Bear Stearns Places Losses From Crash at $96 Million

Bear Stearns Cos. said Tuesday that it lost $96 million in last month’s stock market crash, virtually wiping out the brokerage holding company’s second-quarter profit and prompting cuts in employees’ incentive pay and bonuses.

The company attributed the losses to its stakes in corporate takeover situations and the need to establish reserves to cover the unsecured obligations of some of the arbitrageurs and options traders who execute their trades through Bear Stearns.

For the fiscal second quarter ending Oct. 30, the firm reported net income of $413,000--a 99% drop from the $49.9 million earned in the same period last year. Gross revenue for the quarter was $441.9 million, a 2.7% decrease from the $454.1 million reported a year earlier.

A strong performance in retail and institutional sales, merger and acquisition fees and bond trading allowed the firm to post a net loss of just $8.6 million for October, despite the market’s collapse.

Veteran brokerage analyst Perrin Long of Lipper Analytical Services said the earnings report was “excellent,” given the unprecedented turmoil on Wall Street.

Long said Bear Stearns had kept its losses in takeover investments to $45 million to $50 million by “cutting its losses very quickly” when the market sank. The additional $45 million to $50 million in losses relating to its trading activities for smaller brokerages reflected careful risk management, he added.

“They didn’t get too far out on a limb,” Long said.

Alan C. Greenberg, Bear Stearns’ chairman and chief executive, said employees’ quarterly incentive pay and bonuses had been adjusted downward to reflect the company’s depressed earnings.

But unlike some Wall Street firms that have announced layoffs, Greenberg said Bear Stearns instead is hiring market professionals in the wake of the crash even as it slices unnecessary expenses.