Goldman Sachs, Lehman profits fall

Goldman's chairman and chief executive, Lloyd Blankfein, said "market conditions are clearly very difficult", while his counterpart at Lehman, Richard Fuld, said the banking industry was facing "challenging" times.

Goldman Sachs's fiscal first-quarter earnings plunged 53 per cent to $1.51 billion (Dh5.54bn) compared with the same period a year earlier while Lehman's fiscal first-quarter profits slumped 57 per cent to $489 million.

Despite the earnings declines, investors breathed a sigh of relief as Goldman and Lehman's respective earnings were better than most analysts had forecast.

Banking stocks have come under extreme pressure in recent weeks as a broadening credit crisis has gripped Wall Street and investors have sold off financial shares.

Lehman's shares tumbled 16 per cent to $33.00 on Monday after falling sharply on Friday.

The credit squeeze, which has forced many banks to tighten their lending standards, was triggered by rising losses on mortgage investments tied to the US housing downturn.

One of Goldman and Lehman's rivals, Bear Stearns, came close to collapsing late last week as the liquidity crunch worsened.

Bear Stearns agreed to be taken over by another bank, JP Morgan Chase, on Sunday for $236 million or just $2 a share in a deal supported by the Federal Reserve.