Alex. Brown's net up 117% to a record $3.02 a share dwarfs the $1.50 of year-ago quarter

'It was just wonderful'

Despite the applause, Baltimore firm's stock sags with the market

July 24, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Alex. Brown Inc.'s earnings soared to a record $49.8 million in the second quarter, up 117 percent, as profits were propelled by the surging stock market, the company said yesterday.

The Baltimore-based investment banking and brokerage firm earned $3.02 a share in the second quarter ended June 30, more than doubling the $1.50 earned for the same quarter of 1995. The results beat analysts' estimates by a nickel.

"Everything went according to plan," said A. B. "Buzzy" Krongard, Alex. Brown's chairman and chief executive officer. "Everybody contributed, everybody put out. We had a great market opportunity. It was just wonderful."

Revenues for the quarter jumped 54 percent to a record $310.2 million. For the first half of the year, Alex. Brown earned $90.5 million, up 130 percent from the prior year, and revenues grew 65 percent to $581.1 million.

"Clearly, stellar earnings," said Michael Flanagan, a securities analyst with Fort Washington, Pa.-based Financial Services Analytics Inc. "The company's margins and return on shareholder's equity are among the highest in the securities industry. The only downturn I see is in their stock price."

Alex. Brown's stock lost $1.50 yesterday, closing at $44. The shares have been beaten up, slipping 26.5 percent from their high of $59.875 on May 23.

"All of the investment banks have been under pressure," Krongard said.

The primary reason for the declines in a number of investment banking company stock prices has been the recent volatility of the market, and the fear that stocks in general will continue falling.

"It is very difficult for us to buck the market," Krongard said. "I think we will continue to do well" relative to other companies in the industry.

"It's a great company, good margins, great management," said Perrin Long, an independent securities analyst. "Going out longer-term, say over the next three to four years, the stock price will double from where it is."

Alex. Brown's earnings were driven by record revenues from the company's investment banking operations, which totaled $133.7 million, up 78 percent from the same time a year ago. The gain was due to increases in underwriting revenues and in merger and advisory fees.

About 10 percent of the company's investment banking revenues come from underwriting initial public offerings.

Alex. Brown is a leader in taking high-technology companies public, but Krongard said the pace has slowed.

"We are still doing deals," he said. "We are not doing them at the velocity that we were. Good companies can still be brought to market."

Revenues from commissions were up 23 percent to $54.4 million in the quarter because of growth in private client and institutional listed business as well as from an increase in private client over-the counter agency business.

Margin loan balances outstanding reached $1.6 billion, up 62 percent from the prior year. As a result, interest and dividend revenues were up 55 percent to $36.4 million.

Alex. Brown's total operating expenses grew 39 percent in the quarter to $226.9 million, and by 50 percent to $430 million for the first half of the year.

More than half of the total operating expenses were made up of compensation and benefits, which totaled $162.8 million for the quarter.

Pub Date: 7/24/96

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