Bear Stearns (NYSE:BSC) ain't afraid of no subprime.

Bear was the third big brokerage house to report earnings this week, and it didn't disappoint. Though subprime did provide a drag for its fixed income capital markets segment, the firm was able to put up results that beat analysts' expectations.

All three of Bear's segments -- capital markets, global clearing, and wealth management -- showed positive growth year over year. The capital markets segment, Bear's largest, saw particular strength in fixed income, where revenue grew 27% year over year, and core investment banking revenue, which was up 20% year over year. The global clearing services and wealth management segments, both smaller than capital markets by nearly an order of magnitude, grew 5% and 14%, respectively, year over year.

Though the core investment banking business did very well on a year-over-year basis, Bear's merchant banking business was down more than 50% thanks to declines in revenue from the firm's private equity business. Bear is coming off some nice advisory assignments in the last quarter -- including Blackstone's Equity Office buyout, Motorola's (NYSE:MOT) acquisition of Symbol Technologies, and the sale of Pfizer's (NYSE:PFE) consumer products division to Johnson & Johnson (NYSE:JNJ) -- and it said it still has a strong backlog going forward.

No discussion would be complete without ...
... a mention of the effect of subprime on the business. After the reports out of Goldman Sachs (NYSE:GS) and Lehman Brothers (NYSE:LEH) earlier in the week, Bear's message sounded like a safe, familiar tune. Bear's CFO, Sam Molinaro, said on the conference call that Bear's overall exposure to subprime is minimal and so the current troubles pose little direct threat to the company. He said that the "vintage" 2005 and 2006 originations seem to be the big problem, and tighter underwriting standards going forward should quell the storm. Molinaro also mentioned that the environment could be beneficial for Bear, and the company could see some good secondary trading opportunities.

Comments about subprime in relation to the rest of the credit market also sounded a similar note. Molinaro said that the problems seem to be contained within subprime, and Bear's fixed income results -- which were up 27% year over year despite the drag from residential mortgage -- suggest that credit markets have remained strong. Of course, the bulk of concern lies with what we have ahead. Molinaro believes most of the subprime fallout was captured in this quarter for Bear, but given that we're only a few weeks into the new quarter, that's still just speculation.

Subprime is only one card in the house
There's good reason for investors and analysts to be concerned about subprime when it comes to the brokerages, since these firms have direct exposure to subprime loans and lenders. The bigger issue, though, is the "contagion" issue -- whether the subprime woes stay behind their firewall or end up igniting problems in the broader economy. Since the firms' activities are intimately linked with broad economic performance and sentiment, a domino effect sparked by the subprime meltdown poses a much greater risk than direct subprime exposure itself.

For now, though, Bear is continuing to deliver good growth and strong margins. The fact that it's growing across all of its segments and continuing to invest in its people and technology make it tough to be a bear on Bear.

Pfizer is a Motley Fool Inside Value recommendation. Johnson & Johnson is a Motley Fool Income Investor recommendation. Try any one of our investing services free for 30 days.

Fool contributor Matt Koppenheffer ain't afraid of no subprime, either. OK, that's a lie, he is a little afraid of subprime -- but just a little. OK, a lot. He owns shares of Goldman Sachs, but does not own shares of any of the other companies mentioned. The Fool's disclosure policy sends any and all disclosure issues knocking on heaven's door.