Legg Mason earnings off 58% in 4th quarter

January 20, 1995|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Legg Mason Inc. said its profits fell 58 percent in the last three months of 1994, as higher interest rates froze public offerings for bonds and real estate investment trusts and drove investment banking revenues down to just over one-third of late 1993 levels.

The Baltimore-based stock brokerage, best known for serving retail customers, said it earned $4.1 million during the quarter, the third of the company's fiscal year. That was down from $9.9 million in the same three months of 1993.

Vice Chairman John F. Curley Jr. said the drop in stock and bond offerings was the main reason for the decline. Higher interest rates were the main reason that offerings dried up, the company said.

"Those have declined both for a number of reasons, both in corporate finance and municipal [bonds]," he said. "On the corporate finance side, there continues to be very intense competition. The deals that are done, the spreads are narrower than they used to be. That's true for the whole industry."

Mr. Curley said the higher interest rates, and the uncertainty they created in the stock markets, also led to a decline of about $5.5 million in commissions from customers buying and selling securities. "People who would normally be active hesitate," he said.

One of the small number of analysts who follow Legg Mason stock said the figures were not a surprise, coming out as they did on the same day that larger New York investment bank Bear Stearns Cos. announced an even bigger profit drop and weeks after Merrill Lynch & Co. announced 500 layoffs.

"Everybody's [earnings] were going to be so lousy anyway," said Nancy Zambell, who works for JW Charles Securities Inc. in Boca Raton, Fla. "It looks like their investment banking dried up."

Legg Mason's stock yesterday closed at $22.125, down 25 cents.

Last fall, executives at Legg Mason and other local securities-oriented firms, such as investment bank Alex. Brown Inc. and mutual fund operator T. Rowe Price Associates Inc., were confident that they could avoid the layoffs and other problems that were vexing larger New York-based rivals, who are more active in bond trading and got hit hard by the falling value of bonds as interest rates rose.

Now that Legg Mason is feeling the indirect fallout of higher rates, Mr. Curley said, there is still no reason to expect major changes at the firm.

"Legg Mason has really never had a layoff since I joined the firm . . . and we don't have plans for any," Mr. Curley said.

He said the company may tighten criteria for opening new offices, which normally are not immediately profitable, but, he said, major cost cuts are not likely because "we try to watch our costs in good times as well as bad times."

Legg Mason Inc.

Baltimore ... ... ... Ticker ... ... Yesterday's

... ... ... .. .. Symbol ... ... Cls. ... Chg.

... ... ... ... .. .. LM ... ... ... 22 1/8 .. .. - 1/4

Period ended

12/31 ... ... ... ... 3rd qtr. ... ... Year ago ... ... Chg.

Revenue ... ... .. .. $92,887 .. .. .. $103,125 ... ... -9.9%

Net Income ... ... .. $4,133 ... .. .. $9,889 ... .. .. -58.2%

Primary EPS .... ... $0.33 .... ... .. $0.81 ... ... .. -59.3%

... ... ... ... ... 9 mos. ... ... Year ago ... ... Chg.

Revenue ... ... ... $271,174 .. .. $301,240 ... ... -10.0%

Net Income .. .. .. $12,237 ... .. $29,381 .. .. .. -58.3%

Primary EPS ... ... $0.98 .. .. .. $2.43 ... ... .. -59.7%

Figures in thousands (except per share data.)

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