The focus shifts from Fannie/Freddit to Lehman

I had pointed about Lehman Brothers’ disappointing performance in Q2 2008. The post was titled focus shifts from SocGen/UBS to Lehman. Lehman released its expected Q3 results yesterday and the losses continue to worsen.

In Q3 2008 it expects losses to be about USD 3.9 billion. Moreover, the talks about pumping capital by Korean Development Bank have been stalled. So expect some intensive efforts to raise capital or asset sales.

It has made a plan to sell a majority interest in its investment management divisison and expects to write down mortgages significantly

Lehman Brothers has announced its intent to sell a majority stake (estimated to be approximately 55%) in a subset of its Investment Management Division. The subset of businesses (the “IMD Business”) includes the asset management, private equity and wealth management businesses but excludes its middle market institutional distribution business and the Firm’s minority stakes in external hedge fund managers. The sale of a majority stake in the IMD Business will enhance the Firm’s already strong capital base.

Already Strong Capital Base!!

The maximum losses comes from its Capital Markets division (USD 4.1 billion). Within Capital Markets, fixed income markets led to loss of USD 4.6 billion and equity market to a gain of USD 0.5 billion. I-Banking and Investment divsions led to a gain of USD 0.6 billion respectively. Add expenses to this and we have a loss of USD 3.9 billion.

Another thing to note is within expenses compensation expenses have declined from USD 2.3 billion to USD 1.9 billion. It was maddening to see the compensation rising in previous quarter from USD 1.8 billion to USD 2.3 billion.

Let’s see how Lehman fares from now on. The markets were in a frenzy y’day seeing Lehman results expecting more to follow.

Advertisements

2 Responses to “The focus shifts from Fannie/Freddit to Lehman”

  1. ezineaerticles » Blog Archive » The focus shifts from Fannie/Freddit to Lehman Says:

    […] Original Amol Agrawal […]

  2. Exploring Lehman Brothers bankruptcy puzzle « Mostly Economics Says:

    […] had posted on last Thursday that Lehman is next firm on the firing line after Fannie Freddie mess. All were expecting […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: