Lehman Brothers Holdings Inc.'s (LEH) profits climbed 22 percent for the fourth quarter as the brokerage saw a surge in its merger and acquisition (search) business, the company announced Wednesday. The company's full year earnings climbed 39 percent from the previous year on record revenue and net income.

For the fourth quarter ending Nov. 30, Lehman earned $585 million, or $1.96 per share, up from $481 million, or $1.71 per share, in the fourth quarter a year ago. Revenues were up 25 percent to $2.9 billion from $2.3 billion a year ago.

Analysts surveyed by Thomson Financial had expected Lehman to earn $1.69 per share on revenues of $2.6 billion for the quarter.

Lehman Brothers credited record investment banking revenues, fueled by a 95 percent increase in merger and acquisition advisory fees, for its quarterly gains. A rebound in trading volumes — which had slowed significantly over the summer as investors held off on making trades before the election — also helped the company's transaction fee revenues.

The brokerage's client services segment also saw record net revenues, with its assets under management rose to $137 billion.

For all of 2004, Lehman Brothers earned $2.4 billion, or $7.90 per share, on revenues of $11.6 billion, all records for the company. It earned $1.7 billion, or $6.35 a share, on revenues of $8.6 billion in 2003. Wall Street analysts had expected full-year earnings to come in at $7.63 per share, according to Thomson Financial.

''Due to excellent performance throughout the year and very strong fourth quarter results, we are reporting record annual net revenues, net income and earnings per share,'' said Richard S. Fuld Jr., chairman and chief executive officer. ''Both our reputation as a trusted advisor to our clients and our momentum as a franchise have never been stronger.''

Shares of Lehman Brothers were up $1.10, or 1.3 percent, at $86.75 on the New York Stock Exchange (search).