Lehman Brothers reported net revenues of $262 million for its fixed income capital markets segment, a drop of 88%, caused by deterioration in the market for residential mortgages, commercial mortgages and acquisition finance. During the same period last year, the bank cleared $2.2 billion in net revenues that it completed the first quarter of last year, according to statement about it first-quarter results. The results reflect the impact of what was a very difficult market environment, said Erin Callan, CFO of Lehman Brothers. The investment bank's results were highly anticipated, given news about the collapse of Bear Stearns, which presented Lehman Brothers with fierce competition on several fronts of asset securitization and fixed-income investment banking. From a competitive standpoint, however, officials there declined to discuss how it might use the opportunity to take more market share. "It is fair to say that we have great sympathy for our colleagues at Bear Stearns. We are very sad about what happened at that organization," said Callan. Still, she said, so many other issues surround the ongoing fallout of the current capital market that it was hard to focus on the potential upside for Lehman Brothers. As for its other capital markets results, weaker demand for fixed-income investment banking led to lower underwriting activity in that segment, but its mark-to-market adjustments also materially impacted results, said Callan. Despite the ongoing volatility in the capital markets, however, the company highlighted two positive developments that helped it sustain some buoyancy during its first quarter: strong trading and robust client activity across its credit markets. Spreads on several securities asset classes underscored the market conditions, said Callan. Certain classes of asset-backed securities had widened out to levels of 140 basis points over their benchmarks, while triple-A MBS paper had ballooned to 135 basis points over and triple-A CMBS paper had widened out to 180 basis points, she said. Overall, the holding company saw its net income drop to $489 million, a 57% decrease from net income of $1.15 billion in the same quarter a year ago.