Now this is more like it. Investors by and large gave a yawn and a shrug to a very solid (albeit maybe not spectacular) earnings report from Lehman Brothers (NYSE:LEH), but showed a fair bit more love to Bear Stearns (NYSE:BSC) Thursday morning.

And why not? True, fourth-quarter net revenue was only up about 3%, but it exceeded the average estimate by a healthy margin and even surpassed the published high point. Capital market revenue was flat as good growth in equities and fixed income was offset by declines in investment banking tied to reduced gains from the merchant banking operations. In other words, capital markets did pretty well aside from a difficult year-ago comparison in merchant banking.

Global clearing and wealth management also performed well on the top line, but it was the cost control that caught my eye. Non-compensation expenses were down 13% from last year's level as the company incurred fewer legal expenses and kept a lid on other costs in general.

Bear Stearns also announced that it had submitted a settlement offer to the Securities and Exchange Commission and the New York Stock Exchange in regard to the mutual fund trading scandal. The company is offering to pay a $250 million fine and hire consultants to review its relevant operations. Time will tell whether or not the regulatory bodies accept this. There have been calls in the past to force Bear Stearns to divest its global clearing business as part of a settlement, but I'd imagine that the company would fight that tooth and nail.

All in all, I still like where Bear Stearns is going. Sure, next year could be a little tougher in fixed income, and there are risks associated with the mortgage-backed securities market. But I also happen to think that the market has overdiscounted the stock for that risk, and underappreciates the growth in wealth management, international operations, and prime brokerage, where Bear Stearns is the largest player ahead of rivals like Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MWD).

Just to close on a bit of trivia, I found the company's margin debt and short balances to be a little interesting. Margin debt was about 16% higher than last year, and short balances were about 4% higher. Perhaps that says nothing in particular about the market as a whole (after all, Bear Stearns could be gaining share), but it might be worth keeping an eye on as a market sentiment indicator.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).