Lehman Brothers, the fourth-largest U.S. securities firm, reduced its mortgage holdings in the second quarter by 20% to curb further losses from the credit-market collapse.

Lehman reported a loss of $2.8 billion, or $5.14 per share, in line with preliminary figures the company released last week. Leveraged buyout loans were cut 37% to $18 billion.

"We have begun to take the necessary steps to restore the credibility of our great franchise and ensure that this quarter's unacceptable performance is not repeated," Chief Executive Officer Richard Fuld said in the statement. The loss was Lehman's first since it was spun off from American Express Co. in 1994.

Lehman has lost more than 60% of its value on the New York Stock Exchange this year amid speculation mortgage-related writedowns will continue to depress earnings. After disclosing the wider-than-estimated second-quarter loss last week, the firm replaced its president and finance chief. Fuld, the longest- serving chief executive officer on Wall Street, is trying to convince investors Lehman can weather the credit contraction.

The firm shed $147 billion of assets during the quarter, more than the $130 billion it estimated last week. Net assets declined by $70 billion, the bank said today.

Its mortgage-backed holdings dropped to $64.7 billion from $80.8 billion in the first quarter. Residential mortgages and related securities dropped 22% to $24.9 billion. Commercial mortgages and related bonds declined 19% to $29.4 billion. Real estate holdings fell 19% to $10.4 billion.

Writedowns wiped out revenue for the firm, which said fixed- income revenue was a negative $3 billion. Equity trading dropped 65 percent to $601 million due to writedowns on private-equity stakes. Investment-banking revenue fell 25 percent to $858 million, and asset management rose 10 percent to $848 million.

Compensation costs declined 14 percent to $2.33 billion in the quarter from a year earlier. Severance pay of $140 million was included in compensation costs, the firm said. Lehman has announced some 4,000 job cuts this year. Lehman's headcount fell by almost 2,000 in the second quarter to 26,189, according to figures released today.