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Lehman’s fantastic pipeline

Deal flow

Lehman Brothers executives appear to have been overcome by optimism. While reporting dismal third-quarter earnings of 70 cents a share - way down on sell-side analysts' consensus of 85 cents a share - Lehman CFO David Goldfarb made a point of stressing that the firm's backlog of deals across the board was looking quite healthy.

High-yield and high-grade bond issuance backlogs rose $8 billion apiece this quarter to $27 billion and $24 billion respectively, compared with the end of 2001, while M&A hit $62 billion, up $9 billion. The backlog for equity issuance, meanwhile, was up $500 million to $11 billion.

Exaggerated notions?

CSFB's brokerage analyst Joan Solotar wasn't convinced. "The equity numbers you talked about are bigger than the filed numbers for the entire industry," she pointed out to Goldfarb on the conference call. "We've heard much talk from the brokers for the last several quarters that the pipelines are increasing, yet we continue to see decreases in investment banking revenues."

That might just be because Lehman isn't limiting itself to talking about deals already filed. "We include items which are in the process of being filed," replied Goldfarb calmly.

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