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Bear Stearns Profits Drop, Something About Mortgage Bonds

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While total net revenue for Q2 rose to a record $2.51 billion, earnings for Bear Stearns dropped 33%, the bank’s first quarterly drop in two years, Bear reported today. Net income fell to $361.7 million ($2.52/share), versus last year’s $539.3 million ($3.72/share). Without the Bear Wagner Specialists $277 million (88 cents/share) charge, earnings would have been at $3.40/share.
Avoiding words like “subprime” and “mortgage,” CEO James Cayne said: “The diversity of our franchise is clearly demonstrated in the record net revenues generated this quarter…The Global Clearing Services and Wealth Management segments reported record performance while results were also very strong from debt and equity underwriting, equity derivatives and leveraged finance. Internationally, we continue to grow aggressively, hiring talented people, broadening our product platform and reaching new clients in multiple geographies."
In other BS news, High-Grade Structured Credit Strategies Enhanced Leverage Fund, a fund managed by Bear, is rushing to sell $3.86 billion in mortgage-backed bonds to prospective buyers today, which many believe is an effort by Bear Stearns traders to help a big losing hedge fund in the mortgage market. Since April 30, HGSCSELF has lost 23% of its value, and Bear recently angered investors by barring them from taking their money out of the sinking ship.
Meanwhile, Breaking Views thinks everyone should stop freaking out over the whole “mortgage-market turmoil” thing and likes Bear’s $17.4 billion valuation, and attraction as a takeover target.
Bear Stearns Press Release [Business Wire]
Earnings at Bear, Goldman Suffer Due to Subprime Mess [WSJ]
Bear Stearns Profit Drops 10 Percent as Mortgage Bonds Slump [Bloomberg]
Is Bear Stearns Cutting Its Losses? [BusinessWeek]
Bear Stearns' Subprime Bath [BusinessWeek]
Bear's Fund Is Facing Mortgage Losses [WSJ]
Bullish on Bear [Breaking Views]