Wall Street investment banks Goldman Sachs, Bear Stearns and Lehman Brothers reported a drop in revenue from mortgage underwriting, although second-quarter profits were still up at two of the three firms.
Bear Stearns Companies Inc. said profits were down 10 percent, despite record setting second-quarter revenues of $2.51 billion. Excluding a one-time accounting charge, net income would have been $486 million, down from $539 million for the second quarter of 2006. Earnings per share would have been $3.40 for the quarter.
Fixed-income net revenues were $962 million for the 2007 second quarter, down 21 percent from the record $1.2 billion posted in the second quarter of 2006. Mortgage-related revenues reflected both industry-wide declines in residential mortgage origination and securitization volumes and “challenging market conditions” in the subprime and Alt-A mortgage sectors, the company said.
Goldman Sachs Group Inc. blamed weak results in mortgages, particularly in the subprime sector, for part of a 24 percent year-over-year drop in fixed-income net revenues, to $3.37 billion. The bank’s net earnings were $2.33 billion, or $4.93 per share, up from $4.78 per share in the same quarter last year.
Lehman Brothers Holdings Inc. reported record profits of $1.3 billion, or $2.21 per share, despite a 14 percent year-over-year decline in fixed-income net revenues. The company said fixed-income revenue fell to $1.9 billion because of continued weakness in the U.S. residential mortgage business and decreased revenues from Lehman’s municipal and interest-rate products businesses.
The percentage of loans in the foreclosure process at the end of the first quarter was 1.28 percent of all loans outstanding, an increase of nine basis points from the previous quarter and 30 basis points from one year ago, the Mortgage Bankers Association reported Thursday.