Bear Stearns 1Q profit misses views

Bear Stearns Cos. said Monday its profit plunged 79 percent in the fiscal first quarter that ended just two weeks before speculation about a liquidity crisis forced its sale to JPMorgan Chase & Co.

The nation's fifth-largest investment bank posted results just shy of Wall Street projections. Earnings for the quarter ended Feb. 29 showed Bear Stearns was able to stay profitable as the credit crisis roiled on.

That supports Bear Stearns Chief Executive Alan Schwartz's assertion in early March that the investment bank's books were in order despite rumors to the contrary. However, speculation about possible financial constraints ultimately caused a crisis of confidence in the bank — and the Federal Reserve orchestrated its fire sale to JPMorgan on March 17.

The company posted a profit of $110 million, or 86 cents per share, down from $548 million, or $3.82 per share, a year earlier. Revenue fell to $1.48 billion from $2.48 billion a year ago.

Analysts polled by Thomson Financial projected a profit of 87 cents per share on $1.35 billion of revenue. The results were released in a filing with the Securities and Exchange Commission.

The investment bank did not disclose anything about how its business is doing so far during the second quarter. However, on Friday the bank said in another regulatory filing that assets under management have shrunk 20 percent since the end of November, and stock and fixed-income trading has plummeted to "well less" than half of activity levels in 2007 and the first quarter of this year.

Bear Stearns also said it faces a rapid loss of trading partners and customers and may be forced to file for bankruptcy protection and liquidate its assets if the company's deal to sell itself to JPMorgan does not close. With the bank's stock trading at about $30, JPMorgan stepped in with a $2 per share offer that was later raised to $10.

The sale is expected to be completed by June.

Already this week, JPMorgan has begun to approach some 4,500 front office workers at Bear Stearns about the possibility of layoffs once the two sides combine operations.

JPMorgan declined to comment about how many positions would be eliminated in the acquisition. But, more information might be available when the nation's third-biggest retail bank posts quarterly results on Wednesday.

A spokesman for Bear Stearns also declined to comment.

Bear Stearns also announced in its most recent filing that the Securities and Exchange Commission is considering a civil injunctive action or an administrative hearing regarding the company's bidding process with municipal securities. The company said it would respond to the so-called "Wells notice" and will discuss the matter with staff before its official response to the regulator.

In addition, Bear Stearns said its EMC Mortgage Corp. subsidiary has been cooperating with an investigation by the Federal Trade Commission over its business practices.

Bear Stearns shares fell 11 cents to $10.11 Monday before the results were released. The shares were worth more than $150 a year ago.