State Street Corp , one of the world's biggest institutional investors, reported a 10 percent drop in quarterly profit on Tuesday and said that it had $5.9 billion in unrealized losses in its investment portfolio.

Net profit shrunk to $476 million, from $530 million a year before, while earnings per share stood at $1.02, down from $1.35 a year earlier.

Operating earnings were $1.04 per share, better than the $1.02 analysts had expected but still down 25 percent from a year earlier.

The 271-year old company, which also earns fees for providing back-office services to investment managers, said unrealized losses in its investment portfolio stood at $5.9 billion, down modestly from $6.3 billion at the end of the fourth quarter.

Unrealized losses in the State Street-administered asset-backed commercial paper conduits were $3.6 billion, unchanged from the end of December.

In February, the company said it would slash its dividend and dramatically cut bonuses to help increase its capital levels. Analysts had blamed the high unrealized losses for State Street's tumbling stock price at the start of the year.

A recent change in mark-to-market accounting rules was seen helping State Street.

(Reporting by Svea Herbst-Bayliss; Editing by Derek Caney and Gerald E. McCormick)