Goldman Sachs, Lehman Brothers

Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc.’s profit fell more than 50% in the first quarter due to heavy market turbulence and the credit crunch, but the New York-based investment banks managed to beat Wall Street estimates. Goldman Sachs said net income fell 53%, as the firm posted a loss on mortgage and other securities investment and struggled in its proprietary trading business. The company said net income fell to $1.51 billion, or $3.23 per share, down from $3.2 billion, or $6.67 per share. Thomson Financial estimated that the company would earn $2.53 per share. Goldman said profits in its trading and principal investments business fell 46%, due to a $1 billion loss related to mortgages and other credit products. Revenue in the investment banking division fell 32%, due to lower revenues in debt underwriting. On a positive note, the asset management and securities services division said net revenues grew 28%, as assets under management increased 21% to $873 billion. Shares of Goldman rose $18.39, or 12%, to $169.41 in afternoon trading. Lehman Brothers said net income fell 57% on a write-down and weak returns in the capital markets division. The company said net income fell to $489 million, or 81 cents per share, down from $1.15 billion, or $1.96 per share in the year-ago period. Thomson Financial predicted that the company would post earnings of 72 cents per share. Lehman's earnings were hit by a $1.8 billion write-down caused by the slump in the mortgage market and a 52% decrease in revenues in the capital markets division. The losses were offset by stronger earnings in the investment management and capital markets divisions, which increased 39% and 2%, respectively. Assets under management increased 15% to $277 billion. Shares of Lehman rose $10.76, or 33.89%, to $42.51 in afternoon trading. The strong results also gave a lift to the major market indices, which were anticipating a Federal Reserve interest rate cut at 2:15 EST. The Dow Jones Industrial Average rose 282.99 to 12,255.24. The Nasdaq Composite rose 49.98 to 2,226.99. The Standard & Poor's 500 rose 33.97 to 1,310.57.