James Cayne, the chairman and chief executive of Bear Stearns, is understood to be stepping down as chief executive, six months after the bank admitted huge losses caused by the sub-prime mortgage crisis in the United States.

Mr Cayne, 73, is expected to be succeeded by Alan Schwartz, a 57-year-old investment banker and the Bear Stearns president.

In August, Bear Stearns removed Warren Spector, the investment bank’s co-president and joint chief operating officer, who had been widely tipped to succeed Mr Cayne. But the bank’s fortunes have continued to nosedive since then and shares now are near a four-year low at $76.25.

Bear Stearns was one of the first banks to signify trouble when it closed two hedge funds with a combined loss of $1.5 billion. In November, the bank said that in the fourth quarter it would write down $1.2 billion of assets linked to mortgages. In the same month it said that 650 jobs, 4 per cent of its global workforce, was to be cut.

In recent months, Citigroup, Merrill Lynch and UBS have removed their chief executives after reporting heavy losses on soured mortgage-related bets.

It emerged yesterday that Citigroup could cut up to 32,000 jobs to stem rising losses. The world’s largest bank is expected to signal the loss of 10 per cent of its workforce when it unveils full-year results next Tuesday. It is also believed to be considering the sale of non-core assets to raise capital.

However, Meredith Whitney, one of Wall Street’s top banking analysts, said that the only way Citigroup could repair its balance sheet would be by selling Smith Barney, the broker, for about $25 billion (£12.7 billion).

Ms Whitney, an analyst at CIBC World Markets, told The Times: “In these markets banks can only sell their best assets . . . To really reduce their leveraging, Citigroup have to sell a chunk of their mortgage or card portfolio, but there is no market for those assets. The only asset they could sell of any size is Smith Barney.”

Citigroup is expected to write down as much as $18.7 billion in the fourth quarter of the year, to cover losses on bonds backed by American sub-prime mortgages, and to slash its dividend by 40 per cent. Yesterday, Citigroup said that reports “on specific numbers are not factual”.

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