Bear Stearns Announced First Ever Quarter Loss

by Stewart Douglas

Story link: Bear Stearns Announced First Ever Quarter Loss

Investment bank and asset manager Bear Stearns has today announced it has made its first ever quarterly loss over the last three months as a result of growing problems within the troubled US sub-prime sector in its investment portfolio led to writedowns and loss of earnings.

The leading investment firm reported that it had made a loss over the last quarter to November of $854 million, a violent swing from $535 million profits over the same period in 2006, as a result of problems within its sub-prime mortgages investments and fatal blows to two of its major hedge funds.

Over the last three months the bank has also been forced to writedown just under $2 billion in recognition of its continuing deflating exposure to the sub-prime sector, which has as of yet still to be cleared by the bank with a view to avoiding repeat scenes later into 2008.

Whilst the results have been seen as a major blow for Bear Stearns and its investors, it has been announced that executives will not take a bonus this year and the firm would look to tighten up cost centres over the course of 2008 to ensure residual profitability.

Meanwhile the bank has been forced to pull back its workforce by some 10% in cost saving exercises, despite profits declining by well over 60% over the summer months as the company’s exposure became more obvious.

It remains to be seen whether more job cuts will be on the cards at Bear Stearns in light of its growing financial difficulties, which will nevertheless damage the firm’s reputation even further.

Bear Stearns was amongst the first of the major investment banks to make public its problems relating to the sub-prime sector, with many of its competitors following suit in the last few months in recognition of their over exposure to the once profitable and valuable sector.