Alex. Brown profits drop 48% in quarter

January 26, 1995|By David Conn | David Conn,Sun Staff Writer

Alex. Brown Inc., the Baltimore-based brokerage and investment banking firm, reported sharply lower profits in the fourth quarter as higher interest rates and stagnant stock and bond markets drove revenues down in most of the company's businesses.

In the three months that ended Dec. 31, Alex. Brown's earnings fell 48 percent to $20.1 million, or $1.34 a share, from $38.9 million, or $2.42 a share, a year earlier. Revenues dropped 30 percent in the quarter, to $153.8 million.

Without a gain of $7.8 million from the sale of a real estate advisory joint venture in December, earnings would have fallen roughly 68 percent in the quarter. That doesn't include the forgone revenues in the month after the joint venture was sold.

"The securities industry faced significant challenges in 1994, and we were unable to match 1993's record performance," Chairman and Chief Executive A.B. "Buzzy" Krongard said in a statement. "Nevertheless, we are pleased that our long-term strategy, which emphasizes balance and focus in our businesses, coupled with careful attention to costs and risk management, was again validated."

Mr. Krongard said the company managed to report the second highest annual revenues and earnings in its 195-year history. For the full year, earnings of $70.9 million, or $4.60 a share, were 21 percent lower than in 1993, when earnings totaled $89.2 million, or $5.61 a share. Absent the real estate joint venture sale, earnings would have been 26 percent lower.

The news has been bleak throughout Wall Street lately. For instance, Lehman Brothers Holdings Inc. earlier this month said fourth-quarter earnings declined 60 percent, while Bear Stearns Cos. reported a 76 percent drop in profits.

Alex. Brown reported its earnings after the market closed yesterday. But the company's stock hit a record high yesterday of $35.125 a share, up 75 cents. Brown was cited as a possible takeover candidate on Tuesday, when its stock also hit a record high. Its shares fell early yesterday after the company denied it was in talks with anyone, but rose late in the day on heavy trading volume.

Despite the lower profits, which are in line with the rest of the industry, some analysts found good news in the earnings report. "They're down because of interest rates being up, but they're not taking a bloodbath like some of their competitors," said Perrin H. Long Jr., an independent analyst in Darien, Conn.

Without the one-time gain, earnings were comparable to the third-quarter figures.

In the latest period, only revenues from commissions on investment trading and income from interest and dividends increased. The hardest-hit segment was investment banking, where revenues fell 54 percent to $48.5 million.

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