Lehman Reduced Mortgage Assets 20% in Second Quarter

Lehman Reduced Mortgage Assets 20% in Second Quarter

June 16 (Bloomberg) -- Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, reduced its mortgage holdings in the second quarter by 20 percent to curb further losses from the credit-market collapse.

Lehman rose in New York trading after reporting a loss of $2.8 billion, or $5.14 per share, in line with preliminary figures the company released last week, the New York-based firm said today in a statement. Leveraged buyout loans were cut 37 percent to $18 billion.

``We have begun to take the necessary steps to restore the credibility of our great franchise and ensure that this quarter's unacceptable performance is not repeated,'' Chief Executive Officer Richard Fuld said in the statement. The loss was Lehman's first since it was spun off from American Express Co. in 1994.

Lehman has lost more than 60 percent of its value on the New York Stock Exchange this year amid speculation mortgage-related writedowns will continue to depress earnings. After disclosing the wider-than-estimated second-quarter loss last week, the firm replaced its president and finance chief. Fuld, the longest- serving chief executive officer on Wall Street, is trying to convince investors Lehman can weather the credit contraction.

The firm shed $147 billion of assets during the quarter, more than the $130 billion it estimated last week. Net assets declined by $70 billion, the bank said today.

Mortgage Assets

Its mortgage-backed holdings dropped to $64.7 billion from $80.8 billion in the first quarter. Residential mortgages and related securities dropped 22 percent to $24.9 billion. Commercial mortgages and related bonds declined 19 percent to $29.4 billion. Real estate holdings fell 19 percent to $10.4 billion.

Shares of the company rose 12 cents, or 0.5 percent, to $25.93 in composite trading at 9:37 a.m.

Writedowns wiped out revenue for the firm, which said fixed- income revenue was a negative $3 billion. Equity trading dropped 65 percent to $601 million due to writedowns on private-equity stakes. Investment-banking revenue fell 25 percent to $858 million, and asset management rose 10 percent to $848 million.

Compensation costs declined 14 percent to $2.33 billion in the quarter from a year earlier. Severance pay of $140 million was included in compensation costs, the firm said. Lehman has announced some 4,000 job cuts this year. Lehman's headcount fell by almost 2,000 in the second quarter to 26,189, according to figures released today.

BlackRock, Greenberg

BlackRock Inc., the largest publicly traded fund manager in the U.S., and Maurice ``Hank'' Greenberg, the former CEO of American International Group Inc., the world's biggest insurer, bought stakes in Lehman earlier this month and said they remain optimistic about its businesses. Putnam Investments LLC, the mutual fund firm that oversees about $173 billion, invoked the ``strong franchise'' Fuld has built in his four-decade career.

Fuld, 62, stunned Wall Street on June 12 by replacing Chief Financial Officer Erin Callan and President Joseph Gregory in an effort to reassure investors amid speculation that mortgage- market losses will continue to drag down earnings. The demotions capped a 42 percent drop in Lehman's shares on the heels of a $6 billion cash infusion. Fuld snapped a four-day losing streak Friday, when the stock gained 14 percent in New York trading, the biggest rise since April 1.

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