Alex. Brown profits soar in quarter

April 24, 1991|By Timothy J. Mullaney

Alex. Brown Inc. said yesterday that it earned more during the first three months of 1991 than in all of 1990 and gave much of the credit to a rising stock market that boosted the Baltimore investment bank's stock and bond trading commissions and investment banking fees.

Alex. Brown earned $10.6 million, or 66 cents a share, during the first quarter, which ended March 29. The company earned only $2.5 million, or 16 cents a share, in the first quarter of last year.

"In general, the industry had a very good quarter," said Beverly L. Wright, Alex. Brown's chief financial officer. "We benefited from increased volume in the industry and got more than our pro-rata share of it."

The company said that its revenues from stock and bond trading commissions rose 36 percent, revenues from the company's trading of stocks and bonds for its own account as a market-maker more than doubled, and investment banking revenues rose more than 40 percent.

The company's investment bankers also held on to the top spot in national rankings of the number of public stock offerings and initial public offerings managed or co-managed.

"We really outperformed the [securities] industry," said Benjamin H. Griswold IV, chairman of Alex. Brown. "Virtually every part of the business made an important contribution."

Perrin Long, a securities analyst with First of Michigan Corp. in Detroit, said that he had been expecting Alex. Brown to earn between 50 cents and 60 cents a share.

He said about 75 percent of the gain in profits was the result of the stronger stock market and the rest came from Alex. Brown's work to hold down costs during the industry's slow times during 1989 and 1990.

"It was both, but probably more the market than anything else," Mr. Long said. "Earnings have been up across the board [among securities firms], but this compares very well. . . . When the initial public offering market does well, Alex. Brown does well."

Mr. Long said the gain in profits also came because Alex. Brown was able to avoid some of the investing mistakes that dogged the company in 1990. Last year's full-year profits were held down by losses on stock that Alex. Brown held in an advertising firm and on junk bonds and other investments.

Ms. Wright said that Alex. Brown's compensation costs grew by almost a third because it had to pay out more commissions to investment bankers and brokers who brought in extra business. Compensation and benefits is by far the biggest item on the company's expense sheet, accounting for more than $51.6 million of the company's $76.7 million in first-quarter expenses.

But she said that fixed compensation costs, such as salaries, were virtually flat for the quarter, which Mr. Long said was a signal that Brown's cost controls are working.

"Overall costs aren't too different than they were," Mr. Long said. "You don't mind paying commissions as long as the business is there."

Mr. Long said that Alex. Brown could earn as much as $2.30 or $2.40 a share for the full year, if the firm can avoid big trading losses. The company earned 50 cents a share last year.

Its best year as a public company was 1986, when it earned $1.45 a share.

Three months ended 3/29/91

.. .. .. .. .. Revenue .. .. .. ..Net .. ..Share

'91.. .. .. 93,597,000 .. .10,625,000 .. .. 0.66

'90.. .. .. 68,465,000 .. ..2,509,000 .. .. 0.16

% change .. .. ..+36.7 .. .. ..+323.5 .. .+312.5

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