Lehman Surprises With Profit Gain

Lehman Bros. Holdings Inc. posted an unexpected increase in profit for the second quarter as it benefited from strong stock-trading income, fees from advising companies on mergers and a shrinking dependence on bonds. The nation’s fourth-largest securities firm said net income grew 2% to $330 million from a year ago. Earnings per share were $2.09, down from $2.12, reflecting an increase in the number of shares outstanding. The results countered expectations of analysts surveyed by First Call Corp., who had predicted a decline to $1.68 a share. Net revenue edged down to $1.46 billion from $1.47 billion. Strong stock and bond markets worldwide helped Lehman’s commissions jump 35% to $168 million, and revenue from principal transactions, or trading, rose 13%. Total trading revenue, which includes net interest income and commissions, was up 16%. The dollar amount of merger deals Lehman completed in the quarter was up 70% from a year ago, and the amount of initial public offerings was nearly three times higher. Other Wall Street firms also have seen key securities businesses kick back into high gear this year, after global financial turmoil slashed profits last year. Morgan Stanley Dean Witter & Co. and Goldman Sachs Group Inc. are expected to post strong earnings this week. Lehman shares fell $3.69 to close at $56.63 on the New York Stock Exchange. They had jumped 7.6% on Monday as investors anticipated the earnings report.