Lehman Brothers’ chief executive Richard Fuld faces a severe test of his personal credibility, analysts suggest.
The bank has endured its first quarterly loss since becoming a public company in 1994, with larger-than-expected negative earnings of $2.8 billion racked up over the past three months.
Lehman has also demoted senior managers including its president Joseph Gregory – a close friend of Fuld – and chief financial officer Erin Callan.
Shares in the bank have lost 42% of their value in New York, and the company has also undergone a $6 billion cash call in order to shore up its balance sheet.
“[Fuld’s] credibility is on the line,” ex-Lehman Director Bruce Foerster told Bloomberg.
However, other banking experts sounded a more positive note, with Maurice Greenberg buying shares in Lehman last week.
“Lehman is a very good franchise…they’ve done a great deal to reduce their leverage,” says AIG and American International Group ex-chief executive of insurers. “I think they’ll do fine.”