Lehman Brothers

745 Seventh Avenue
New York, NY 10019

212-526-7000

www.lehman.com

 

2003 net revenues: $8.6 billion

2003 net income: $1.6 billion

2003 investment banking revenues: $1.7 billion

2003 debt underwriting revenues: $980.0 million

 

2003 total capital: $58.0 billion

 

2003 total employees: 16,200

 

Chairman and Chief Executive Officer: Richard S. Fuld Jr.  

 

Lehman Brothers is a global investment bank that provides services to institutional, corporate, government and high-net-worth individual clients and customers.

 

History

In 1845 Henry Lehman, an immigrant from Germany, opened a dry goods store in Montgomery, Alabama. He was joined by his two brothers in 1850. The family often accepted raw cotton instead of cash for merchandise, which resulted in a successful cotton business on the side. In 1862, the brothers formed Lehman, Durr & Co. with cotton merchant John Durr, and in 1870, helped to form the New York Cotton Exchange. The firm carried out its first IPO underwriting in 1899 and partnered with Goldman Sachs in 1906 to take Sears Roebuck public. The company continued its investment banking operations during the Depression.

 

In 1977 it merged with Kuhn Loeb & Co., the company that helped finance the railroad industry. The merger, however, did not work out. The company was acquired by Sandy Weill in the 1980s and became a part of American Express. In 1992, American Express divested some of its financial services businesses, and in 1994, it spun off Lehman. The stand-alone company struggled to increase sales, cut costs and stay competitive.

 

The company’s 2002 earnings increased by $108 million from insurance settlements related to the destruction of its World Trade Center offices after 9-11.

 

Business Segments

 

The company's three business segments are:

Investment Banking

Capital Markets

Client Services

The Investment Banking Division provides advice to corporate, institutional and government clients on mergers and acquisitions and related financial matters.

 

The company's 2003 10-K described its underwriting business in the following manner:

 

"The Company is a leading underwriter of initial and other public and private offerings of equity and fixed income securities, including listed and over-the-counter securities, government and agency securities and mortgage- and asset-backed securities."

 

Lehman Brothers, through its Capital Markets Division, "is a major dealer in municipal and tax-exempt securities, including general obligation and revenue bonds, notes issued by states, counties, cities, and state and local governmental agencies, municipal leases, tax-exempt commercial paper and put bonds."

 

Income/Revenues from Business Segments

 

Net revenues increased 40 percent to $8.6 billion in 2003 from $6.1 billion in 2002. Net income in 2003 was $1.6 billion, an increase of 74 percent compared to 2002. These increases were attributed largely to performance in Capital Markets, along with improvements in debt underwriting and Client Services activities. 

 

Revenues from investment banking totaled $1.7 billion in 2003. Investment banking revenues were generated from fees and related revenues earned for underwriting public and private offerings of fixed income and equity securities, advising clients on mergers and acquisitions and corporate financing activities. The increase in the volume of fixed income underwriting was offset by lower equity underwriting and lower volumes of mergers and acquisition related activities and resulted in comparable revenues from investment banking for 2003 and 2002.

 

Debt underwriting revenues, however, increased 11 percent in 2003 to a record $980 million, due to narrowing credit spreads and historically low interest rates. In 2002 the company generated $886 million from debt underwriting revenues.