NEW YORK (Reuters) - Bear Stearns Cos Inc BSC.N said on Wednesday it would cut 650 jobs, or 4 percent of its global work force, as the investment bank braces to lose money in the fourth quarter due to bad bets on subprime mortgages.
The collapse of the U.S. subprime mortgage market continues to reverberate around the globe, forcing Wall Street to slash jobs and write down billions of dollars of assets underpinned by mortgages given to people with shaky credit.
Bear shares are down 39 percent this year amid a number of worries. The work ethic of Chairman and Chief Executive James Cayne, whose hobbies include bridge and golf, has been questioned, along with the company’s dependence on fixed-income trading.
Cayne allayed some of those fears recently after striking an alliance with China’s No. 1 brokerage, CITIC Securities Co, which should help diversify its revenue base overseas. Bear says it has plenty of cash and does not need a capital infusion.
Bear Stearns has cut about 9 percent of its work force from peak employment levels. This summer’s collapse of two Bear Stearns hedge funds led to the ouster of co-president Warren Spector and tarnished the image of a company known for its savvy in bundling home loans into mortgage-backed bonds.
Since mid-August, Bear Stearns has announced the elimination of about 1,490 jobs. The company employed about 15,500 people at the end of August.
The latest cuts at the New York-based investment bank affect employees across the company, including back-office jobs in London.
“As we indicated at the end of October, we are continuing to rationalize our business, monitor staffing needs and align our infrastructure with current market conditions,” Bear Stearns said in a statement.
Bear Stearns said it will make strategic hires in growth areas as it works to replace revenue lost due to the disruption in the U.S. mortgage market.
Earlier this month, Bear Stearns said that, in the fourth quarter, it would write down $1.2 billion of assets linked to mortgages. The reduction will result in a net loss, compared with a $563 million profit in the year-earlier period.
Analysts, on average, expect Bear to lose $1.36 a share in the fourth quarter, or about $200 million, according to Reuters Estimates.
Bear Stearns shares closed up 4.3 percent at $99.50 on the New York Stock Exchange.
Reporting by Tim McLaughlin; additional reporting by Olesya Dmitracova in London; Editing by Tim Dobbyn and Andre Grenon