Bear Sterns Posts Q4 Loss

Bear Stearns Posts 4Q Losss Amid Bigger-Than-Expected Mortgage Writedown

NEW YORK (AP) -- Bear Stearns Cos. said Thursday a bigger-than-expected writedown in its mortgage portfolio caused the nation's fifth-largest U.S. investment bank to post the first loss in its 84-year history.

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.

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.

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.

On Wednesday, Morgan Stanley Inc. reported a $9.4 billion writedown from bad bets on mortgage debt -- almost triple what it originally expected. That triggered its first loss as a public company for the nation's second-largest investment bank.

It also unveiled a $5 billion investment from China's state-run investment vehicle. Bear Stearns agreed in October to a $1 billion investment from China's government-controlled Citic Securities Co.

Like Cayne, Morgan Stanley's John Mack will pass up a bonus that topped $40 million last year. It was not clear how much smaller, if at all, either man's bonus would have been this year.

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.

It reported fourth-quarter revenue from equity sales and trading dropped 11 percent to $384 million. Meanwhile, investment banking fees -- an area Cayne hoped to build on -- fell 44 percent to $205 million.

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

With this quarter's sluggish performance, and an $850 million writedown during the third quarter, Bear Stearns reported a steep decline in full-year results. Profit in 2007 fell 90 percent from the year-ago period to $212 million.

The dismal year for Bear Stearns might put more heat on Cayne, 73, to announce succession plans. Citigroup Inc. CEO Charles Prince and Merrill Lynch & Co. CEO Stan O'Neal were both ousted after their companies posted massive subprime writedowns.

Cayne ousted his co-president, Warren Spector, after Bear Stearns closed the two troubled hedge funds. Spector was considered to be an heir-apparent at the company.

However, shares rose $1.78 to $92.36 as investors hoped the worst might be over for the company.