NEW YORK (Reuters) - Bear Stearns BSC.N said on Monday profit fell 79 percent in its fiscal first quarter, ahead of a liquidity crisis that led to the investment bank's purchase by JPMorgan Chase & Co JPM.N.
Net income for the quarter ended February 29 fell to $115 million, or 86 cents per share, from $554 million, or $3.82 per share, a year earlier. Net revenue, after interest expense, declined 40 percent to $1.48 billion.
Results included about $600 million of write-downs tied to mortgages and leveraged finance. These contributed to a 94 percent drop in revenue from fixed income, a traditional Bear specialty.
Bear disclosed results in its quarterly report filed with the U.S. Securities and Exchange Commission. It said it missed last week’s filing deadline because it needed more time to determine operating results.
“The continuation of the global liquidity crisis coupled with a further repricing of credit risk created a difficult operating environment” in the quarter, Bear said.
Net revenue from capital markets activities fell 47 percent to $1.04 billion. In clearing services, including prime brokerage, net revenue fell 8 percent to $253 million. Net revenue from wealth management fell 22 percent to $200 million. Other adjustments reduced total net revenue by $10 million.
Results were consistent with Chief Executive Alan Schwartz’s statement on March 12 that he was “comfortable” with analysts’ forecasts that Bear would be profitable.
Later that week, Bear saw liquidity plunge precipitously, leading to JPMorgan’s eventual agreement to buy the bank in an all-stock transaction then valued at a rock-bottom $10 per share. The transaction on Monday valued Bear at $9.03 per share, based on JPMorgan’s closing share price.
Bear said business has fallen substantially since its liquidity crisis began. It said failure to complete the merger could “seriously jeopardize the company’s financial viability,” and perhaps force it to file for bankruptcy protection and liquidate.
On Friday, JPMorgan said it had amassed a 48.4 percent stake in Bear. A majority of shareholder votes is needed to approve the merger.
JPMorgan shares closed Monday down $1.03 at $41.50. Bear shares fell 11 cents to $10.11.
Reporting by Jonathan Stempel; Editing by Braden Reddall/Andre Grenon
Our Standards: The Thomson Reuters Trust Principles.