State Street Corp., the world’s largest money manager for institutions, said it was slashing its dividend and cutting its forecast for 2009 to reflect a gloomier market outlook.

State Street shares, pummeled last month after the company reported worse-than-expected losses on investments and commercial paper, were down 5.5 percent in premarket trading.

State Street, whose management is due to make a presentation to investors and analysts later in the day, said it was cutting its quarterly dividend to 1 cent per share from 24 cents as part of a plan to boost its tangible common equity ratio — a closely watched barometer of financial strength.

It also eliminated bonuses for its top five executives for 2008 and roughly halved incentive compensation for the rest of the company.

State Street Chief Executive Ronald Logue said in a statement that the moves were taken to alleviate investors’ concerns about the impact on its balance sheet of various asset-backed commercial paper conduits it administers.

State Street’s asset-backed commercial paper conduits are some of the biggest in the industry. Borrowers sell assets like mortgages and other loans to these vehicles and the conduit managers make money by selling securities like commercial paper backed by these assets to investors.

As a result of the dividend cut and the other moves, State Street revised its previously reported 2008 earnings to $4.30 per share from $3.89, which also boosts return on shareholder equity.

The Boston-based financial services group warned that it now expects operating earnings per share to decline 12 percent to 16 percent this year. It said operating revenue would fall 8 percent to 12 percent. Previously it had forecast flat revenue.