Profit falls at Lehman Brothers

Lehman's results were better than expected

The US investment bank Lehman Brothers has reported a small fall in three-month profits, but the figures were still better than expected.

Net income between June and August fell 3% to $887m (£445m).

Lehman's boss Richard Fuld said the results showed the bank's diversity and strength under "challenging conditions in the markets".

There is great interest how hard the big American banks have been hit by the sub-prime mortgage crisis.

Record defaults

The sub-prime crisis was caused by record levels of defaults by people with poor credit histories or low incomes who had been lent money to buy houses.

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Last month, Lehman announced it was shutting down its BNC Mortgage sub-prime lending unit and cutting 1,200 jobs.

The bank said it recorded "substantial valuation reductions" on certain investments over the three months.

The total valuation adjustments led to a net reduction in revenue of $700m.

Big week

Nonetheless, given the sub-prime problems, the results were expected to be much worse.

"A slight decline is a pretty admirable showing in this environment," said Ned Riley, head of Riley Asset Management in Boston.

It is a big week for the top four US investment banks with all of them publishing quarterly results.

The most eagerly-awaited will be Bear Stearns on Thursday.

The figures will include the period towards the end of June when Bear Stearns had to bail out two of its hedge funds that had got into difficulties because of their exposure to mortgage debt.