Lehman Brothers Holdings Inc. posted a nearly $3 billion loss Monday, after the nation’s fourth-largest investment bank was hurt by wrong-way hedging and trading positions.
The results marked the first time that Lehman Brothers recorded a loss since going public in 1994, and confirmed what the company had forecast last week. It follows a tumultuous week in which Lehman also was forced to raise $6 billion in fresh capital, and unexpectedly demoted two of its top executives.
Lehman did not announce any new plans to raise capital. However, Chief Executive Richard Fuld took the blame for the company’s stunning second-quarter loss, and said the investment bank was too slow in reacting to the market’s tumult.
“This is my responsibility,” Fuld declared. “We made active decisions to deploy our capital, some of which in hindsight were poor choices because we really didn’t act quickly enough to the eroding environment.”
Fuld, sounding agitated during a conference call with analysts, said the company has “made a number of changes and now it is now my job to make sure we execute.”
The company reported a loss of $2.87 billion, or $5.14 per share, compared with a profit of $1.26 billion, or $2.21 per share a year earlier. Markdowns on risky assets caused revenue to hit negative $668 million from last year’s $5.51 billion.
Global banks and brokerages have written down nearly $300 billion worth of assets because of exposure to risky mortgage-backed securities. Lehman’s business model was considered the most similar to Bear Stearns, which in March was saved from collapse through an acquisition by JPMorgan Chase & Co.
Lehman said it has continued to cut its exposure to residential mortgages, commercial mortgages and real estate investments. It said exposure has been cut by 20 percent in those areas, even more than the 15 percent it projected last week.
Last week, Lehman shuffled its top management in a bid to restore investor confidence. Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory were both ousted from their jobs.
Callan, who took the job in December, was one of the highest ranking women on Wall Street. Gregory had been with Lehman for three decades, and considered to be a close confidant to Fuld.
So far, investors have reacted positively to steps Fuld has taken in the past week. Shares of the company, which last week plunged by 30 percent before rebounding on Friday, rose in early trading Monday.
“Lehman’s survival as an independent entity should not be at stake,” said Chermaine Lee, an analyst with Boston-based financial consulting firm Celent. “Yes, their exposure to subprime was very heavy and yes, they are comparatively smaller as an investment bank, but they have taken credible measures thus far in reducing their leveraged positions, getting rid of subprime and mortgage-related assets from their balance sheet.”
Fuld said that the company does not need to raise additional capital, and expects that it will weather the credit crisis as a stand-alone company — but did not rule out a change if conditions require. He said Lehman can “go it alone” but that any reasonable offer would be considered.