Lehman cuts its mortgage assets

Lehman Brothers Holdings Inc, the fourth-largest US securities firm, reduced assets tied to real estate 20 percent to $64.7 billion in the second quarter to curb further losses from the collapse of the mortgage market.

Lehman lost $2.8 billion, or $5.14 per share, during the quarter, in line with the preliminary figures it released last week, the New York-based firm said yesterday in a statement. Leveraged loans were cut to $18 billion from $28.7 billion.

Lehman fell for four straight days in New York trading last week after disclosing the wider-than-estimated $2.8 billion loss, followed by a shakeup of senior management. Richard Fuld, the longest-serving chief executive officer on Wall Street, is trying to convince investors that the firm can weather the global credit market contraction.

"Since we announced our expected second-quarter earnings last week, we have begun to take the necessary steps to restore the credibility of our great franchise and ensure that this quarter's unacceptable performance is not repeated," Fuld said in the statement.

Writedowns wiped out revenue for the firm, which said fixed- income revenue was a negative $3 billion. Equity trading dropped 65 percent to $601 million due to writedowns on private-equity stakes. Investment-banking revenue fell 25 percent to $858 million, and asset management rose 10 percent to $848 million.

BlackRock Inc, the largest publicly traded fund manager in the US, and Maurice Greenberg, the former CEO of American International Group Inc, the world's biggest insurer, bought stakes in Lehman earlier this month and said they remain optimistic about its businesses. Putnam Investments LLC, the mutual fund firm that oversees about $173 billion, invoked the "strong franchise" Fuld has built in his four-decade career.

Fuld, 62, stunned Wall Street on Thursday by replacing Chief Financial Officer Erin Callan and President Joseph Gregory in an effort to reassure investors amid speculation that mortgage-market losses will continue to drag down earnings.

Agencies

(China Daily 06/17/2008 page17)