Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported record net income of $1.15 billion, or $1.96 per common share (diluted), for the first quarter ended February 28, 2007, representing increases of 6% and 7%, respectively, from net income of $1.09 billion, or $1.83 per common share (diluted), reported for the first quarter of fiscal 2006. Fourth quarter fiscal 2006 net income was $1.00 billion, or $1.72 per common share (diluted).
Lehman Brothers' 2006 first quarter results include an after-tax gain of $47 million, or $0.08 per common share (diluted), from the cumulative effect of a change in accounting principle associated with the Firm's adoption of SFAS 123R on December 1, 2005.
Lehman Brothers First Quarter Business Highlights
"¢ Reported record net revenues in the Capital Markets and Investment Management
segments
"¢ Reported record net revenues in both Europe and Asia
"¢ Announced the acquisition of Grange Securities Limited, marking the Firm's entrance into Australia
"¢ Named the #1 "Most Admired Company" in the securities industry by Fortune magazine in its annual ranking of "America's Most Admired Companies"Â
Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, "By expanding our global footprint, building our capabilities and partnering with our clients, we have again posted record net revenues, net income and earnings per share. Our results clearly demonstrate that we are better positioned than ever to create value for our clients and our shareholders."Â
Net revenues (total revenues less interest expense) for the first quarter of fiscal 2007 were a record $5.0 billion, an increase of 13% from $4.5 billion reported in the first quarter of fiscal 2006 and an increase of 11% from the $4.5 billion reported in the fourth quarter of fiscal 2006. Capital Markets reported record net revenues of $3.5 billion in the first quarter of fiscal 2007, an increase of 15% from $3.0 billion in the first quarter of fiscal 2006, driven by strong performances in both Fixed Income and Equities Capital Markets. Fixed Income Capital Markets reported net revenues of $2.2 billion, its second highest revenue quarter and an increase of 3% from $2.1 billion in the first quarter of fiscal 2006, reflecting record results in credit products as well as a strong performance in real estate, partially offset by declines in securitized products due to weakness in the U.S. residential mortgage sector and in interest rate products.
Equities Capital Markets reported record net revenues of $1.3 billion, an increase of 42% from $944 million in the first quarter of fiscal 2006, driven by continued growth in execution services and prime brokerage activities, as well as solid customer flow activities and strong equity markets. Investment Banking reported its second highest revenue quarter, increasing 2% to $850 million from $835 million in the first quarter of fiscal 2006. These revenues were driven by record debt origination, which increased 4% to $428 million from $410 million in the first quarter of fiscal 2006, and strong merger and acquisition advisory revenues, which increased 9% to $247 million from $226 million in the first quarter of fiscal 2006, partially offset by lower revenues in equity origination as compared to the first quarter of fiscal 2006. Investment Management reported record net revenues of $695 million, an increase of 20% from $580 million in the first quarter of fiscal 2006.
This performance was driven by record revenues in both Asset Management, which increased 13% to $416 million from $368 million in the first quarter of fiscal 2006, and Private Investment Management, which increased 32% to $279 3 million from $212 million in the first quarter of fiscal 2006. Assets under management grew to a record $236 billion.
Non-interest expenses for the first quarter of fiscal 2007 were $3.3 billion, compared to $2.9 billion in the first quarter of fiscal 2006 and $3.0 billion in the fourth quarter of fiscal 2006. Compensation and benefits as a percentage of net revenues was 49.3% during the first quarter of fiscal 2007, consistent with both the first and fourth quarters of fiscal 2006. Non-personnel expenses in the first quarter of fiscal 2007 were $860 million, compared with $809 million in the fourth quarter of fiscal 2006 and $711 million in the first quarter of fiscal 2006, reflecting higher brokerage and clearing expenses and continued investments in the franchise.
The Firm's pre-tax margin was 33.7% for the first quarter of fiscal 2007, compared to 34.8% for the first quarter of fiscal 2006. Return on average common equity was 24.4% for the first quarter of fiscal 2007, compared with 26.7% for the first quarter of fiscal 2006. Return on average tangible common equity was 29.9% for the first quarter of fiscal 2007, compared with 33.5% for the first quarter of fiscal 2006.
As of February 28, 2007, Lehman Brothers' total stockholders' equity was $20.0 billion, and total long-term capital (stockholders' equity and long-term borrowings, excluding any borrowings with remaining maturities of less than twelve months) was $109.0 billion. Book value per common share was $35.15.April 14, 2007. - Lehman Brothers Press News
Posted March 14th, 2007 by Armen Hareyan
