If ever an investment bank has been underestimated, it's Lehman Brothers. Ever since it managed to extricate itself from its loveless marriage to American Express in 1994 Lehman has been the perennial subject of rumour, usually about wanting or needing to sell out. And in autumn 1998 there were even strong rumours after the Russian meltdown that it was going bankrupt.
Instead Lehman has enjoyed an incredible transformation in fortunes. Confirmation of its success came last month when it reported second-quarter results: bucking the trend of larger rivals Morgan Stanley and Goldman Sachs, which posted a drop in earnings, Lehman reported a 14% increase. Most of that came from the credit markets operations, for which Lehman has always been well known.
But the firm has also picked up steadily in equities and M&A. That's not reflected so well in the most recent results because the market has not treated any firm well, but Lehman has still managed to increase market share. An indication of its success is that it was the only US bank to be appointed to the IPO syndicate for the Deutsche Börse.
Across the board investors and clients praise the quality of sales, trading, and research as well as the headline-grabbing underwriting.