Legg Mason reports record 3rd quarter Profits doubled from '90 period on strength of DJIA

January 20, 1992|By David Conn

With the Dow Jones Industrial Average as its inspiration, the investment firm Legg Mason Inc. reached record heights in its third quarter, with profits more than doubling over the same period in 1990.

The Baltimore-based regional brokerage reported profits of $5.8 million, or 63 cents a share, for the quarter that ended on Dec. 31. That compares to profits of $2.6 million, or 30 cents a share, in the third quarter of 1990.

Third quarter revenues rose 30 percent, to $76.0 million from $58.4 million a year earlier. Results for the first nine months of 1991 also were higher, with earnings up 55 percent to $14.5 million, or $1.60 per share, compared with $9.4 million, or $1.05 per share, in the same period in 1990.

The market had little reaction to Legg Mason's earnings at mid-day today, with the stock remaining unchanged from Friday's closing price of $25.75 a share.

Legg Mason and stock analysts attributed the results not only to the strong performance of the stock market -- the Dow rose 7.5 percent during Legg Mason's third quarter -- but also to the firm's growing reliance on asset management services.

Nearly $11 million of Legg Mason's $76 million quarterly revenues came from investment advisory services and related fees, up from $9.5 million the year before. That includes Legg Mason's 10 mutual funds, with $2.5 billion under management, and another $8.5 billion in private accounts, according to vice chairman John F. Curley Jr.

"One of the good things about our results in recent periods is that a year ago, when the securities industry was having some severe profitability problems," Mr. Curley said, "we remained at reasonable profitability during that period, in part because of the money management business."

Said John E. Keefe, an analyst with Lipper Analytical Services Inc.: "The backbone of their revenue structure is their asset management business."

In the latest quarter, Legg Mason didn't need much of a backbone to make a profit, however. Revenues from commissions on securities trading were up 47.5 percent to $28.6 million, compared with $19.4 million in the 1990 third quarter.

That's because the market has been rising, because there's new interest from both individual and institutional investors, and because many companies are issuing stock, Mr. Keefe said.

"It's been a great year all around," he added. "But you look around the rest of the economy and it's been an embarrassment of riches for the securities business."

Both he and Mr. Curley noted that the industry suffered through an early recession, losing some 20 percent of its work force in the two years after the October 1987 stock market crash.

Mr. Curley, who warned that he's making no predictions about the near-term future of the market, said he's encouraged by the continuing influx of money from small investors.

"A lot more individual investors are now looking at investing," he said.

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