Shares of State Street Corp. (STT) fell more than 50% on Tuesday after the Boston-based custodial bank posted sharply lower fourth-quarter earnings and warned investors that some obscure off-balance-sheet assets could leave the bank at risk of heavy losses in the future.

State Street's shares recently traded down 50.7% to $17.93.

State Street's troubles also weighed on the stock of fellow custodial company Bank of New York Mellon Corp. (BK), which had recently fallen 27.8% to $16.58.

Custodial banks generally hold investments and securities for other investors but have recently faced troubles related to secondary businesses like managing money-market funds.

State Street Corp.'s (STT) fourth-quarter net income slid 71% on steps the asset manager took to shore up some funds and restructuring charges, as flat results are expected for 2009.

That forecast, which compares with 2008's $5.21 and the $4.71 expected for 2009 by analysts surveyed by Thomson Reuters, is below the company's long-term goal of 10% to 15% growth. Revenue is also seen being unchanged, compared with State Street's 8% to 12% goal and the 3% drop projected by analysts.

Unrealized mark-to-market losses at State Street's investment portfolio more than doubled during the quarter to $6.3 billion, which State Street blamed on the ongoing market illiquidity. In the new year, the figure dropped by $400 million as of Friday.

The company also said mark-to-market losses in off-balance-sheet conduits it administered rose to $3.6 billion in the fourth quarter from $1.4 billion at the end of September.

The company first disclosed the losses in a regulatory filing issued Friday after the market closed.

The stock has lost more than half its value the past three months.

The parent of State Street Global Advisors reported net income of $65 million, or 15 cents a share, down from $223 million, or 57 cents a share, a year earlier. Operating earnings, which excluding the fund moves and restructuring charges in the latest quarter, fell to $1.18 from $1.38.

Revenue rose 7.8% to $2.67 billion as net interest revenue surged 42% as continued declines in the Fed Funds rate lowered funding costs. That more than offset weakness in declines of servicing revenue and management fees.

Analysts were looking for earnings of $1.14 a share on $2.42 billion in revenue.

As part of the U.S. Treasury's capital purchase program, the Treasury bought stakes in State Street and is investing $2 billion in the money manager. State Street, which provides large financial institutions safekeeping for stocks and assets, was also hired to serve as a custodian in the government's efforts to revitalize the markets.

-By Marshall Eckblad, Dow Jones Newswires; 201-938-4306; marshall.eckblad@dowjones.com

-By Shirleen Dorman, Dow Jones Newswires; 201-938-2310; shirleen.dorman@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.