Third Quarter 2007
Lehman Brothers Reports Third Quarter Results

Reports Net Income of $887 Million and Net Revenues of $4.3 Billion

NEW YORK, September 18, 2007 —
Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported net income of $887 million, or $1.54 per common share (diluted), for the third quarter ended August 31, 2007, representing decreases of 3% and 2%, respectively, from net income of $916 million, or $1.57 per common share (diluted), reported for the third quarter of fiscal 2006. Net income and earnings per common share (diluted) for the second quarter of fiscal 2007 were $1.3 billion and $2.21, respectively.

For the first nine months of fiscal 2007, the Firm reported record net income of $3.3 billion, or $5.71 per common share (diluted), up 10% and 12%, respectively, from net income of $3.0 billion, or $5.09 per common share (diluted) for the first nine months of fiscal 2006. The 2006 results include an after-tax gain of $47 million, or $0.08 per common share (diluted), from the cumulative effect of a change in accounting principle associated with the Firm's adoption of SFAS 123R on December 1, 2005.

Third Quarter Business Highlights

Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, "Despite challenging conditions in the markets, our results once again demonstrate the diversity and financial strength of the Lehman Brothers franchise, as well as our ability to perform across cycles. For the quarter, we reported record net revenues in Investment Management, and our second highest net revenues in both Investment Banking and Equities Capital Markets. In addition, more than half of our net revenues for the quarter came from outside the U.S. We remain focused on delivering significant long term value for our clients and shareholders."

Net revenues (total revenues less interest expense) for the third quarter of fiscal 2007 were $4.3 billion, an increase of 3% from $4.2 billion reported in the third quarter of fiscal 2006 and a decrease of 22% from the record $5.5 billion reported in the second quarter of fiscal 2007. For the first nine months of fiscal 2007, the Firm reported record net revenues of $14.9 billion, an increase of 14% from $13.1 billion for the first nine months of fiscal 2006.

Capital Markets reported net revenues of $2.4 billion for the third quarter of fiscal 2007, a decrease of 14% from $2.8 billion in the third quarter of fiscal 2006. Fixed Income Capital Markets reported net revenues of $1.1 billion, a decrease of 47% from $2.0 billion in the third quarter of fiscal 2006, primarily due to lower performances within Credit and Securitized Products. Within Fixed Income Capital Markets, the Firm recorded very substantial valuation reductions, most significantly on leveraged loan commitments and residential mortgage-related positions. These losses were partially offset by large valuation gains on economic hedges and other liabilities. The result of these valuation items was a net reduction in revenues of approximately $700 million. Equities Capital Markets reported its second highest net revenue quarter, with net revenues of $1.4 billion, an increase of 64% from $837 million in the third quarter of fiscal 2006. This performance was driven by strong client activity in both Cash and Derivative Products, and represents the third straight quarter that Equities Capital Markets has surpassed $1 billion in net revenues. Investment Banking also reported its second highest net revenue quarter, with net revenues of $1.1 billion representing an increase of 48% from $726 million in the third quarter of fiscal 2006. This performance was driven by record advisory net revenues, which more than doubled to $425 million from $195 million in the third quarter of fiscal 2006, as well as strong equity origination net revenues, which rose 62% to $296 million from $183 million in the third quarter of fiscal 2006. For the quarter, debt origination net revenues were $350 million, consistent with $348 million reported in the third quarter of fiscal 2006. Investment Management reported record net revenues of $802 million, an increase of 33% from $605 million in the third quarter of fiscal 2006. This performance was driven by record Private Investment Management net revenues, which increased 30% to $334 million from $256 million in the third quarter of fiscal 2006, and record Asset Management net revenues, which increased 34% to $468 million from $349 million in the third quarter of fiscal 2006. Assets under management grew to a record $275 billion.

Non-interest expenses for the third quarter of fiscal 2007 were $3.1 billion, compared with $3.6 billion in the second quarter of fiscal 2007 and $2.8 billion in the third quarter of fiscal 2006. Compensation and benefits as a percentage of net revenues was 49.3% during the third quarter of fiscal 2007, consistent with both the second quarter of fiscal 2007 and the third quarter of fiscal 2006. Non-personnel expenses in the third quarter of fiscal 2007 were $979 million, compared with $915 million in the second quarter of fiscal 2007 and $751 million in the third quarter of fiscal 2006, reflecting continued investments in the franchise and $44 million ($37 million after tax, or $0.06 per common share (diluted)) of costs associated with the restructuring of the Firm's global residential mortgage origination business, including the closure of BNC Mortgage LLC. These costs reflect non-personnel expenses of approximately $17 million and a goodwill write-down of approximately $27 million, which are included in Other expenses in the Firm's Consolidated Statement of Income.

The Firm's pre-tax margin was 28.0% for the third quarter of fiscal 2007, compared with 32.7% for the third quarter of fiscal 2006. Return on average common equity was 17.1% for the third quarter of fiscal 2007, compared with 21.0% for the third quarter of fiscal 2006. Return on average tangible common equity was 21.1% for the third quarter of fiscal 2007, compared with 26.1% for the third quarter of fiscal 2006.

As of August 31, 2007, Lehman Brothers' total stockholders' equity was $21.7 billion, and total long-term capital (stockholders' equity and long-term borrowings, excluding any borrowings with remaining maturities of less than twelve months) was $141.5 billion. Book value per common share was $38.29.

Lehman Brothers (ticker symbol: LEH), an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private investment management, asset management and private equity. The Firm is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world. For further information about Lehman Brothers' services, products and recruitment opportunities, visit the Firm's Web site at www.lehman.com. Lehman Brothers Inc. is a member of SIPC.

Conference Call
A conference call to discuss the Firm's financial results and outlook will be held today at 10:00 a.m. ET. The call will be open to the public. Members of the public who would like to access the conference call should dial, from the U.S., 888-323-4182 or from outside the U.S., 517-623-4500. The pass code for all callers is LEHMAN. The conference call will also be accessible through the "Shareholders" section of the Firm's Web site under the subcategory "Webcasts." For those unable to listen to the live broadcast, a replay will be available on the Firm's Web site or by dialing 866-501-0095 (domestic) or 203-369-1821 (international). The replay will be available approximately one hour after the event and will remain available on the Lehman Brothers Web site and by phone until 11:59 p.m. ET on October 19, 2007.

Please direct any questions regarding the conference call to Shaun Butler at 212-526-8381, sbutler@lehman.com or Elizabeth Besen at 212-526-2733, ebesen@lehman.com.

Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements. These statements are not historical facts, but instead represent only the Firm's expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include risks and uncertainties relating to market fluctuations and volatility, industry competition and changes in the competitive environment, investor sentiment, liquidity and credit ratings, credit exposures, operational risks and legal and regulatory matters. The Firm's actual results and financial condition may differ, perhaps materially, from the anticipated results and financial condition in any such forward-looking statements and, accordingly, readers are cautioned not to place undue reliance on such statements. The Firm undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. For more information concerning the risks and other factors that could affect the Firm's future results and financial condition, see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Firm's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

Selected Statistical and Financial Information Attached (365 k)

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