Lehman plans asset sales, reports huge 3Q loss
NEW YORK -- Another of Wall Street's renowned firms is taking drastic steps to try to outrun the nation's worst financial crisis since the Depression.
Lehman Brothers said Wednesday it will sell a majority stake in its prized investment management business, slashed its dividend and indicated it may even consider selling the whole company. It reported an almost $4 billion third-quarter loss, boosting its losses so far this year to about $6.5 billion.
The nation's fourth-largest investment bank said it will spin off $25 billion to $30 billion of its commercial real estate operations and slashed its dividend to 5 cents from 68 cents in a move to save $450 million a year.
The moves are intended to prove to Wall Street that the embattled bank has enough liquidity to survive.
But Lehman also said it is open to "examining all strategic alternatives to maximize shareholder value" which on Wall Street suggests it would consider a bid for the entire company.
Lehman Brothers Holdings Inc., whose shares have plunged more than 80 percent this year as investors lost confidence in the company, said it lost $3.9 billion during the third quarter. The company, like others on Wall Street, suffered from wrong-way bets on mortgage securities and other risky assets.
"This is an extraordinary time for our industry, and one of the toughest periods in the firm's history," Chief Executive Richard Fuld said in a statement. "The strategic initiatives we have announced today reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance sheet risk, reinforcing our focus on our client-facing businesses and returning the firm to profitability."
In premarket trading, Lehman shares rose $1.03, or 13.2 percent, to $8.82.
Lehman's quarterly loss includes gross write-downs of $5.3 billion on residential mortgages and $1.7 billion on commercial real estate positions. The results reflect a continued decline in Lehman's portfolio -- in the second quarter the company lost $2.8 billion for the period, and in the year-ago period it posted profit of $887 million.
Lehman said it has reduced its residential mortgage exposure by 31 percent to $17.2 billion, and expects its sale of $4 billion of its U.K. residential mortgage portfolio to BlackRock Financial Management Inc. to be completed within the next few weeks.
