Bear Stearns Net Tumbles 61% |
Date: Friday, September 21, 2007
Author: Tim McLaughlin, Reuteres.com
NEW YORK (Reuters)—Bear Stearns Cos. Inc. said on Thursday [Sept. 20] that its quarterly profit plunged 61% to its lowest level in five years on bad bets on subprime mortgages and disrupted fixed-income trading. The U.S. investment bank's profit badly missed the estimates of analysts after the collapse of two hedge funds triggered about $200 million in losses. Industry giant Goldman Sachs Group Inc., meanwhile, thrived where Bear Stearns stumbled, posting a 79% gain in profit. Seen as a leader in packaging home loans into mortgage-backed bonds, Bear Stearns' bread-and-butter business, fixed-income, saw its revenue plunge 88% to $118 million. "They were definitely hurt by the mortgage problems and credit markets," said Meg McMullen, president of Boston's New England Research & Management. "And they are the least diversified among the major investment banks." Net income was $171.3 million, or $1.16 a share, in the third quarter ended Aug. 31, down from $438 million, or $3.02 a share, in the year-earlier period. Analysts on average looked for Bear Stearns to earn $1.78 a share, according to Reuters Estimates. Total net revenue fell 38 percent to $1.3 billion. Bear Stearns shares are down 29% this year, underperforming the 2.5% decline on the Amex Securities Broker Dealer Index. By Tim McLaughlin
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