Wall Street giant Goldman Sachs admitted that jitters over the decline in share prices had sent takings at its corporate finance business down 41%.

General business activity is likely to remain subdued until there is an improvement in economic conditions

Henry Paulson, Goldman Sachs

Revenues at the division, which advises firms on flotations, mergers and takeovers, came in at $652m (�419m) for the June to August period, compared with $1.1bn the year before.

And rival Lehman Brothers, warning of "a record level of downgraded debt, an increased level of defaults and a steep decline in global equity markets", saw its trading revenue slump by 63%.

"The results... reflect the extremely difficult market conditions that continue to confront our industry," Richard Fuld, Lehman chairman and chief executive, said.

Lehman's profits of $194m for the quarter compared with $309m a year before, and equated to 70 cents a share.

Wall Street analysts had, on average, expected the firm to earn 85 cents per share.

But Lehman shares nonetheless rallied on the results, rising $1.47 or 3.1%, to $49.46 in early trade in New York.

"A lot of bad news has already been priced in," said Art Hogan, chief market strategist at Jefferies.

"You sell on the rumour, buy on the news on this particular tape,"

'Difficult conditions'

Goldman Sachs said its corporate finance division had noted particular declines in revenues from communications, media, entertainment and hi-tech sectors.

But a strong performance by the bank's bond department allowed overall profits to come in at $522m for the quarter, 11.5% higher than a year before.

"In light of the difficult business conditions, we are pleased with our... financial performance, which is in large part due to record revenues from our fixed income, currency and commodities businesses," chairman and chief executive Henry Paulson said.

Safer haven

As shares have slid, investors have increasingly sought sanctuary in bond markets.

The firm's mortgage business was also strong, Tuesday's results statement noted.

But Mr Paulson warned that trading would remain challenging for many other divisions.

"General business activity is likely to remain subdued until there is an improvement in economic conditions and a greater degree of investor and corporate confidence," Mr Paulson said.

Goldman shares added $1.98 to $67.65 in early trade in New York on Tuesday,