The third-quarter results for Lehman Brothers Holdings Inc., the first indicator of Wall St. earnings in the wake of the recent financial market turmoil, weren’t as bad as some had feared.

Lehman reported net income of US$887 million for the third quarter ended Aug. 31, a decrease of 3% from US$916 million in the same quarter a year earlier. The decline was notable, however, since net income for the second quarter of fiscal 2007 was US$1.3 billion. For the first nine months of 2007, the firm reported record net income of US$3.3 billion, up 10% from 2006.

Net revenues for the third quarter were US$4.3 billion, an increase of 3% from US$4.2 billion reported in the third quarter of 2006, but a drop of 22% from the record US$5.5 billion reported in the second quarter of this year. For the first nine months of the year, net revenues were at a record level of US$14.9 billion, an increase of 14% from the previous year.

The biggest area of weakness for the firm in the third quarter was fixed income. The Fixed Income Capital Markets division reported net revenues of US$1.1 billion, down 47% from US$2 billion in the third quarter of 2006, primarily due to lower performances within credit and securitized products.

Within fixed income, the firm said it recorded very substantial valuation reductions, most significantly on leveraged loan commitments and residential mortgage-related positions. The losses were partially offset by large valuation gains on economic hedges and other liabilities.

Additionally, its Capital Markets division reported net revenues of US$2.4 billion for the third quarter, down 14% from the same quarter last year.

Chairman and CEO Richard Fuld Jr. said, “Despite challenging conditions in the markets, our results once again demonstrate the diversity and financial strength of the Lehman Brothers franchise, as well as our ability to perform across cycles.”

“For the quarter, we reported record net revenues in Investment Management, and our second highest net revenues in both Investment Banking and Equities Capital Markets. In addition, more than half of our net revenues for the quarter came from outside the U.S. We remain focused on delivering significant long term value for our clients and shareholders,” he said.