Brokerage firm Lehman Brothers Holdings Inc. reported record net income of US$879 million for the third quarter ended August 31, up 74% from the third quarter of fiscal 2004. Second quarter fiscal 2005 net income was $683 million.

The profit improvement was driven by much higher revenues across many of Lehman’s businesses. The firm reported that net revenues – total revenues less interest expense – for the third quarter of fiscal 2005 rose to a record $3.9 billion, up 47% from $2.6 billion in the third quarter of fiscal 2004, and up 18% from $3.3 billion in the second quarter of fiscal 2005.

Investment banking revenues increased 55%, driven by the firm’s highest level ever of debt origination revenues as well as strong equity origination and mergers and acquisitions revenues.

The Capital Markets division also saw net revenues rise 49%. While fixed income makes up the majority of the capital markets segment, the firm also reported that the equities component’s revenues nearly doubled to $637 million in the quarter, reflecting robust customer flow activity, particularly in the cash businesses and equity derivatives, improved results in convertibles and continued growth in the firm’s prime broker business. The Investment Management division reported 29% higher revenues.

Non-interest expenses for the third quarter were $2.6 billion, compared to $1.9 billion in the third quarter of fiscal 2004. Compensation and benefits represented 49.5% of net revenues during the quarter, compared to 49.8% during the third quarter of fiscal 2004 and 49.5% in the second quarter of fiscal 2005.

For the latest quarter, return on average common stockholders’ equity was 23%, compared to 15% in the third quarter of fiscal 2004.