The fourth-quarter writedown wiped out the firm's revenue in debt sales and trading. Lehman Brothers Holdings Inc., the No. 1 underwriter of mortgage-backed bonds this year, reported $860 million of fixed-income revenue in the fourth quarter. Half of Lehman's 2007 revenue came from outside the U.S. That ratio has been lower than 20 percent for Bear Stearns.
Mortgage Woes Drive Fourth Quarter Loss of $854 Million at Bear Stearns
Bear Stearns Thursday reported its first-ever quarterly loss, posting a $854 million loss for the fourth quarter as mortgage market woes led to continuing writedowns for mortgage-backed investments and a drop in fixed-income trading revenue. The Wall Street firm said it absorbed $1.9 billion in subprime-led writedowns during the quarter, net of hedges. The loss of $6.90 per share compared to net income of $563 million, or $4.00 per share, for the fourth quarter of 2006. Net revenues for the 2007 fourth quarter were a loss of $379 million down from revenues of $2.4 billion for the 2006 fourth quarter. Bear Stearn's fixed income business -- which includes various mortgage-related businesses -- was a huge drag on overall quarterly performance. Writedowns drove net revenues within the segment to a quarterly loss of $1.5 billion, down from revenues of $1.1. billion in the year-ago period. The bank said in a statement that continuing dislocation in the structure products market drove illiquidity as well as "lower levels of client activity across the fixed income sector and a significant revaluation of mortgage inventory." The company did not provide specific information on its mortgage-related activities. The losses at Bear certainly were expected -- after all, the company derives roughly half of its revenue from its fixed income business. It's also less vested into global markets outside the U.S. than its peers on the Street. Bloomberg reports: