Investment bank Lehman Brothers Holdings Inc. said on Wednesday first-quarter profit rose 6 percent, as real estate and strong equity markets helped lift trading profits even with weakness in subprime mortgages.
Lehman, the fourth-largest U.S. investment bank by market value, said net income rose to $1.15 billion, or $1.96 a share, for the three months ended February 28, from $1.1 billion, or $1.83 a share, a year earlier.
The results beat average analyst estimates by a penny, according to Reuters Estimates.
Net revenue was $5 billion, up 13 percent from the same quarter last year.
Despite the better-than-expected earnings, the ratio of the company's profit compared to revenue, assets, and other items fell, which may imply the company is operating slightly less efficiently as it grows.
Lehman Brothers, traditionally seen as a bond house, has invested heavily in asset management and investment banking in recent years.
The company's investment management segment posted record revenues of $695 million in the quarter, up 20 percent from $580 million in the same quarter last year. Assets under management grew to $236 billion from $188 billion a year ago.
Lehman on Tuesday said it had bought a 20 percent stake in D.E. Shaw Group, one of the largest hedge fund managers in the world.
Trading revenue rose 15 percent, to $3.5 billion, bolstered by equity prime brokerage, strong equity markets, and credit products like corporate bonds.
Lehman's pretax margin fell 1.1 percentage points to 33.7 percent, its return on average common equity fell 2.3 percentage points to 24.4 percent, and it return on average tangible common equity fell 3.6 percentage points to 29.9 percent.
Lehman's shares have been hit hard recently on concerns that turmoil in the subprime mortgage market could cut into its securitization business and force it to write down assets.
Lehman's shares had fallen 16 percent since reaching an all-time high closing level of $85.80 in early February. The Amex Securities Broker-Dealer index fell 12 percent during that period.