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Bear Stearns expects to write down $1.2 billion of assets linked to mortgages in the fourth quarter, but the worst of the bank's mortgage writedowns is over, Bear's chief financial officer said.
The writedown will result in a quarterly loss, CFO Sam Molinaro told a banking conference.
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Investors were relieved the write-down was not bigger and sent Bear Stearns shares [BSC
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] higher.
The news also helped boost the overall stock market and pushed bond prices lower.
"We have another firm out today with writedowns, and people are getting comfortable with the view that this second round of writedowns may be the beginning of the bottom," said Owen Fitzpatrick, head of U.S. Equity Group at Deutsche Bank Private Wealth Management.
Bear Stearns has reduced its exposure to subprime mortgage bonds and repackaged mortgage bonds known as collateralized debt obligations, Molinaro said.
Bear Stearns is now positioned to profit if subprime mortgage bonds weaken further, but still has $884 million of exposure to collateralized debt obligations.
"This has been an incredibly challenging period," Molinaro said.
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