Bear Stearns: A Look Behind The Write-Down
By taking a bigger than expected write-down on its mortgage-related portfolio,Bear Stearns has now written off about 60 percent of its $3.2 billion net CDO and sub-prime mortgage position.
Goldman Sachs has a good take on this: "The good news is that Bear's sub-prime mortgage related woes appear largely behind it, but the bad news is that unlike peers, Bear's businesses are not as diversified on a product or geographic basis and its core fixed income trading/underwriting businesses will likely be negatively impaired for some time."
Indeed, even discounting the write-downs, business was poor. Sandler O'Neill noted that "Revenues were weak across most businesses including institutional equities (down 11 percent YOY), investment banking (down 44 percent YOY), and global clearing services (up 2 percent YOY). Even after excluding markdowns, it appears fixed income trading revenues were also significantly weaker. Assets under management declined by over 20 percent sequentially to $44.6 billion."
So why is the stock only down modestly?
1) No capital raising (from sovereign funds or other sources)
2) Stock is at a three-year low already.
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