Bear Stearns had to bail out two hedge funds earlier in the summer

It made a net loss of $854m (£429m) in the three months to the end of November from a profit of $536m a year earlier.

The investment bank was one of the first banks to admit problems linked to sub-prime mortgages, after two of its hedge funds had to be bailed out.

It revealed it had written down $1.9bn in the period due to these woes.

This was more than the $1.2bn it had earlier suggested, and reflected the reduced value of its sub-prime mortgage-related securities.

Job cuts

Top executives will not receive bonuses as a result of the unprecedented losses, Bear Stearns said.

The company had already seen profits between June and August fall by 61%.

It has also cut about 1,500 jobs from its 15,000 workforce since the two hedge funds were forced to close.

Sub-prime lenders focus on people with poor or non-existent credit histories. Higher interest rates in the US led to an increase in the number of mortgage defaults, with the sub-prime sector especially hard hit.

Over the past few weeks, a string of global banks have indicated how much they have lost as a result of exposure to investment products linked to US sub-prime mortgages.

So far announced losses have totalled about $80bn, but the final toll might be much higher.

On Wednesday, Morgan Stanley revealed a bigger-than-expected write-down of assets and sold a $5bn stake to a Chinese sovereign wealth fund.