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Lehman 4Q profit soars
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January 6, 2000: 9:59 a.m. ET
Earnings quadruple to $2.28 a share, well above analysts’ expectations
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NEW YORK (CNNfn) - Lehman Brothers Holdings Inc. Thursday joined some of its fellow investment banks in reporting record fiscal fourth-quarter and year-end profit, aided by a surge in trading revenue and robust gains from leading some of 1999’s more notable initial public offerings.
Earnings for the quarter ended Nov. 30 more than quadrupled to $301 million, or $2.28 per diluted share, from $74 million, or 51 cents per share, in the year-earlier quarter. Analysts polled by First Call had expected Lehman to earn $1.97 a share.
Revenue rose to $1.41 billion from $665 million.
Lehman is the latest investment bank to join Wall Street’s record earnings club. Last month, Morgan Stanley (MWD) reported fiscal fourth-quarter earnings of $2.84 a share, well above the $1.95 predicted by analysts, while Goldman Sachs (GS) said its fiscal fourth-quarter profits rose to $1.54 a share, beating the $1.48 estimate.
At the same time, membership into the club hasn’t been that difficult to obtain, with 1999’s stellar equity gains and IPO market. What’s more, earnings from Wall Street firms this fiscal year have been that much more exemplary in the wake of Russia’s debt crisis and the subsequent credit crunch that took a significant bite of investment banks’ profits in fiscal 1998.
Trading fees surge
In the fourth quarter, fees from debt and equity trading in the public and institutional markets rose to $623 million from $90 million in the fourth quarter of 1998. Commissions on trading jumped to $186 million from $135 million, while total trading revenue -- which includes trading, commissions and interest income combined -- more than doubled to $972 million from $400 million a year earlier.
Much of those fees came from arranging public offerings during the quarter.
The investment bank managed 11 IPOs -- including wireless technology maker Qualcomm (QCOM)’s $1.1 billion offering -- allowing itself a 4.8 percent market share and a No. 5 ranking in the quarter, according to Thomson Financial Services Data. Lehman led $2.9 billion of stock offerings in fiscal 1999, up from $74 million in the same period last year.
It also fared well on the fixed-income front. Lehman led Wal-Mart Stores' (WMT) $5.5 billion global bond offering last year and Pepsi Bottling (PBG)’s $2.3 billion corporate debt issue. With mergers and acquisitions, Lehman managed AT&T (T)’s $63 billion pending acquisition of MediaOne (UMG) and Qwest Communications (Q)’s $48.8 billion pending takeover of US West (USW), among others.
For the full year, Lehman posted earnings of $1.13 billion, or $8.15 per diluted share, up from $736 million, or $5.19 per share, in 1998. Analysts had expected Lehman to earn $7.76 in fiscal 1999.
Lehman (LEH) shares fell 4-7/16 Wednesday to 69-15/16. 
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Lehman Brothers
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