Lehman Brothers Holdings reported net income of $875 million, or $2.91 per common share (diluted), for the first quarter ended February 28, 2005.
This represents increases of 31% and 32%, respectively, from net income of $670 million, or $2.21 per common share (diluted), reported for the first quarter of fiscal 2004, and increases of 50% and 48%, respectively, from net income of $585 million, or $1.96 per common share (diluted) for the fourth quarter of fiscal 2004.
Richard S. Fuld, Jr., chairman and chief executive officer, said, “This was truly a great quarter. These record results reflect an outstanding performance from all of our businesses and regions and the earnings power of the Firm. We have never been stronger than we are today and are very well- positioned for the future. Our performance and momentum are clearly the result of how well we are working together as one Firm to deliver on our client-focused strategy.”
The Firm reported record net revenues (total revenues less interest expense) for the first quarter of fiscal 2005 of $3.8 billion, a 21% increase from $3.1 billion in the first quarter of fiscal 2004, and a 32% increase from $2.9 billion in the fourth quarter of fiscal 2004.
Investment Banking revenues increased 34% to a record $683 million for the first quarter of fiscal 2005, from $508 million for the same period a year ago, reflecting improved performance across all products, including record results in debt origination and continued strength in M&A activity. Record Capital Markets net revenues, which increased 21% to $2.7 billion from $2.2 billion in the first quarter of fiscal 2004, were driven by record results in Fixed Income Capital Markets and strong results in Equities Capital Markets. The record results in Fixed Income Capital Markets reflect a strong performance across all major businesses, and in particular mortgages and interest rate products. Improved global equity markets and increased secondary activity contributed to another quarter of solid performance in Equities Capital Markets. Investment Management, formerly Client Services, net revenues increased 5% to $437 million for the first quarter of fiscal 2005, from $416 million in the same period a year ago. Net revenues in Asset Management reflected a continued increase in Assets Under Management from strong net inflows as well as market appreciation. A slight decline in Private Investment Management net revenues was largely attributable to a decline in fixed income production as investors allocated a larger proportion of investments into cash.
Non-interest expenses were $2.5 billion in the first quarter of fiscal 2005, compared to $2.1 billion in the first quarter of fiscal 2004, and $2.0 billion in the fourth quarter of fiscal 2004. Compensation and benefits as a percentage of net revenues were 49.5% during the first quarter of fiscal 2005, consistent with the Firm’s full year 2004 ratio. Non-personnel expenses in the first quarter of fiscal 2005 were $618 million, compared with $527 million (excluding the $19 million real estate reconfiguration charge) in the previous fiscal year’s first quarter, and $603 million in the previous fiscal year’s fourth quarter.
For the quarter ended February 28, 2005, the Firm’s pre-tax margin was 34.3% versus 32.8% in the first quarter of fiscal 2004, and 30.5% in the fourth quarter of fiscal 2004. Return on average common equity was 24.5% for the first quarter of fiscal 2005, compared to 21.1% for the first quarter of fiscal 2004, and 17.0% for the fourth quarter of fiscal 2004. Return on average tangible common equity was 32.0% for the first quarter of fiscal 2005, compared with 29.7% for the first quarter of fiscal 2004, and 23.0% for the fourth quarter of fiscal 2004.
As of February 28, 2005, Lehman Brothers total stockholders’ equity was $15.8 billion, and long-term debt was $59.3 billion (including junior subordinated debentures of $1.2 billion), for total capital of $75.1 billion. Book value per common share was $51.75.
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