Bear Stearns Earnings Declined 61%

123jump.com Staff
20 Sep, 2007
New York City

Bear Stearns earnings declined as market had expected. Third quarter earnigs declined to $171 million from $438 million. The revenue fell 37.5% to $1.3 billion from $2.1 billion a year ago. Net revenue in fixed income group fell 88%. Wealth management recorded negative earnings of $38 million compared to $233 million. Global clearing services revenue increased 30%.

[R]10:00AM New York – Bear Stearns earnings declined 61% on 37.5% lower revenue.[/R]

Bear Stearns revenue in the third quarter declined 37.5% from a year ago to $1.33 billion and earnings fell 61% to $166 million. Earnings per share in the quarter declined to $1.16 from $3.02 per share a year ago.

The annualized return on equity in the third quarter was 5.3% and 13.7% for the last twelve months.

The company ((BSC)) incurred $200 million loss related to BSAM High-Grade hedge fund.

""""The third quarter was characterized by extremely difficult securitization markets and high volatility levels across asset classes. While our fixed income results clearly reflect these market conditions, we reported solid revenues in Investment Banking and record revenues in Global Equities and Global Clearing Services,"""" said James E. Cayne, chairman and chief executive officer.

For the third quarter ended August 31, 2007, earnings were $171 million compared to $438 million a year ago.

Institutional Equities division reported net revenue increase of 53%. Net revenues in Capital Markets segment were down 36% from a year ago to $1.0 billion. Fixed income net revenue were $118 million, down 88% from a year ago. Investments banking net revenues were reported at $211 million, down 9% from a year ago.

Global Clearing Services group reported $332 million in revenue, up 30% from a year ago. Wealth management net revenues for the quarter were negative $38 million compared to $233 million.

Compensation as a percentage of net revenues was 49.9% compared to 48.1% a year ago.

The company authorized quarterly dividend of 32 cents per common share and increased its stock buyback to $2.5 billion from $2 billion.

[R]9:00AM New York – Goldman Sachs earnings jumped 79%. Bear Stearns earnings fell 61%.[/R]

Goldman Sachs ((GS)) reported third quarter revenues of $12.33 billion and net earnings of $2.85 billion. Earnings per share were $6.13 compared to $3.26 billion a year ago and $4.93 billion in the second quarter of this year.

Net revenues in investment banking jumped 67% to $2.15 billion from a year ago. Net revenue in the financial advisory jumped more than 100% to $1.41 billion and equity and debt underwriting revenue increased 8% to $733 million. Revenue from trading and principal investments jumped 70% from a year ago to $8.23 billion and 24% higher than in the second quarter.

The company statement also added that ‘significant losses on non-prime loans and securities were more than offset by gains on short mortgage positions. In addition, net revenues in both commodities and credit products were higher compared with the third quarter of 2006.’

Net revenue in asset management and securities services jumped 35% from a year ago to $1.96 billion. Operating expenses jumped 55% from a year ago to $8.08 billion and compensation and benefit increased 68% to $5.92 billion.

The company declared a dividend of 35 cents per common share and $404.41 per Series A Preferred Stock.

[R]6:00AM New York, 7:00PM Tokyo, Japanese stocks closed up 0.2%. Commodity- related stocks and Real Estate however rallied buoyed by rising metals prices. Japan commercial land prices gains 1% and manufacturing companies to boost capital spending by 6.3%.[/R]

Japanese stocks were largely tepid as losses in technology stocks sparked by 10% fall in DRAM chips weighed on chipmakers. However, commodity related stocks and realty developers gained on rising metal prices and strengthening land prices. Of the Nikkei 225 index 131 stocks advanced, 84 slumped and 10 traded unchanged. Nikkei 225 Index edged up 32 points to close at 16,413.79.

The Ministry of Land Infrastructure and Transport says Japans commercial land prices firmed for the first time since 1991 by 1%. Decline in nationwide residential land prices slowed to 0.7% from 2.3%.

The Cabinet Office and Ministry of Finance survey released today shows that sentiment among manufacturers with one billion yen worth of capital soared 7.7 points this quarter, compared to a loss of 2.2. The gain in confidence was a significant reversal of the pessimism that characterized business in the second quarter. Japanese companies are also planning to increase capital spending, especially on equipment and factories by 6.3% and overall companies from all sectors are likely to increase investment by 1.5%.

Japan Iron and Steel Federation says the August production of crude steel increased for the fifteen month with an increase of 3.7% compared to a year ago to 9.97 million metric tons driven mainly by rising global demand.

Realty developer Mitsui Sumitomo led the rising stocks in the index with a gain of 5.62% on firming land prices, followed by mineral resources company Sojitz Corp, climbing 25 or 5.49%. Hitachi Zosen soared 5.26%, while Marubeni Corporation added 5.21%. Japan Steel Work jumped 4.61% propped up by metal prices.

Metal prices upward spiral, driven mainly by demand from emerging economies, especially China, continues, as copper added 4%, while nickel recorded the biggest rise in three years to 9.9%. Zinc gained 5.1%.

Consumer lender Mitsubishi UFJ led the index decliners with a loss of 13.41% on speculation that falling consumer spending will hurt earnings and reports that the financial institution expects a 100 billion loss this year. Chipmakers Tokyo Electron and Adventist Corp, the world’s biggest memory –chip-testing equipment shed 4.92% and 4.65% respectively. Chubu Electric Power lost 4.49% and Sumitomo Trust retreated 4.48%.

Concerns of declining consumer spending also took their toll on consumer lenders providing unsecured lending such as Aiful, Acom and Promise.

Bloomberg news service reported that according to an analyst at DRAMeXchange, Asia’s largest computer memory chip market, memory prices will drop 10% between $16 and $17 in the first half of this month. Elpida, the largest memory maker, fell 6% and chip makers Advantest and Tokyo Electron declined 5%.