Lehman Brothers has outlined a plan to spin off $30bn (€21.3bn) in mortgage assets and confirmed it will sell a majority stake in its investment management division in dramatic developments aimed at strengthening its balance sheet, which should also dampen the volatility of its earnings given the accounting treatment of the new mortgage vehicle.

The broker-dealer, which yesterday fell 45% to close at $7.89, traded up in early pre-market trading but once again turned flat within an hour of the results announcement. Yesterday's share price slump, after reports that Korea Development Bank had withdrawn from investment talks, prompted Lehman to pre-announce its earnings today.