Lehman Brothers posts $4 billion loss

Lehman Brothers has announced a $4 billion (£2.3 billion) loss for the third quarter, raising fears for the US bank's future.

The bank's shares plunged by around 45 per cent earlier after takeover talks with Korea Development Bank fell through.

New York-based Lehman Brothers said its net loss for the third quarter was $3.9 billion, compared to a loss of $2.8 billion in the second quarter.

The loss was driven by write-downs on real estate investments, the bank added.

Chairman and chief executive Richard Fuld said: "This is an extraordinary time for our industry, and one of the toughest periods in the firm's history.

"The strategic initiatives we have announced today reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance sheet risk, reinforcing our focus on our client-facing businesses and returning the firm to profitability."

Along with the investment bank's results, Lehman Brothers has announced a package of measures to keep the company afloat.

The firm has decided to reduce its annual common dividend to just $0.05 per common share from $0.68 per common share, shoring up its capitalisation with $450 million annually.

In addition, during the first quarter of 2009, Lehman Brothers will spin off to its shareholders $25 billion to $30 billion of its commercial real estate portfolio into a separate publicly-traded company, Real Estate Investments Global (REI Global).

The Wall Street bank has been taking steps to reduce its exposure to the ailing US residential mortgage market over the quarter, cutting it by 31 per cent to $17.2 billion.

The bank also struck a deal with BlackRock to sell $4 billion of its UK residential mortgage portfolio over the period.

Lehman Brothers axed approximately 1,500 positions since the beginning of the third quarter, in an effort to boost profits.