Loss SoarsBy Reuters - | Posted 2008-09-10 Email Print
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Shares of Wall Street's fourth-largest investment bank Lehman Brothers gave up some of their overnight gains as investors expressed disappointment that Lehman, whose business model and outlook face wide scrutiny, did not announce more concrete actions.
Lehman said its net loss applicable to common shareholders was $4.09 billion, or $5.92 per share, for the third quarter, ended Aug 31. Net revenue was negative $2.9 billion, reflecting the write-downs.
Analysts' average forecast was a loss of $3.43 per share on revenue of $88 million, according to Reuters Estimates. The company lost $2.77 billion in the second quarter.
Lehman said it has eliminated 1,500 jobs since the end of May.
"One of my customers told me, 'I don't know if I will see you tomorrow or not,'" said Hany Besha, who operates a coffee truck outside Lehman's headquarters in New York.
The write-downs included $5.3 billion for residential mortgages, $1.7 billion for commercial real estate, and $800 million for other matters. They were offset by $2.2 billion of gains from hedging and higher debt prices.
Lehman said future write-downs of residential mortgage assets are unlikely. The bank also expects to report a loss of $760 million from principal investments.
Lehman said it ended August with total assets at 21.1 times shareholder equity, down from multiples of 24.3 three months earlier and 31.7 at the end of February.
Thomas Russo, a principal at Gardner, Russo & Gardner in Lancaster, Pennsylvania, said, "Losses from mortgages have overwhelmed the capital at Lehman, and the steps required, including the sale of Neuberger, are really quite a drastic turnaround."
Lehman had examined options from selling a stake to a Korean bank to spinning off the investment management unit, but investors have been frustrated at the lack of progress.
In what looked like a concerted effort to boost investor confidence in Lehman, a slew of major banks, including Citigroup Inc and Goldman Sachs Group Inc, said they were still trading with the firm late Tuesday afternoon.
(Additional reporting by Joseph A. Giannone and Aarthi Sivaraman in New York, Sweta Singh in Bangalore, Kim Yeon-hee and Marie-France Han in Seoul, Steve Slater and Natsuko Waki in London, Blaise Robinson in Paris; Editing by Lincoln Feast, Erica Billingham and John Wallace)
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