Bear Stearns Cos Inc expects to write down $1.2 billion of assets linked to mortgages in the fourth quarter, resulting in an overall loss, the Wall Street bank's chief financial officer said on Wednesday.

Investors were relieved the write-down was not bigger, and sent Bear Stearns shares up 6.6 percent in pre-market trading.

Bear Stearns has reduced its exposure to subprime mortgage bonds and repackaged mortgage bonds known as collateralized debt obligations, CFO Sam Molinaro said at a Merrill Lynch & Co banking conference.

He said Bear Stearns is now positioned to profit if subprime mortgage bonds weaken further, but still has $884 million of exposure to collateralized debt obligations.

This has been an incredibly challenging period, Molinaro said.

In pre-market trading, Bear Stearns shares rose to $107.57 from $100.87 the day before.

(Reporting by Dan Wilchins, editing by Mark Porter/Gerald E. McCormick)

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