maximizing your retirement savings? Send us an email at makeover@moneymail.com. For the CNNMoney.com Comment Policy, click here.
 

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Bank of America pledged Monday to increase its lending to small and medium sized businesses by $5 billion next year. The announcement immediately followed a White House meeting at which President Obama pressured the nation’s biggest bailed-out banks to start reinvesting in the rest of the economy.

"Bank of America is determined to do our part to help the economy grow next year and reduce unemployment by making every good loan we can make," CEO Ken Lewis said in a statement.

Lewis acknowledged the key role that small businesses play in creating jobs, calling them the "lifeblood" of the U.S. economy. "Our improved financial condition and our optimism about the economy will allow us to step up lending to support these clients," he said.

Bank of America (BAC, Fortune 500), based in Charlotte, N.C., is currently the second largest small business lender in the U.S., behind only Wells Fargo (WFC, Fortune 500), according to reports filed to the Treasury Department. Bank of America ended September with $41.9 billion in small business loans outstanding. That tally includes credit lines, credit cards, traditional loans and other financing.

But like most other big banks, Bank of America has pared back its lending through the recession. Since April, when top banks began submitting monthly reports on their small business lending, Bank of America has shaved its outstanding loan balance by 5%, or $2.2 billion.

Bank of America also cut back drastically this year on its lending through the Small Business Administration’s flagship loan program. SBA lending represents a small sliver of all small business lending, but it’s an important indicator of trends in the broader credit market.

Bank of America made 308 SBA-backed loans, totaling $17.6 million, in the SBA’s 2009 fiscal year, which ended in September. That’s a 90% drop from the bank’s year-earlier lending, when Bank of America made 3,354 loans, totaling $121.4 million.

Bank of America has struggled this year with big losses in its small business loan portfolio.

Last fall, as the Wall Street crisis turned critical in the wake of Lehman Brothers’ collapse, CEO Ken Lewis famously referred to the bank’s small business portfolio as a "damn disaster." In the first nine months of this year, Bank of America wrote off $2 guaranteed payday loans.2 billion in small business lending as bad debt, a default rate of almost 16%. By comparison, the bank’s charge-off rate on commercial loans to larger companies was just 1%.

But the bank’s executives have recently taken a more optimistic tone. "We think we are close to the peak in small businesses losses," CFO Joe Price told analysts in October.

Obama turns up the heat: The next set of Treasury reports are due later this week, with updates on October lending from the 22 biggest recipients of government bailout funds. In previous six months, those banks cut their small business lending by a cumulative total of $10.5 billion.

In his Monday meeting with the chief executives of 12 of the nation’s largest banks, President Obama emphasized the "extraordinary assistance" the financial industry received from taxpayers.

"We expect some results," Obama told the bankers. "I’m getting too many letters from small businesses who explain that they are credit worthy, and banks that they’ve had a long-term relationship with are still having problems giving them loans."

Banking industry representatives point to rising default rates, and say they’re having trouble finding creditworthy small business borrowers. Obama is unimpressed by that excuse.

"I urged these institutions here today to go back and take a third and fourth look about how they are operating when it comes to small business and medium-sized business lending," Obama said after his meeting.

All of the participating banks said they would be willing to institute a policy of "second looks" at loans that had thus far been rejected, White House Press Secretary Robert Gibbs said in a press briefing after Obama’s meeting.

So far, despite multiple attempts by Washington policymakers to revive the small business lending market, bank vaults have stayed slammed shut. The White House is trying yet again to change that.

"I think that the bully pulpit can be a powerful thing," Gibbs said. 

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Nokia on Wednesday bolstered its smartphone line-up to better compete with Apple and put a price on the new laptop leading its foray into the fiercely-competitive netbook market.

The handset announcements, the latest moves by the Finnish firm to match Apple’s innovation in a sector switching focus to services and software, left some analysts unimpressed.

“Nokia has major challenges on developing user experience, and we might have to wait for a significant improvement until the second half of next year,” said Jari Honko, analyst with eQ Bank in Helsinki.

Nokia unveiled three new phone models and said its new Booklet 3G will go on sale for about 575 euros ($820).

Nokia has seen its profit margins drop over the last few quarters as handset demand has slumped, and analysts have worried that entering the PC industry, where margins are traditionally razor-thin, could further depress earnings.

But Gartner analyst Carolina Milanesi said Nokia had no choice.

“Nokia had to do it. You see more and more PC guys getting into the mobile operators’ shelves. It’s kind of the counterattack, it’s not just defensive,” Milanesi said.

With the move into laptops, Nokia is crossing the border between two converging industries from the opposite direction to Mac-maker Apple, which entered the phone industry in 2007 with the iPhone.

Nokia will face new rivals like HP, Dell and Acer and some commentators said the market could be too tough to crack.

At the same time Nokia’s history has been marked by major steps from one industry to another. In the early 1990s it sold most of its units, including rubber cables and home electronics, to focus on telecommunications.

Nokia said its new top-end N900 phone will sell for 500 euros. The phone, which has computer-like functions, is the Finnish firm’s first phone to use Linux software. The unveiling of the phone last Thursday helped to lift its shares 11 percent for the week.

PUTTING NOKIA MAPS TO FACEBOOK

Nokia has been looking for business opportunities in offering services like music downloads or games to cell phone users as the handset market matures, but so far its offerings have had limited traction.

Nokia also on Wednesday announced a long-awaited deal with social networking website Facebook that will link Nokia Maps to Facebook, and allow people to update their location and status directly via a Nokia Ovi account.

The first phone to support the service will be the N97 mini, which will start shipping to retailers in October. 

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Elizabeth Cowie chose to step away from teaching nutrition at Fontbonne University this year to become the store nutritionist at Sappington Farmers’ Market. The change in her audience has been the sharpest difference.

Cowie conducts store tours by appointment, giving shoppers meal ideas and introducing them to special products. She also shares strategies on how to save money by adding shelf life to fruits and vegetable bought fresh at the store.

She is also facilitating a program the grocery recently began that fights childhood obesity by delivering locally grown fruits and veggies to area day-care centers.

While she does miss the eager students whom she formerly lectured, Cowie said her new audiences have been receptive to her message to buy local produce.

What’s the most common question you get/expect to get?

Gluten-free is big. Probably the next most is just helping people find product that is local and sustainable. They want help (identifying products) that are from the metro area and (I tell) them why those would be a better choice as opposed to another product.

How do you prepare yourself to be a store nutritionist?

I don’t know that I prepared myself, I just kind of dove in. The inspiration for eating more eco-friendly was a personal thing that started probably a few years back when I read the book, "Animal, Vegetable, Miracle: A Year of Food Life" (by Barbara Kingsolver, with Steven L. Hopp and Camille Kingsolver). That was just so inspirational to me. I’ve always eaten well and educated people to eat well, but this took it a step further where you’re not just eating healthily but you’re also eating for a bigger cause — to help the environment. That was moving to me.

What advice do you give in economic times like these when its cheaper to eat unhealthy and where poverty and unhealthy eating can go hand in hand?

It’s in our advantage to help people save money by eating healthy. Some of the sizes (of our fruits and vegetables) are bigger so (consumers) can get a lot more bang for their buck payday advance. Then I can help them on how to process and store it, freeze it or maybe even can it.

I’ve only been here a couple of months, but that’s one thing I’d love to talk about with more people. (She will soon start a blog on the store’s website). I would love to see more people who think they can only get fresh produce in the summer realize we’ve got fresh produce well into the fall; it’s just going to be different seasonal produce. A lot of those keep well into the winter.

How do health fads affect your job and what the store carries?

It is my duty to educate consumers on the best choices. Those choices always go back to the same foundation — lots of fruits and vegetables, lots of whole grain and eating as close to the earth as possible.

Fads come and go, some are dangerous, unhealthy and temporary. … I just keep leading them back to the principles. There’s not any (fad) right now. The biggest trend — and I hope is not a temporary thing —is eating more eco-friendly. I’m thrilled that’s happening. It’s only going to do good. Thankfully the low-carb, low-fat diets seem to be taking a back seat right now.

Are there certain foods you’re going to try help the store sell?

We’re trying to add more local products. … We need more whole grain options, such as whole wheat pizza crusts, whole grain graham crackers. Some options that are healthy for kids are what I’m focusing on outside the store and for the store too. We have plenty but want to keep finding more.

The other thing we’re working on is denoting what items are local and also ones that are high-fructose corn syrup-free and gluten-free. We’re coming up with a labeling system that helps to identify those products clearly.

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Mattel Inc, the world’s top toymaker, posted a higher-than-expected quarterly profit as it cut costs to make up for a dearth of toys based on summer movies and the impact of foreign exchange.

While both Mattel and rival Hasbro Inc are battling lower demand in the recession, Hasbro is ahead in the movie-based segment this year with toys linked to summer films such as “Transformers - Revenge of the Fallen” and “G.I. Joe - The Rise of the Cobra.”

Net profit for Mattel, the owner of Hot Wheels and Barbie, rose to $21.5 million, or 6 cents a share, in the second quarter from $11.8 million, or 3 cents a share, a year earlier.

Analysts on average expected 1 cent per share, according to Reuters Estimates.

Sales fell 19 percent to $898.2 million, Mattel said. The impact of currency exchange rates accounted for 5 percentage points of the decline.

Worldwide Barbie sales fell 15 percent, hurt mostly by lower overseas sales, the company said.

Mattel has taken elaborate steps — from hosting a fashion show in New York to opening a six-story flagship store in Shanghai — to stoke demand for its iconic Barbie doll, which marks its 50th year in 2009 100% approval payday loans.

The El Segundo, California-based company has cut 1,000 jobs, shaved corporate travel expenses and taken steps to trim advertising and distribution costs in past months as it tries to offset weak demand for toys.

In the past quarter, it cut roughly $91 million of costs in areas such as administration and advertising.

Besides reducing capital spending, Mattel has said it must cut the number of toys it makes to be successful in 2009.

It has said it would rather wait to make toys after determining consumers’ preferences than end up with unwanted products. Even toy retailers have restricted the number of toys on their store shelves to dodge excess inventory and deep discounts.

(Reporting by Aarthi Sivaraman; Editing by Lisa Von Ahn and John Wallace)

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Colombia’s central bank cut its benchmark rate by the smallest amount in five months in a bid to spur growth without sparking inflation, and said it doesn’t see additional rate changes in the “near future.”

The seven-member board, led by bank chief Jose Dario Uribe, reduce the interbank rate by half a point to 4.5 percent, matching expectations of 24 of 31 economists surveyed by Bloomberg. Four analysts expected no change, one saw a 0.75- point cut and two expected a quarter-point cut.

Latin America’s fifth-biggest economy shrank for the first time since 1999 in the fourth quarter of 2008 and a report next week may show that gross domestic product contracted again in the first quarter. The slump has cooled consumer spending and slowed inflation to within the bank’s target range, giving policy makers room to continue their longest rate-cutting cycle in more than six years.

“A good part of the effect of the rate reductions on the economy will be seen in the coming quarters, and with the information available to us up to now, we don’t expect changes to the benchmark rate in the near future,” bank chief Uribe said today at the central bank in Bogota after the rate announcement.

The government has reduced its official economic growth forecast for 2009 twice, from 5 percent in October to 0.5 percent now, and may cut it further once first-quarter GDP data is released later this month.

‘Fine Tuning’

Policy makers expect to see the effect of lower interest rates on the economy in the quarters ahead, as the economy recovers and inflation continues to fall toward their target, the bank said in a statement after the rate announcement.

“The central bank said very clearly it considers the current level already expansionary,” said Jimena Zuniga, Latin America economist at Barclays Capital in New York. “What we’re seeing now is fine tuning rather than shock therapy.”

Finance Minister Oscar Ivan Zuluaga, who is also president of the bank’s board, on June 16 said the economy is expected to improve in the second half and that GDP may expand 2.5 percent in 2010.

“Given the green shoots we’re observing in the global market and the up-tick in commodities, these suggest the economy will enjoy some tailwinds going forward,” said Zuniga, who expected the half-point reduction today.

Target

The economy saw record growth through 2007 when GDP expanded 7.5 percent, a three-decade high. President Alvaro Uribe’s improvements in security created a boom in consumer spending, construction and industrial output.

That in turn sparked annual inflation last year that hit 7 guaranteed approval payday loans no teletrack.7 percent, its highest in eight years. The central bank raised rates 16 times to bring prices under control.

Zuluaga said inflation should end this year at 5 percent and end 2010 at 4 percent. The board targets inflation this year of 4.5 percent to 5.5 percent. It has missed its annual target two years in a row.

After pushing the benchmark rate up to 10 percent last year, policy makers kept it at that level — the highest since August 2001 — until half-point cuts in December and January.

Before today, the bank trimmed the rate by a full point at each of the last four monthly meetings.

‘Time Lag’

Now, after seven straight rate cuts, bank chief Uribe has cautioned against keeping rates low for too long, saying that by encouraging borrowing policy makers run the risk of fueling inflation.

“We have to take into consideration the time lag in the effects of the central bank’s decisions,” said Mario Nigrinis, an economist at BBVA Colombia. “If they are lowered too much, then they will need to be raised later and that creates market instability.”

Policy makers may signal that they will pause after today’s cut or say that the easing cycle is coming to an end, Rafael de la Fuente, chief Latin American economist at BNP Paribas SA in New York, wrote in a report ahead of the meeting.

“The bank has to consider 2010 inflation,” Nigrinis said.

Colombia’s consumer prices rose 0.01 percent in May from the previous month and the annual inflation rate eased to 4.77 percent from 5.73 percent in April.

Still, Camila Estrada, chief analyst at Banco de Credito de Colombia SA, thinks the economy still needs help.

Exports, industrial output and retail sales are weak and the economy expanded just 2.5 percent in 2008 as the global economic slump choked bank lending and sapped consumer confidence, she said.

Retail sales fell 7.1 percent in April from the year- earlier period, while industrial output fell 14.5 percent in April from a year earlier, the biggest decline in a decade, the national statistics agency said yesterday.

Bank chief Uribe said that output has “hit bottom,” in comments to reporters in Bogota today.

“The need for monetary stimulus hasn’t finished yet,” said Estrada, who sees the bank cutting the rate to 4 percent this year. “The economy remains in poor shape.”

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HELSINKI – Nokia on Monday began rolling out its much-anticipated online software and content store, Ovi Store, as it aims to follow the success of Apple’s App Store.

Nokia said it had started moving Ovi Store to production servers, preparing for the global commercial launch, and the store was opened to users of a few of its phone models in Australia and Singapore on Monday.

Nokia has promised to open the store globally this week.

To cope with slowing phone demand Nokia is building a new business from mobile Internet services – like games or maps – but is scaling back separate investment plans due to the slowdown, and focusing on merging the delivery of services.

Nokia, which made its first ever quarterly pretax loss in January-March, is cutting annual costs at its key handset unit alone by more than 700 million euros ($979.7 million U.S.) to counter plunging phone demand.

The Apple App Store has proved extremely popular, with one billion applications downloaded in less than a year, and operators and technology firms including Vodafone Nokia, and Microsoft now want a piece of the pie.

However, analysts say firms will likely struggle to match the success of Apple’s store when creating their own stores, hampered by technical issues, a lack of applications and increased competition.

"Ovi Store is in some ways the last castle for Nokia – both N-Gage and ‘Comes with Music’ are industry laughing stocks," said Global Crown analyst Tero Kuittinen.

Games and music have been spearheads of Nokia’s services push, but its mobile gaming offering has had little success, and its much-hyped music offering, which bundles free music downloads with a sold phone, has also found few clients cash advance payday loan.

Nokia will also sell games and music through the Ovi Store.

"Ovi Store is where Nokia tries to re-group and muster its forces for a counter-offensive," Kuittinen said.

After Apple introduced the iPhone in 2007, handset vendor rivals all focused their efforts on building similar, sleek devices with large touch screens – a situation that is being repeated in 2009 in the rush to build a rival App Store.

Research firm Strategy Analytics has forecast the value of the mobile content market – including downloadable games, ringtones, wallpapers, video, mobile TV, text alerts and mobile Web browsing – to grow 15 percent this year to $62 billion (U.S.).

Nokia shares rose slightly on the news, up 1.3 per cent at 10.76 euros at 1501 GMT.

The store will combine Nokia’s legacy software distribution channels such as the Download! service, which has been pre-installed on more than 200 million phones. However, only a fraction of those phones have ever been used to buy a program through the service.

In late April, Nokia said it would have operator billing – something it expects to boost takeup – in place in eight countries for its launch, but dropped an earlier goal of including the key U.S. market from the start.

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Some soccer moms will have to give up hulking SUVs. Carpenters will still haul materials around in pickups, but they will cost more. Nearly everybody else will drive smaller cars, and more of them will run on electricity.

The higher mileage and emissions standards set Tuesday by the administration of President Barack Obama, which begin to take effect in 2012 and are to be achieved by 2016, will transform the American car and truck fleet.

The new rules would bring new cars and trucks sold in the United States to an average of 35.5 miles per gallon, about 10 mpg more than today’s standards. Passenger cars will be required to get 39 mpg, light trucks 30 mpg.

That means cars and trucks on American roads will have to become smaller, lighter and more efficient.

Eric Fedewa, vice president of global powertrain forecasting for the auto consulting firm CSM Worldwide in Northville, Mich., said the changes would make pickups so much more expensive that they would be used almost exclusively for work.

And instead of a minivan or SUV, more parents will haul their families in much smaller vehicles with three rows of seats — something more like the Mazda 5 small van, he said.

"I think what you’ll see is a lot more creativity in interior packaging," Fedewa said. "You’ll get more rows of seats where you traditionally had cargo space."

Already on Tuesday, some drivers were skeptical. Dixie Bishop, who runs a plumbing business in San Antonio, Texas, that uses vans, worries that the new requirements will drive up her costs at a time when customers are cutting back on repairs.

"Are they going to take my horsepower down?" she asked. "I have to be able to carry old water heaters and toilets."

The new standards mean the end of full-size vans such as the GMC Savana and Chevy Express "as we know them," auto industry analyst Erich Merkle said. GM builds the Savana and Express at its Wentzville plant.

Vans, Merkle said, will probably become more like Ford’s Transit Connect, which uses a four-cylinder engine. Ford expects the Transit Connect, not yet available in the United States, to get 22 mpg in the city. In contrast, a 2009 GMC Savana 1500 two-wheel drive, six-cylinder cargo van, and a similar Express, both get 15 mpg in the city.

The changes will start with smaller cars and trucks, and improvements to the internal combustion engine, Fedewa said free business cards. Automakers are already working on new technology, including direct fuel injection and high compression of the air-fuel mixture.

Car companies are rewiring vehicles so components such as air conditioners and power steering pumps are powered by electricity rather than by the engine.

And they’re developing computer-controlled transmissions with six or more gears, adding efficiency, and rolling out more gas-electric hybrids — among the few cars sold today that meet the 2016 standards.

Of course, developing the technology will cost money — billions of dollars — and automakers will pass that on to customers.

Consumers were already going to pay an extra $700 for mileage standards that had been approved previously, according to administration officials. The Obama plan adds another $600 to the price of a vehicle, bringing the total extra cost to $1,300 by 2016, although some private analysts say the increase will be much heftier.

The administration says gas savings will make up the difference in about three years and would, over the life of a vehicle, save consumers about $2,800 through better gas mileage.

Under the new rules, vehicle carbon dioxide emissions also must be reduced by about one-third by 2016.

"The fact is, everyone wins," Obama said Tuesday at a Rose Garden ceremony attended by representatives of the auto industry and environmental groups as well as state and federal lawmakers.

"Consumers pay less for fuel, which means less money going overseas and more money to save or spend here at home. The economy as a whole runs more efficiently by using less oil and producing less pollution," he said. "And companies like those here today have new incentives to create the technologies and the jobs that will provide smarter ways to power our vehicles."

The new rules will cause manufacturers "to accelerate their technology plans, probably a little more aggressively than they originally thought," said Tony Posawatz, who heads development of the technology used in the Chevrolet Volt electric car that GM plans to build. "For us, we feel comfortable that we’ve got choices."

Angela Tablac of the Post-Dispatch contributed to this report.

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State Street Corp said it plans to sell $1.5 billion of stock and will also sell notes to help repay government bailout funds, and took a $3.7 billion charge to move some assets onto its balance sheet at a loss.

The Boston-based custodial bank and asset manager said it will use proceeds from the securities sales to help repay a $2 billion infusion from the Troubled Asset Relief Program.

It said the debt offering would not be backed by the federal government. Issuing such debt is a requirement for paying back TARP.

Many banks want to repay TARP funds because of restrictions imposed by the government, including on executive pay, and because holding the funds is viewed as a sign of weakness.

State Street was among 19 large U.S. banks to undergo government “stress tests” of their ability to handle a deep recession, and was among nine found not to need more capital.

“The capital-raising is positive,” said Murali Gopal, vice president at Keefe, Bruyette & Woods Inc in New York. “State Street is taking advantage of a run-up in its stock to raise capital, and who knows how long this run-up will last.”

State Street shares have more than doubled since bottoming on January 20 but have fallen by nearly half since last July amid worries about losses from asset-backed commercial paper conduits, a special-purpose vehicle that holds receivables.

The $3 pay day loan lenders.7 billion charge relates to unrealized losses on $22.7 billion of assets from the conduits, which State Street is now moving onto its balance sheet. In February, the bank slashed its dividend and reduced bonuses to bolster capital.

State Street’s charge, equal to about $7.70 per share, will help the company “ensure that capital issues are behind them,” wrote Goldman Sachs & Co analyst Brian Foran. “It makes sense to put the issue to bed.”

Shares of State Street rose $2.09, or 5.4 percent, to $40.60 in afternoon trading. They have traded in a range of $14.44 to $74.85 over the last year.

Foran raised his 12-month share price target to $45 from $25. KBW’s Gopal rates State Street “market perform.”

PROFIT FORECAST

State Street on Monday projected 2009 operating profit of $4.25 to $4.50 per share, including 75 cents per share from interest revenue from the conduit assets.

Excluding the boost from interest revenue, the forecast is below analysts’ average estimate of $3.80 per share, according to Reuters Estimates.

State Street said its forecast reflects a “marginally weaker” environment than expected, and assumes a 12 percent drop in operating revenue and a 17 percent return on equity. 

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