Lehman Sinks on Writedown Fears

However, Worthington doesn't think a sale is likely, saying “we don't think the investors and rating agencies would welcome this divestiture, which brings a steady cash flow, diversification and a lower compensation ratio.

While Worthington said Lehman needs to shore up investor confidence and perhaps raise more capital, he noted reducing risk is a preferable option to selling off valuable assets.

Management wants to leave its mortgage troubles behind and restore confidence, which it can best accomplish by reducing its higher-risk credit exposure, Worthington wrote.

Competitors followed Lehman lower on Tuesday, with Merrill Lynch(MER Quote) sinking 2.8% to $24.05; Morgan Stanley(MS Quote) dropping 3.7%, to $38.11; and JPMorgan(JPM Quote) falling 3.7% to $35.38.