NEW YORK (AP) – Bear Stearns Cos., the fifth-biggest U.S. investment bank, said Thursday fiscal second-quarter profit sank as a downturn in the U.S. mortgage market slammed the company's business of issuing and dealing bonds backed by pools of home loans. Its shares fell nearly 2 percent.
The Wall Street brokerage said, for purposes of calculating diluted earnings per share, it reported a profit for the three months ended May 31 of $374.6 million, or $2.52 per share, down from $558.2 million, or $3.72 per share, a year ago.
Excluding an accounting charge, second-quarter profit would have been $486 million, or $3.40 per share.
Analysts surveyed by Thomson Financial had estimated Bear Stearns would earn $3.50 per share. Those estimates typically exclude onetime items.
Revenue rose marginally to $2.51 billion from $2.5 billion. Analysts polled by Thomson Financial expected revenue to fall 7 percent to $2.33 billion.
Bear Stearns said revenue in its capital markets segment shrank 9.7 percent, dragged by the bank's bond business.
Bear Stearns is a big player in the market for bonds backed by mortgage debt. Earlier this year, more borrowers began missing payments on home loans, which shrank investors' appetite for debt backed by risky home loans. The bank said revenue in its bond segment slid 21 percent to $962 million, mainly because of the struggles among mortgage borrowers with bad credit.
The troubled mortgage industry offset robust results for advising on corporate takeovers and brokering stock trades for clients.
Revenue in Bear Stearns' wealth management division, which helps rich clients manage their investments, more than doubled as assets under management swelled 25 percent to $60 billion.
Shares of Bear Stearns slid $2.49, or 1.7 percent, to $147 in morning trading.