Writedown Leads to Bear Stearns' Loss

It took a $1.9 billion writedown in the quarter ended Nov. 30 as its mortgage-backed securities continued to lose value amid the global credit crisis. That was much larger than the $1.2 billion it expected in November.

Bear Stearns' fiscal fourth-quarter loss, and collapse of two hedge funds it managed during the summer, prompted Chief Executive Jimmy Cayne to pass on his 2007 bonus. Members of the company's executive committee also will not receive year-end bonuses.

"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," he said in a statement.

Cayne is under pressure like other chief executives on Wall Street, as global banks have written off more than $100 billion in assets this year. Bear Stearns and other firms have seen writedowns from subprime-related investments and fixed-income trading come in much steeper than first expected.

The fiscal fourth-quarter loss after paying preferred dividends was $859 million, or $6.90 per share, compared to a profit of $558 million, or $4 per share, a year earlier. The company had negative net revenue of $379 million, compared to revenue of $2.41 billion a year earlier.

The results broadly missed Wall Street expectations, as analysts were unable to get a handle on exactly how exposed Bear Stearns was to risky subprime mortgage securities. Analysts polled by Thomson Financial had expected a loss of $1.79 per share on $625.1 million of revenue for the quarter. No analyst polled by Thomson expected a loss of more than $2.45 per share.

Bear Stearns has undergone three waves of layoffs since two hedge funds it controlled collapsed during the summer. Some 1,500 jobs have been eliminated from its staff of around 15,500.

The company, one of the nation's biggest underwriters of mortgage-backed bonds, may be the Wall Street investment bank most directly exposed to this year's credit squeeze. It faces a number of legal actions related to the funds' collapse, including a suit filed this week by investor Barclays PLC.

Bear Stearns said fixed-income net revenue was negative $1.5 billion in the fourth quarter. However, it did not disclose how much was actually lost before being offset by hedging activity.