It seems Lehman Brothers Inc.'s Tuesday earnings announcement, which beat analyst expectations, proved Deutsche Bank AG analyst Mike Mayo prophetic. Mayo said in a report Monday: "Lehman is not Bear." The news of the better-than-expected earnings pushed Lehman's stock up nearly 32% in late morning trading.
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The New York-based firm announced net income dropped to $489 million, or 81 cents a share, surpassing analysts expectations of 72 cents a share. Earnings were buoyed by a rise in merger advisory fees by 34% to $330 million, equities revenue jumping 6% to $1.4 billion and investment management revenue climbing 39% to $968 million. Meanwhile, earnings declined on a $1.8 billion write-down caused by the slump in the mortgage market.
Although Lehman is not out of the woods yet, the firm has advantages over its brethren Bear Stearns Cos. For one, on Monday Dealscape pointed out: "Lehman's prime brokerage business is also much smaller than Bear's, suggesting that the bank isn't as vulnerable as Bear was." In addition, Lehman sold almost two-thirds of its holdings in the leveraged loan market when the market briefly recovered in the fourth quarter, reducing the risk of losses when prices declined again in 2008. - Gerald Magpily
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See Dealscape: Bear Stearns deal heightens Lehman jitters
