In this May 27 file photo, traffic passes Lehman Brothers headquarters in New York.

Lehman Brothers, in a desperate bid to survive, announced plans Wednesday to sell a majority stake in its prized investment management business and said a sale of the entire company was possible.

Lehman, battling America's worst financial crisis since the Depression, also said it would spin off a troubled real estate unit and slash its dividend.

Those moves come as the fourth- largest US investment bank reported a third-quarter loss of approximately US$4 billion, boosting its losses so far this year close to US$6.5 billion.

The bank said it will spin off US$25 billion to US$30 billion of its commercial real estate operations and slashed its dividend to 5 cents from 68 cents in a move to save US$450 million a year.

The moves are intended to prove to Wall Street that the embattled bank has enough liquidity to survive.

But Lehman also said it is open to "examining all strategic alternatives to maximise shareholder value" which on Wall Street suggests it would consider a bid for the entire company.

Lehman Brothers Holdings Inc, whose shares have plunged more than 80 per cent this year as investors lost confidence in the company, said it lost US$3.9 billion during the third quarter.

Wrong-way bets

The company, like others on Wall Street, suffered from wrong-way bets on mortgage securities and other risky assets.

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

"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."

Lehman's quarterly loss includes gross write-downs of US$5.3 billion on residential mortgages and US$1.7 billion on commercial real estate positions.

The results reflect a continued decline in Lehman's portfolio - in the second quarter, the company lost US$2.8 billion for the period, and in the year-ago period it posted profit of US$887 million.

Lehman said it has reduced its residential mortgage exposure by 31 per cent to US$17.2 billion, and expects its sale of US$4 billion of its United Kingdom residential mortgage portfolio to BlackRock Financial Management Inc to be completed within the next few weeks.

No buyer named

Lehman Brothers also reduced its commercial real-estate exposure by 18 per cent in the third quarter to $32.6 billion from $39.8 billion.

The company did not name a buyer for a 55 per cent stake in its investment management business, which includes the prized Neuberger Berman asset management unit.

The bank said the spin-off of the commercial real-estate portfolio into a separate publicly traded company, Real Estate Investments Global, will be completed in the first quarter of 2009.

"Taken together, these actions will quickly de-risk and resize the firm," Fuld told investors on a conference call.

- AP