Fitch affirms Lehman Brothers

Fitch Ratings said it affirmed the A+/F1 long- and short-term issuer default ratings of Lehman Brothers Holdings Inc. following a review of the investment banking industry.

The outlook remains negative.

Fitch said it believes global trading markets will remain challenged with limited ability to reduce exposures to high risk assets through sales or effective hedges.

For Lehman, hedging effectiveness was weak in the second quarter due to dislocations in prices between cash positions and derivatives.

Core operating profitability is expected to be challenging for the rest of the year, the agency said. Trading volumes may contract for both institutional and retail investors.

Lehman's capital raises and reductions in leverage serve to limit ratings downside as well but the costs of the most recent raise are considered steep relative to its historic valuation and reputation, the agency noted.

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