expects to take a $1.2 billion writedown related to its exposure to mortgage-related securities in the fourth quarter, but said its leveraged finance business is getting better.
The writedowns are linked to the liquidation of Bear's warehouse of collateralized debt obligations and other subprime mortgages, whose prices have been crushed in the market over the past two months.
However, Bear has cut its exposure to CDOs by more than half since the end of August, to $884 million, and its long position in domestic subprime mortgages has been eliminated. That apparently led investors to believe Bear has gotten a handle on the biggest of its problems, and they sent its shares up 6.1% to $107 in premarket trading.
"[I] don't want to predict that things couldn't get worse, because things keep surprising," Chief Financial Officer Sam Molinaro Jr. commented during an investor conference in New York sponsored by
. "While hedges have worked reasonably well ... there are no perfect hedges. The perfect hedge is selling the assets."
Molinaro said that the business of originating and selling mortgage securities had essentially coming to a "grinding halt," but he held out hope that the company's prime brokerage and global clearing business in the U.S. and internationally would excel.
"We think that the business more broadly away from mortgages is very well poised in 2008," he said.