The Wall Street bank Lehman Brothers lost $2.8bn in the second quarter, it announced this morning.
The bank plans to raise $6 billion to bolster its capital base after losses from trading and hedging resulted in the expectedly high second-quarter loss for the investment bank.
Lehman said it expects to offer common stock and convertible preferred stock through public offerings, diluting existing shareholders. Lehman's shares fell 11.4 per cent to $28.60 in premarket trading.
Questions about the health of Lehman, Wall Street's smallest major investment bank, have soared in recent months following the collapse of smaller rival Bear Stearns Cos, which was acquired at the end of May by JPMorgan Chase & Co .
"It's not all gloom and doom, but certainly not brilliance from Lehman, not a very good start to the week," Peter Boockvar, equity strategist at Miller Tabak & Co in New York, said.
Lehman, based in New York, projected a second-quarter loss attributable to common shareholders of $2.87 billion, or $5.14 per share, for the quarter that ended May 31st.
It said that compared with a profit of $1.26 billion, or $2.21 a share, a year earlier, and $465 million, or 81 cents per share in the first quarter.
Net revenue is expected to be negative $668 million, compared with positive $5.51 billion a year earlier, Lehman said
"I am very disappointed in this quarter's results," Chief Executive Richard Fuld said in a statement. He said the company has strengthened its balance sheet since March, and is "well positioned" to executive its business strategy.
The company said it reduced gross leverage to below 25 times from 31.7 times at the end of its first quarter. It said it has also cut exposure to residential mortgages, commercial mortgages and real estate investments 15 percent to 20 percent each.
Lehman said it expects to announce full second-quarter results on June 16th.