In the general gloom and doom pervading global equity markets, less bad news is good news. That would explain the rising stock prices of investment banks Goldman Sachs and Lehman Brothers today even after reporting 50 per cent-plus declines in quarterly profits, simply because these results were better, or not as bad as what analysts had predicted.

While Goldman Sachs, the largest Wall Street bank by market value reported a 53 per cent drop in first-quarter profits, Lehman Brothers, the fourth largest, reported corresponding declines of 57 per cent. As a result of these unexpected numbers, Goldman and Lehman shares enjoyed considerable gap-up openings in the US exchanges.

This was a relief on the Street after last week's sudden collapse of the venerable Bear Stearns, which had earlier been preceded by the bankruptcy of Carlyle Capital in Amsterdam (See: Carlyle heads for liquidation as creditors refuse bailout).

In fact, there had been speculation that Lehman Brothers might be the next target for a takeover after the acquisition of Bear Stearns by JPMorgan Chase for a mere $2 per share on Sunday. Analysts are waiting with bated breath for the next banking major, Morgan Stanley, to announce its first-quarter results tomorrow.

The impressive climb in share prices today must rank high in the annals of Goldman Sachs and Lehman Brothers. While the former climbed the most in more than seven years, the latter posted its steepest gain ever. This was in spite of the banks reporting the worse results in almost a decade.

As for beating forecasts, here are the figures. While analysts on average expected Goldman to earn $2.57 per share on revenue of $7.29 billion, the bank reported revenue of $8.34 billion, earning it $3.23 per share. This was in contrast to per share earnings of $6.67 a year earlier. Net income had reduced from $3.20 billion last year to less than half at $1.51 billion. This was for the quarter ended 29 February.

Goldman Sachs had benefited from relatively lesser exposure to mortgage-backed securities as compared to other investment banks, and reported record 2007 results.

However, share prices have plunged on fears of earnings taking a hit due to the existing credit crunch. It also suffered a $532 million loss from its stake in Industrial and Commercial Bank of China Ltd and other corporate investments.

As for Lehman Brothers, analysts had predicted a profit of 73 cents per share on revenue of $3.3 billion. The bank reported earnings of 81 cents per share on revenue of $3.51 billion. Net income fell to $489 million from $1.15 billion a year earlier, when earnings per share had been $1.96.

Lehman's investment woes were partly compensated by increased earnings from the advisory side of their business. Results benefited from a 34 percent increase in merger advisory revenue to $330 and a 39 per cent increase in investment management revenue to $968 million.

These results, coupled with hope of an impending rate hike, may have fuelled a short-term rally in US stocks, but credit concerns remain. After the collapse of one of the oldest names in Wall Street last week, investors and analysts are keeping their fingers crossed.