Lehman Holds Up, Driven By Capital Markets (Equity)


The last thing of any real interest to me on the calendar for this year are investment bank earnings, which were kicked off today when Lehman Brothers (LEH) reported fiscal year 4th quarter earnings (LEH FY 4Q Earnings Release).  Goldman, Morgan and Bear are reporting next week.

Lehman’s numbers came in pretty well, all things considered.  The thing everybody was looking for was the size of the writedown related to mortgage backed securities.  Net of hedges and liabilities the writedown was $830 million.  That compares with $700 million in their previous quarter, and huge multi billion dollar writedowns from other banks.

That caused revenue in their Capital Markets (Fixed Income) division to fall by 60%.

But that was offset by a very strong quarter in Capital Markets (Equity) which was up more than 107% from the comparable quarter.

Investment Banking and Asset Management also held up nicely.

All together, revenues were down 3% and net income attributable to shareholders 12%.  I think any shareholder would have to breathe a sigh of relief and feel okay about this quarter.

Lehman’s shares are off about 3%.

Lehman is now trading for about 8 times trailing 12 months earnings and 1.5 times book value.  It is moderately valued and if they can weather the strorm as they have so far, the stock might not go down too much more.  That, however, is a big IF.

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