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Lehman Brothers posts big second quarter

In this Jan. 6, 2006, file photo, the headquarters of Lehman Brothers, Wall Street's fourth-largest investment bank, is shown in New York. Mark Lennihan / AP
/ Source: The Associated Press

Lehman Brothers Holdings Inc. said Monday profit rose 48 percent in its fiscal second quarter, buoyed by recent expansion in Europe and Asia that helped boost investment banking and equities trading.

The New York-based investment firm said net income applicable to common stock rose to $986 million, or $1.69 per share, for the quarter ending May 31 compared with $664 million, or $1.13 per share, in the second quarter a year ago. The earnings figures are after preferred stock payments for both periods.

Trading gains and fees charged for advising on mergers and acquisitions pushed revenue up 35 percent to $4.41 billion from $3.28 billion last year.

Profit topped Wall Street projections for a profit of $1.60 per share on $4.19 billion in revenue, based on a survey of analysts by Thomson Financial.

"Our strong results for the second quarter continue to demonstrate that Lehman Brothers has the breadth, balance and scale necessary to help our clients around the world take advantage of opportunities in a changing and challenging market environment," said Chairman and Chief Executive Richard Fuld in a statement.

"As we remain focused on delivering the best solutions to our clients, we are equally committed to maintaining a strict discipline around risk, liquidity and expense management to drive shareholder value," he said.

Lehman Brothers, the fourth biggest U.S. investment bank by market value, has spent the past 18 months expanding operations overseas. The strategy laid out by Fuld has been to almost reinvent the Wall Street firm from its traditional roots as a bond house, and help capture more lucrative business opportunities.

Investment banking revenue increased 28 percent to $741 million from the year-ago period, driven by strong advisory and equity underwriting. The business segment was partially offset by a decline in debt underwriting.

The company's capital markets business reported record revenue of $878 million, up 85 percent from the $474 million achieved in the year-ago period. The jump was pinned on higher trading volumes, and improved results from its brokerage and derivatives businesses.

Shares of Lehman Brothers dipped 35 cents to $65.26 in premarket electronic trading.