Lehman Brothers Holdings Inc. (LEH) reported a 77 percent jump in third quarter profits Wednesday, handily surpassing Wall Street's forecasts due to record revenues in its investment banking and investment management segments, as well as strong overseas results.

For the quarter ended Aug. 31, the Wall Street firm reported record net income applicable to common shares of $864 million, or $2.94 per share, compared to $487 million, or $1.71 per share, in the third quarter of 2004.

Overall revenues climbed 46.8 percent to $3.85 billion, compared with $2.62 billion last year.

Analysts surveyed by Thomson Financial had forecast earnings of $2.39 per share on revenues of $3.41 billion.

"Despite the geopolitical risk in places such as Britain and Egypt, and the inflationary risk of higher oil prices, there was a much more constructive backdrop for the market and overall capital activity in the quarter," said David Goldfarb, Lehman's chief administrative officer. "We were able to capture many of the opportunities available to us."

Shares of Lehman Brothers climbed $1.32, or 1.2 percent, to $113.60 on the New York Stock Exchange (search).

Lehman Chief Financial Officer Christopher O'Meara said $1.3 billion in revenues, or 33 percent of the company's total quarterly revenues, came from overseas operations, a 90 percent increase from the third quarter of 2004.

Lehman's investment banking division posted a 55 percent increase in revenues to $815 million. The company said it saw the best quarter ever for corporate bond underwriting. Lehman also saw gains in its stock underwriting business, and advised on three of the largest completed merger and acquisition deals in the quarter.

The company's capital markets division saw a 49 percent jump in revenues to $2.5 billion. Lehman said its fixed-income business reported revenues of $1.9 billion, a 37 percent gain from a year ago, due to increased activity in commercial mortgage (search), real estate and credit trading. Equity trading revenues nearly doubled to $637 million as customer stock trading activity increased.

Revenues in Lehman's retail brokerage unit climbed 29 percent to $511 million in the quarter.

For the first nine months of the year, Lehman Brothers reported record net income applicable to common stock of $2.38 billion, or $8.11 per share, compared to $1.73 billion, or $5.94 per share, in the first nine months of 2004. Revenues for the first three quarters of the year were $10.94 billion, a 25.8 percent jump from $8.69 billion during the same period last year.

Goldfarb would not give estimates on the company's future earnings per share or revenues, but noted that the company's pipelines of M&A deals, equity underwriting and debt offerings were at record highs.

"That doesn't mean every quarter will be a record quarter, but we are relatively bullish on the long-term and medium-term aspects of what we do," Goldfarb said. "We believe there's some room to grow."