The profits show year-on-year growth of 5.5 per cent from last year's figure of $1.07 billion and represent a slightly-better-than-expected performance for the bank after market analysts' prediction of profits of $4.79 billion.
The chief areas of growth for Lehman were in stock trading, where revenues rose by 42 per cent to $1.34 billion, and in advice on merger and securities sales, where there was an eight per cent rise in revenue to $247 million.
Meanwhile, fixed-income trading was up just three per cent to $2.16 billion, with US subprime market debts blamed for slowing up growth in the sector.
News of Lehman's profits follows Goldman Sachs announcement of year-on-year 29 per cent rise in operating revenue, as profits rose from $10.43 billion to $12.73 billion.
However, despite Lehman's improved performance shares have fallen by three per cent since the profits were announced.