earnings for its third quarter from a year earlier, to $290 million.
Lehman's third quarter ended Aug. 31. Earnings per share of $2.20 surpassed analysts' expectations by 19 cents.
However, poor market conditions, particularly in bonds, pushed results down 12% from the second quarter.
"Last quarter they blew everyone's socks away in a good market. This quarter they came through with a very respectable performance and came down only a little bit in a more challenging market," said Raphael Soifer, an analyst at Brown Brothers Harriman.
The firm earned $833 million from sales and trading, down 11% from $935 million in the second quarter.
Investment banking, excluding merchant banking, earned $511 million, a 20% increase from the second quarter.
The results showed a dramatic comeback from last year's dismal third quarter, when trading losses sparked by Russia's bond crisis dragged down earnings to $151 million. Lehman's overall net income rose 92% from last year, and earnings per share increased by 100%.
The company has been trying to lessen its reliance on revenues from fixed-income trading and focus more on high-margin businesses, analysts said. Mergers and acquisition advisory and high-yield bond underwriting helped drive the growth in investment banking, they added.
With $203 billion of assets, Lehman has also been expanding its operations in Europe. In a conference call with analysts Thursday, the company said it derived 38% of its revenues during the quarter from its European operations.
Lehman is the third Wall Street firm to report successful earnings this week. However, better-than-expected profits for some investment banks may not signify equally good news for commercial banks.
Citigroup Inc., Chase Manhattan Corp., and J.P. Morgan & Co., which all have large investment banking and securities businesses, are scheduled to report their third-quarter results in October.
Lehman reported return on equity of 22.1%, 70% higher than last year's third quarter, but down from second-quarter ROE of 26.3%.