Many investors expected a nasty quarter for investment bank Bear Stearns
While Bear's big-name competitors Lehman Brothers
As expected, results from Bear's wealth management division were really gnarly. During the quarter, the division forgot that it was supposed to make money and ended up with negative $38 million in revenue. Within wealth management, private client services produced 15% revenue growth, but that was overshadowed by the negative $186 million in revenue contributed by the asset management division. During the quarter, Bear suffered a debacle when two of its hedge funds went belly-up. That led to the reversal of accrued performance fees, the writedown of hedge fund investments and receivables, and lower management fees -- all in all delivering a $200 million drop-kick to Bear's results.
The institutional equities group was one of the few bright spots in Bear's quarter; it increased revenue 53% from the prior year. The firm's global clearing services also logged some good results, upping revenue 30% from 2006 on the strength of higher client margin debt and short balances. And as bad as things were in asset management, total assets under management actually grew 15% year over year.
As of this writing, Bear Stearns' stock is up more than 1.3% for the day, so the poor quarter may not have been as bad as some had braced themselves to expect. Bear has been knocked down the most from the highs that the investment banks hit earlier in the year, and it's trading at a very notable discount to its major competitors. While the quarter's results emphasize why it has dropped so much, the post-quarter reaction may suggest that investors think the firm's major problems are behind it.
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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool's disclosure policy once wrestled a teddy bear and lost on disqualification. The ref called the match when the disclosure policy bit the bear's ear and stuffing started coming out.