Lehman Brothers second-quarter profit climbs 27 percent
NEW YORK: Lehman Brothers Holdings, the fourth-largest investment bank in the United States, said Tuesday robust stock trading and buyout business pushed second-quarter profit up 27 percent year-over-year.
For the three months ended May 31, profit after paying preferred dividends rose to $1.26 billion (\940 million), or $2.21 per share, from $986 million, or $1.69 per share, a year earlier.
Fees charged for stock trading amid a record run on Wall Street, as well as those charged to companies for advice on takeover deals, helped drive Lehmans business during the quarter. Revenue rose 25 percent to $5.51 billion (\4.13 billion) from $4.41 billion a year prior.
Results topped Wall Street projections for earnings of $1.88 per share on revenue of $4.97 billion (\3.72 billion), according to analysts polled by Thomson Financial.
Chairman and Chief Executive Richard Fuld said in a statement the banks diversification efforts contributed to strong growth in non-U.S. net revenue, which represented nearly half of total net revenue for the quarter.
Fuld, who has led Lehman since it was spun off from American Express in 1994, has transformed the company into one of Wall Streets biggest investment banks. While Lehmans bond business has traditionally been its biggest revenue stream, Fuld has steered the bank into more profitable businesses globally, such as merger and acquisition advisory.
Diversifying the firm has allowed Lehman to remain profitable even as some of its key businesses lag. For example, this year the company has been able to compensate for weakness in its mortgage banking business related to subprime loans.
Lehmans capital markets business posted revenue of $3.6 billion (\2.7 billion) during the quarter, up 17 percent from $3.1 billion a year earlier. However, the fixed income segment of that business - which includes bonds, derivatives and credit products - fell 14 percent to $2.2 billion (\1.65 billion) because of “continued weakness in the U.S. residential mortgage business.”
Investment banking posted revenue of $1.2 billion (\900 million), up 55 percent from $741 million (\555 million) a year earlier. The flurry of takeover deals during the quarter caused many companies to seek financing, driving Lehmans debt origination up 87 percent to $530 million (\397 million) and equity origination up 60 percent to $333 million (\249 million).
Shares of Lehman, which fell 10.8 percent during the second quarter, closed at $75.68 on Monday. Shares rose $2.42, or 3.2 percent, to $78.10 in premarket electronic trading.
