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Bear Stearns hurt by mortgage weakness

Investment bank Bear Stearns Cos. Inc. said on Thursday quarterly earnings fell by a third as trouble in the mortgage market hurt bond trading revenue and it wrote down assets. Separately, Goldman Sachs reported a profit gain.
/ Source: Reuters

Investment bank Bear Stearns Cos. Inc., one of the nation’s largest mortgage bond underwriters, said on Thursday quarterly earnings fell by a third as trouble in the mortgage market hurt bond trading revenue and it wrote down assets.

The results were weaker than expected.

Net income was $361.7 million, or $2.52 a share, for the fiscal second quarter ended May 31, compared with $539.3 million, or $3.72 a share, a year earlier.

Excluding a non-cash charge of $227 million, or 88 cents a share, related to the write-down of intangible assets linked to its Bear Wagner Specialists unit, earnings were $3.40 a share. On that basis, analysts on average had forecast $3.49 a share, according to Reuters Estimates.

Concerns about U.S. mortgage exposure have weighed on Bear Stearns shares since February. Bear’s business is less diversified than many of its competitors.

Since mid-February, the shares have fallen 10 percent, while the Amex Securities Broker-Dealer index has risen more than 3 percent.

Separately, Goldman Sachs Group Inc. reported higher quarterly profit on Thursday, beating estimates, on record investment banking fees and strong stock trading.

The world’s largest investment bank by profit and market value said net earnings rose to $2.33 billion, or $4.93 a share, in the second quarter ended on May 25, from $2.29 billion, or $4.78 a share, a year earlier.

Analysts on average expected profit of $4.76 a share, according to Reuters Estimates.

Revenue rose to $10.2 billion from $10.1 billion. The analysts’ average estimate was $10.1 billion.

The results come two days after rival Lehman Brothers Holdings Corp. reported a 27 percent jump in profit, trouncing expectations and sparking a rebound in brokerage stocks.

Goldman stock, which hit an all-time high of $233.94 at the end of May, rose 4 percent during the fiscal quarter, outperforming the 1.3 percent gain in the AMEX Securities Broker-Dealer Index but slightly lagging the S&P 500.