Big Beat for Lehman

Shares are rising 2%.
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second-quarter profit soared 27% on strong overseas and investment banking revenue.

In the quarter ended May 31, Lehman made $1.25 billion, or $2.21 a share, compared to $1 billion, or $1.69 a share, a year earlier. Revenue jumped 25% to $5.5 billion.

Analysts expected the New York investment bank would earn $1.88 a share on $4.97 billion of revenue, according to Thomson Financial.

"Our record results for the second quarter and the first half reflect our ongoing commitment to achieving diversified growth," said CEO Richard S. Fuld. "With non-U.S. net revenues representing nearly half of our total net revenues for the quarter, our global platform is stronger and more balanced than ever. To build on this momentum, we remain focused on leveraging our resources and capabilities to maximize value for our clients and shareholders."

Lehman is the first brokerage firm out of the gate with second-quarter earnings. It said investment banking revenue rose 55% from a year ago to $1.2 billion. Principal transactions rose 11.6% to $2.9 billion.

Yet not all of Lehman's results were outstanding. While revenue from the capital markets rose 17% to $3.6 billion, mostly driven by "record performance" in its equities business, fixed income revenue dropped 14% from a year ago to $1.9 billion.

The company attributed the drop to "continued weakness in the U.S. residential mortgage business" and "decreased revenue in the firm's municipal and interest rate products business."

Shares of Lehman rose $1.32, or 1.7%, to $77 early Tuesday.