Bear Stearns, the US investment bank in the centre of a legal row with Britain's Barclays, today confirmed that its "upset" executives would not receive a full-year bonus after reporting an $854 million quarterly loss due to $1.9 billion worth of sub-prime mortgage-related writedowns.

James Cayne, chairman and chief executive at Bear Stearns, said: "We are obviously upset with our 2007 results particularly in light of the fact that weakness in fixed income more than offset strong and, in some areas, record-setting performance in other businesses."

As a result, Mr Cayne and other Bear Stearns' executives have waived their bonuses, following in the footsteps of John Mack, chairman and chief executive at Morgan Stanley, who yesterday announced that he too would forgo his bonus after the bank revealed a $9.7 billion sub-prime-linked writedown, leading a $3.56 billion loss - the first quarterly deficit in the company's 73-year history.

Bears Stearns' $854 million loss for the three months to November compares to a $563 million profit in the final quarter of 2006. Revenues fell from $2.4 billion to a $379 million loss in the final quarter. For the full-year, profits fell from $2.1 billion to $233 million while turnover declined from $9.2 billion to $5.9 billion.

It emerged last night that Barclays is suing Bear Stearns for allegedly misleading the UK over the performance of two collapsed hedge funds that were used as collateral for a $400 million (£200 million) loan. The two funds collapsed in June after sub-prime losses, wiping out $1.6 billion of investors' funds.

It claims that it was defrauded by the unit and Matthew Tannin, a Bear Stearns fund manager, with the help of Ralph Cioffi, another executive.

Mr Cioffi is already under investigation by the Securities and Exchange Commission, the American regulator, over allegations that he withdrew about $2 million of his own money from one of the funds before its collapse.

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