Lehman Brothers announced plans yesterday to shed assets and cut costs to stave off a growing crisis of confidence that threatens its future.

Key elements to bolster the investment bank’s finances include spinning off up to $30 billion (£17 billion) of commercial property, selling a majority stake in its investment management division and cutting its dividend by 93 per cent.

The bank even said that it would consider offers for the entire group.

Lehman’s moves are a desperate attempt to reassure investors that its finances are under control. Its shares, which fell by as much as 45 per cent on Tuesday, slipped again yesterday, closing 6.9 per cent down at $7.25, a new year low.

The brokerage, which had already written down the value of mortgage- related investments by $8.2 billion in the previous year, accompanied its restructuring announcement yesterday with news that a further $7.8 billion hit from the credit crunch had pushed it $3.9 billion into the red in the third quarter. It is the biggest loss in the history of the 158-year-old group.

Lehman was forced to bring forward its results announcement, which had been scheduled for next Thursday, after the collapse of key fundraising talks savaged its shares on Tuesday.

Investors had viewed a potential multibillion-dollar cash injection by the state-owned Korea Development Bank (KDB), or a full takeover by a consortium including KDB, to be the most promising fundraising options for Lehman, which badly needs capital to shore up its balance sheet.

Lehman said that it was in advanced discussions to sell 55 per cent of its asset management unit, which includes Neuberger Berman, with the private equity groups Kohlberg Kravis Roberts and Bain Capital thought to be the most likely buyers.

The brokerage cut the size of its residential mortgage portfolio by 31 per cent to $17.2 billion in the third quarter and is working with BlackRock, the fund manager, to sell about $4 billion of UK home loans within the next few weeks.

Lehman said that it would spin off $25 billion to $30 billion of its commercial property assets into a separate publicly traded company, a move designed to prevent the woes of its high-risk real estate portfolio from dragging down the rest of the group.

The dividend cut is expected to save Lehman about $450 million a year.

Dick Fuld, Lehman’s chief executive, said: “This is an extraordinary time for our industry and one of the toughest times in the firm’s history.” He added that the plans would allow Lehman to “emerge clean” and to refocus its efforts on attracting clients and increasing investor confidence.

Analysts gave Lehman’s moves a cautious welcome, arguing that they may not provide a knockout solution but went some way to calming shareholders and buying it some time. Brad Hintz, of Sanford Bernstein, said: “The immediate crisis has passed and Lehman has bought itself six months. This allows them to go and find new capital if they need it, which we think they do . . . Having said that, a cleaned-up Lehman with a low stock price would be real takeover bait.”

Sean Egan, of Egan Jones Ratings, said: “It’s not enough in the long term and if they don’t organise more funding shortly it’s going to be even more difficult to get . . . The bottom line is they are going to need to sell about $15 billion of new common or preferred shares, which they have only a minimal chance of doing.”

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive