Restored faith makes Lehman shares rocket

18 March 2008

After shares in Lehman Brothers have plummeted over the past few days, with investors expecting it to go the way of Bear Stearns, the announcement of its first quarter results, which were better than expected, caused its shares to shoot up.

Shares in the bank had dropped their value as much as 40 per cent in Monday trading after Wall Street feared it would post appalling results.

But today's announcement that the bank has not been as badly hit as thought caused shares in Lehman to rise 16 per cent as new faith entered the market.

Lehman Brothers was hit with $1.8 billion in writedowns on defaulted mortgages and loans, but this still wasn't enough to drag profits as low as brokerages had suggested.

The bank's net income dropped by 57 per cent to $489 million, or 81 cents a share, during the first quarter of the year, although analysts expected that shares would be worth only 72 cents a share.

However, this is a contrast to the profit of $1.15 billion - the equivalent of $1.96 a share - that Lehman posted for the same period the previous year.

Overall revenue at the bank also dropped by 31 per cent to $3.5 billion, although revenue at its investment management business grew by 39 per cent.

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