Bear Stearns Profit Up 5%

The run of better-than-expected earnings from the nation's top brokerages continued Wednesday, with Bear Stearns(BSC Quote) reporting a 5% gain in first-quarter profits.

While Bear's earnings were less impressive than the 31% year-over-year gain reported Tuesday by Lehman Brothers(LEH Quote), they were still strong, confounding analyst expectations for an earnings decline.

In the quarter, Bear earned $378.8 million, or $2.64 a share, compared with $361 million, or $2.57 a share, a year ago. Net revenue was $1.8 billion, up 7% from a year ago.

Wall Street analysts, according to Thomson Financial, had been expecting earnings of $2.34 a share. Analysts had predicted net revenue would come in at $1.71 billion, the same as a year ago.

In premarket trading, shares of Bear were higher, up $1.46 to $106.20.

"Once again the diversity of our franchise is demonstrated in this quarter's strong performance," said Bear Chairman and CEO James Cayne, in a press release.

The firm's big capital markets group reported a 2% rise in net revenue to $1.4 billion. Most of the gains came from a 7% top-line rise in institutional stock trading.

While Bear is often seen as a bond powerhouse on Wall Street, its fixed-income business posted only modest gains. Net revenue from fixed income trading and related businesses rose less than 1% to $824 million.

Much of the earnings growth at Bear was fueled by the strength of the firm's big stock clearing and hedge fund prime brokerage business. Net revenue from clearing and prime brokerage rose 20% to $225 million in the quarter.

Bear's big clearing and prime brokerage group posted impressive numbers even as securities regulators continue to investigate potential wrongdoing in the division.

Last summer, the Securities and Exchange Commission notified Bear that it's likely to file civil charges because of the clearing arm's role in processing and financing abusive mutual fund trades. Recently, the SEC has notified a number of current and former Bear brokers and clearing executives that they could face civil charges in that investigation, which is continuing.