NEW YORK– Investment bank Lehman Brothers Holdings Inc. says its fiscal first-quarter earnings fell 57 per cent due to a steep decline in the company’s capital-markets business.
Net income for the quarter ended Feb. 29 fell to $489 million (U.S.), or 81 cents per share, the company said yesterday.
That compared with earnings of $1.15 billion, or $1.96, a year earlier.
Revenue fell 31 per cent to $3.5 billion.
Analysts polled by Thomson Financial, on average, had forecast earnings of 72 cents per on revenue of $3.35 billion.
Lehman Brothers took a $1.8 billion writedown during the first quarter because of deterioration in the credit markets.
The company had taken about $2.13 billion in writedowns in the previous two quarters combined, while financial-services firms as a whole have taken about $160 billion in writedowns since the credit markets began to tighten.
Capital-markets revenue fell 52 per cent to $1.7 billion because of continued deterioration of the credit and mortgage markets.
Gains in such products as high-grade corporate debt and foreign exchanges were more than offset by investors’ lack of appetite for riskier products, such as residential and commercial mortgage securities and acquisition finance.
Chair and chief executive officer Richard Fuld said in a statement the current credit environment remains “challenging.”
Nevertheless, the bank maintains a strong capital base and liquidity position, he said.
Lehman has $34 billion in available liquidity.
Liquidity problems among investment banks have been a major question in recent days.
Lehman competitor Bear Stearns Cos. has been forced to agree to sell itself for about $2 per share to avoid bankruptcy.
As mortgagees increasingly defaulted in 2007, investors shied away from bonds backed by risky loans.
That lack of investor appetite led banks to cut the value of their holdings, and has severely reduced investment banks‘ business in capital markets and fixed income.
Investment-management operations at Lehman helped lessen the blow of the weakening credit markets.
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