Bear Stearns' (NYSE: BSC) shares gained more than 5% to $106.45 Wednesday morning after the company said it would write down the value of it subprime-related assets by $1.2 billion in Q4.
Wall Street appeared to be relieved that Bear's announcement wasn't larger, sending BSC's shares up in both pre-market and mid-morning trading. Many analysts and economists had expected Bear Stearns to take a $3-$3.5 billion Q4 charge for the subprime-related assets.
While indicating that the past few months had been "very challenging," Bear Stearns CFO Sam Molinaro, speaking at a Merrill Lynch banking conference, said the company has reduced its holdings of collateralized debt obligations, the securities most impacted by the collapse of the subprime mortgage market, Bloomberg News reported.
Bear Stearns is the second-largest underwriter of mortgage-backed bonds in the United States.
Economic Analysis: Bears' modest $1.2 billion write-down is good news, from both banking sector and macroeconomic standpoints. The building consensus on Wall Street, at least for now, is that the worst of the subprime-default and subprime-asset-backed securities problems appear to be over.
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