Lehman Bros. announces $2.8B loss

— -- LEHMAN/OUTLOOK (URGENT):Lehman sees $2.8 bln 2nd-qtr loss, to raise $6 bln

Determined to avoid the fate of Bear Stearns, which collapsed in March, Lehman Bros. pre-announced on Monday a second-quarter loss of $2.8 billion and said it raised $6 billion in new capital.

But some analysts commended the firm for addressing the biggest questions hanging over it.

"This is the lesser of two evils for shareholders," said David Trone of Fox-Pitt Kelton.

Lehman's first quarterly decline since it was spun off from American Express in 1994 stemmed from trading losses, asset write-downs and hedges that didn't work out. The bank also aggressively sold troubled assets during the quarter, including $130 billion in real estate-related investments, junk-bond positions and other holdings.

"Asset sales are a good thing in the long term, but in the short term, they cause losses," Trone said.

Sandler O'Neill's Jeff Harte said in a research report that the asset sales provided a "modest silver lining" to the otherwise bleak news about earnings and a dilutive capital raise.

Most investment banks have seen the values of real estate-backed assets on their balance sheets decline since the subprime mortgage market imploded last summer. No firm was hit harder by the ensuing credit crunch than Bear Stearns, which had bet heavily on the subprime market.

Investors grew skittish about the firm after Bear Stearns announced billions of dollars in losses stemming from its mortgage-backed holdings. Competitors began to doubt that Bear Stearns had enough access to capital to keep its business flowing.

In a conference call with analysts, Lehman CFO Erin Callan said that the firm's recent asset sales had reduced the bank's leverage to 25 times its equity. Bear's leverage ratio had been higher than 30.