Lehman Brothers HQ in New York. Photograph: Lucas Jackson/Reuters
US investment bank Lehman Brothers today unveiled plans to raise $6bn (£3.03bn) to shore up its balance sheet and admitted it will post an unexpectedly large loss of $2.8bn in the second quarter.
Lehman, the smallest of the major Wall Street investment banks, said it has lost money on trading and hedging. The $2.8bn loss, or $5.14 a share, for the three months to end May is Lehman's first loss since it was spun off from American Express in 1994 and compares with a profit of $1.3bn, or $2.21 a share, a year ago. The bank will report full details of its quarterly figures next Monday. Moody's, the credit rating agency, cut Lehman's outlook from stable to negative.
It plans to rebuild its capital base by issuing $4bn of new shares and $2bn of convertible preferred stock through public offerings, diluting existing shareholders.
"The credit crunch is still with us and reverberating," said Chris Iggo, a strategist at AXA Investment Managers in London. "The fact that they're doing it and they still have problems on their balance sheet is no great surprise, but what it means is that the backdrop is still unfavourable."
Richard Fuld, Lehman's chairman and chief executive, said he was "very disappointed" with the second-quarter results, which fell short of what the market had expected.
"However, with our strengthened balance sheet and the improvement in the financial markets since March, we're well positioned to serve our clients and execute our strategy," he said.
Some analysts felt that on Wall Street Lehman's balance sheet was closest to that of Bear Stearns, which was bailed out by JPMorgan Chase in March.
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