Bear Stearns, the investment bank at the centre of the credit crisis, is considering cutting Wall Street jobs after its quarterly profit collapsed by 62 per cent.
The bank said it would review costs before the end of the year, as it scales back its exposure to riskier parts of the debt markets and works to shore up its tattered reputation in hedge fund management. But the bleak picture at Bear Stearns was not universally copied across the industry, as Goldman Sachs revealed it had been possible to score massive profits during the market turbulence of the past three months. It revealed another record quarter yesterday, blowing through analysts' forecasts and once again forcing rivals to marvel at its traders' ability to capitalise on others' weaknesses.
Bear Stearns' chief financial officer Sam Molinaro said that the company's regional mortgage operations – which had been originating the sorts of loans to low-income Americans that fell dramatically out of favour on Wall Street – had already shed 240 jobs and would "trim" operations further.
And he added that the rest of the bank, which is one of the leaders in packaging mortgage loans into other debt products and trading them on the global markets, would also review costs. "We are going to evaluate headcount and evaluate the cost structure as we look into 2008," he said.
Any job losses would come before the end of the year, Mr Molinaro said, and he promised to update investors on 4 October.
Bear Stearns' profits in the three months to the end of August were $171.3m (£85m), down from $438m last year, impacted by write-downs of its portfolio of mortgage-backed loans and loans to private equity buy-outs, and by the collapse of two hedge funds trading mortgage-backed securities.
The company's shares traded only slightly lower yesterday, and Joe Lewis, the British businessman who became Bear Stearns' largest shareholder this month, is already sitting on a $74m paper profit on his $800m investment.
Goldman Sachs wrote down its portfolio of loans earmarked for private equity buy-outs by a total of $1.7bn and still managed to report a 79 per cent increase in quarterly profit to $2.85bn.
The reckonings from the credit market convulsions are far from over, with many major banks still to report. Continental European institutions appear to have been particularly hard hit by losses on assets backed by US mortgages. Deutsche Bank said it will write down the value of loans and scale back hiring plans after making " mistakes" during the credit boom. "We have certainly also made exaggerated commitments in the whole euphoria," the chief executive, Josef Ackermann, told ZDF television.
Also yesterday, Germany's Commerzbank rowed back on previous estimates for the scale of its losses on US mortgages. It had previously told investors it would put aside €80m (£56m) to cover losses, but its chief executive, Klaus-Peter Mueller, said he did not know if that was sufficient.