PROFITS of Lehman Brothers, the Wall Street investment bank, rose by nearly 40 per cent in the second quarter, to May 31, on the back of soaring figures from share and fixed-income trading.
The bank, in which nearly half the shares are owned by the staff, made $609 million (£320 million) in the quarter, up from $437 million a year ago. However, profits were still below the record $3.1 billion net revenue achieved in the current year’s first quarter.
Revenues from investment banking, including mergers and acquisitions, were $546 million for the period — the fifth consecutive quarterly rise. Total revenue for the quarter was $2.9 billion, up from $2.3 billion the previous year.
The bank’s capital markets business produced the strongest result for the quarter. Its revenue was $2 billion, up 19 per cent on the previous year.
Revenue from fixed-income trading and equity trading were much higher than a year previously. Income from trading equities was 16 per cent higher than a year previously, boosted by a strong contribution from derivatives activities. Assets under management increased to $125 billion, which also added to revenue growth.
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Lehmans, a big employer in the City, remains front-runner to take over Cazenove, the independent British stockbroking firm. The US bank is thought to have made an informal approach to Cazenove, which is to announce full-year figures within the next three weeks. Cazenove, like Lehman, is still mainly owned by employees and past employees, and has been at the centre of frenzied takeover speculation in recent weeks. It may still choose to float independently on the stock market.
Cazenove is valued at about £750 million — down from the estimated £1.1 billion value put it at the peak of the market.
Other possible bidders include Barclays Capital, run by Bob Diamond. However, the high price tag on Cazenove could deter Barclays from making a formal offer for it.