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CIBC Downgrades Bear Stearns

NEW YORK (AP) – A CIBC World Markets analyst downgraded Bear Stearns Cos. on Wednesday, saying most people are still too optimistic about the investment bank's profit this year amid turmoil in the mortgage market.

CIBC World Markets analyst Meredith Whitney downgraded Bear Stearns to “Sector Performer” from “Sector Outperformer.”

Bear Stearns' stock, which has lost a third of its value this year, may seem cheap, she said. However, she expects the bank's profit to suffer well into next year. On that basis, she said, the stock is actually expensive.

Whitney expects Bear Stearns to report profit of $11.85 per share next year. Analysts polled by Thomson Financial forecast a profit of $14.05 per share.

“Most estimates are still far too optimistic,” she said.

Bear Stearns has too much exposure to the weaker areas of the U.S. mortgage market, she said. That market has suffered an unprecedented collapse this year as investors fled risky home loans amid deteriorating credit quality.

Bear Stearns' stock closed Tuesday at $108.42.