Sub-prime problems confined, Bear Stearns says

Bear Stearns Cos., the biggest U.S. underwriter of mortgage-backed bonds, said rising sub-prime loan delinquencies were not spilling over into other markets and may be an opportunity for the firm to expand its market share.

Making loans to borrowers with poor credit histories and packaging them into bonds accounted for 3% of Bear Stearns’ mortgage business, Chief Financial Officer Samuel Molinaro said Thursday after the New York firm announced an 8% increase in first-quarter earnings.

Defaults on U.S. sub-prime mortgages have risen to a seven-year high, causing more than 20 lenders to close or seek buyers since the start of 2006.

Molinaro said Bear Stearns would seek to buy some of the assets from failing companies. He said he wouldn’t rule out purchasing another mortgage originator.

“Difficulties in the sub-prime mortgage markets haven’t appeared to spill over to other credit markets,” Molinaro said. “We’re seeing real market share gains and real opportunities. The dislocation that’s going on here will provide more opportunity for us.”

Shares of Bear Stearns rose $3.21 on Thursday to $148.50.