Transcripts

Lehman Brothers Suffers a $4B Loss

SUSIE GHARIB: Concerns continued to mount today about the future of Lehman Brothers. The venerable Wall Street brokerage reported a third- quarter loss of almost $4 billion, the biggest loss in the firm's 158-year- history. That included more than $5.5 billion in write-downs, over twice what analysts expected. In an effort to boost investor confidence, Lehman will cut its dividend and auction off a majority stake in its asset management group, including crown jewel Neuberger Berman. Lehman shares tumbled another 7 percent today to $7.25 and have plunged 90 percent this year. Scott Gurvey has more on Lehman's battle to repair its balance sheet.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Lehman's plan for asset sales and a spin-off of most of its commercial real estate business drew mixed reactions on Wall Street. S&P analyst Matthew Albrecht says Lehman can survive, at least in some form, if the moves clean up the balance sheet.

MATTHEW ALBRECHT, EQUITY ANALYST, STANDARD & POOR'S: They have a run-rate going forward, a pretty solid run-rate. You know, they claimed it was about $13 billion a year, you know, which, if you look at it, they can certainly be profitable in that kind of an environment. I think it does make them a little bit more susceptible to some type of take-over, because if they get those troubled assets off their books, they're a much smaller organization now and I think we could see an outside buyer step in. And that would -- you now, for shareholders may be a good solution.

GURVEY: But most analysts caution against buying shares on takeover speculation. S&P has Lehman on negative credit watch and it lists the shares as a hold. David Ritter of Argus Research today downgraded his rating of Lehman from buy to hold. He writes, quote: "With volatility in the stock now at extremely high levels, we can no longer recommend the shares until concerns over Lehman's capital and liquidity are resolved." Analyst Lauren Smith of Keefe Bruyette & Woods writes, quote: "The jury is still out. As much as we may want to recommend the shares of Lehman at these levels, there is still significant risk to equity holders should there be some government-assisted deal." Citi analyst Preshant Bhatia is more optimistic, writing, quote: "We would not be surprised if management raises capital to build a margin of safety and to improve perception, which we would view as positive and as more than discounted in the stock. S&P's Albrecht expects Lehman shares to remain under pressure until investors see results.

ALBRECHT: The fact that they came out with this plan today, it's not a lot of new information, a lot if it had been talked about in the market. So until they actually execute some of that, I wouldn't expect a huge move in the stock.

GURVEY: While some are comparing Lehman's situation to that of Bear Stearns, there are differences. Most significantly, many of Bear's counterparties virtually stopped doing business with the firm. In contrast, several major money managers and competitors, including Morgan Stanley (MS) and Goldman Sachs (GS), have publicly expressed their confidence in Lehman. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.