Mellon Bank Corp. said Tuesday that it will redeem $160 million of outstanding preferred stock, causing a drop in fourth-quarter earnings of 11 cents per share.

As a result, analysts said, the bank will just about break even in the quarter, not earning much more than one cent a share. Last year in the same period Mellon earned $114 million, or $1 per share.

This is the second hit to fourth-quarter earnings the bank has announced in a month. In November, the bank said it would take a one-time restructuring charge of $130 million, or 88 cents per share, to repair a badly damaged securities lending portfolio at Boston Co.

The Pittsburgh-based bank will redeem its shares of series H preferred stock on March 1 for $26.30 per share plus accrued dividends.

Even though the impact on earnings sounds dramatic, the bank will save more than $13 million a year, analysts said. Mellon is redeeming the stock because the divident, at $2.60 per share, is more expensive than other funding sources, said Anthony Davis, an analyst at Dean Witter Reynolds.

The bank is well funded without this particular stock anyway, Mr. Davis said. The bank must remain well capitalized in order to finance its August acquisition of mutual fund giant Dreyfus Corp.

Mr. Davis said Mellon's equity averages 10.9% of assets, compared to an average ratio of 8.2% for its peers. Mellon's equity-to-loans ratio is 16.5%; the average for its peers is only 13%.

Mr. Davis called the bank's current strategy, including the redemption "a combination of expensive financing and a reconstituted business mix." Executives "don't need as much capital for their fee business as they have for the spread business," he added.

The redemption is subject to approval by the Federal Reserve Board.

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