Thursday, December 20, 2007

Bear Stearns quarterly mortgage write-down grows to $1.9 bln; bonuses scotched

Confirming press reports earlier this week, Bear Stearns said members of the executive committee will not receive any bonuses for 2007.

"We are obviously upset with our 2007 results, particularly in light of the fact that weakness in fixed income more than offset strong and, in some areas, record-setting performance in other businesses," Chairman James Cayne said in a statement.

The company said it wrote down about $1.9 billion in mortgage inventory net of hedges, which reduced fourth-quarter earnings by $8.21 a share. Its previous write-down estimate was $1.2 billion.

Bear Stearns said fixed-income net revenue was negative $1.5 billion in the fourth quarter.
"The continued repricing of credit risk and the severe dislocation in the structured products market led to illiquidity in the fixed-income markets, lower levels of client activity across the fixed-income sector and a significant revaluation of mortgage inventory," Bear Stearns said in the earnings release.

For the fourth quarter, the company had total net revenue of negative $379 million, compared with net revenue of $2.41 billion a year earlier.

"The results, to us, seem to imply that the problems at Bear are not contained to mortgages and more broad based than seen elsewhere," Mike Mayo, an analyst at Deutsche Bank, wrote in a note to investors.

Bear's fixed income business saw weakness beyond mortgages, the firm's equities business also declined, despite strong overseas performance, and its prime brokerage business also lost ground, Mayo noted.

Shares of Bear Stearns were mixed during morning trading on Thursday. The stock was recently down five cents at $90.55.

Bear Stearns' results cap off a busy week for earnings from the big brokers, which have been buffeted by losses on mortgage and fixed-income assets

Florida Commercial Lender continues to strive to secure funding for thier clients.

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