Bear Stearns President: Market Tensions Are Easing
Bear Stearns is seeing money return to the financial markets as fear created by this summer's credit crunch begins to ease, the firm's president said Thursday.
"You can just see the tension in the market ease," said President Alan Schwartz, of market reaction to the U.S. Federal Reserve lowering the benchmark federal funds rate by a half-percentage point in September.
Wall Street's No. 5 brokerage by market value, which has had a tumultuous summer with the collapse of two hedge funds and the ouster of co-president Warren Spector, now sees opportunities in restructuring assets hit by the credit turmoil.
"Right now the anticipation in the market is for things to ease, which is taking some of the fear out of the market and letting things flow a little bit better," Schwartz added, speaking at a presentation for investors.
Schwartz said the outlook remained "relatively strong for investment banking," despite the credit crunch.
"Strategic M&A activity could remain robust as long as the economy remains strong," he added.
International expansion is another avenue for the firm, with foreign institutional investors looking to new firms to handle their assets.
Equities, with hiring in the prime brokerage business, is another growth area, as are structured equity products, risk arbitrage and energy trading, he added.
While the Fed's recent interest rate cut has eased tension, Thomas Marano, head of Bear Stearns global mortgage business said more intervention is needed.
"My feeling is we need another 100 basis points" taken off interest rates, he said.
Marano continues to see opportunities in mortgages. The firm, which is consolidating its lending businesses, this year cut its mortgage staff by 40 percent, with 310 more jobs eliminated this week, a sign the subprime mortgage crisis is lingering.
Wall Street companies, including Morgan Stanley and Lehman Brothers Holdings , have cut tens of thousands of mortgage jobs so far this year.
On the asset management side, Bear said it will lose about $8 billion of that division's $44 billion of assets with the departure of star money manager James O'Shaughnessy, who is forming his own firm.
Jeff Lane, president of Bear Stearns Asset Management, said the firm's minority stake in O'Shaughnessy Asset Management will lessen the financial impact, under a revenue-sharing agreement.
Lane said his division plans to build out its wealth-management business for high-net worth investors.
The division is also considering acquisitions of long-only, hedge fund and private equity managers to jump-start expansion of its money-management business, Lane added.