The company earned $135.9 million, or 88 cents a share, in the second quarter ended December 31, compared with a net income of $160.2 million, or $1.11 a share, in the year-ago period. The results, however, easily beat Wall Street expectations of 63 cents a share, which had been ratcheted downward following this summer's financial turmoil.

Investment banking revenues dropped 41 percent in the quarter to $163.7 million, from $278.9 million, as the firm derived fewer revenues from underwriting stock and debt offerings. Bear Stearns also attributed the drop to a decline in fees from advising companies on mergers and acquisition, but did not detail the drop.

Like other U.S. securities firms, Bear Stearns benefited from increased stock trading revenues in the quarter. Commission revenues rose 10.5 percent to $254.7 million, from $230.5 million in the year-ago quarter, because of higher clearing and customer commissions.

Principal transactions — revenues from making markets in securities and trading for the firm's own account — rose 7.3 percent to $419 million, from $390.5 million in the year-ago quarter, due to strong results in mortgage-backed securities, government bonds, derivatives, and arbitrage trading.

The segment's robust results contrasted with the drop in principal transactions other U.S. securities firms, such as Merrill Lynch and Co. Inc. have reported for the quarter. Bear Stearns attributed the increase to increased customer activity and tight risk management procedures.