Brown's earnings fall 23% Underwriting slowed by market swings

April 18, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

Less than two weeks after it agreed to be purchased by Bankers Trust New York Corp., Alex. Brown Inc. said yesterday that revenues slipped 14 percent and net income fell 23 percent in the first quarter.

Wild swings in the stock market put a damper on demand for underwriting, a key business for the Baltimore-based brokerage and investment banking firm.

Alex. Brown reported revenues of $233.5 million in the quarter ended March 31, compared with $270.8 million for the corresponding time a year earlier.

Net income was $31.2 million, compared with $40.7 million. Primary earnings per share were $1.23, down 26 percent from $1.67.

A. B. "Buzzy" Krongard, chairman and chief executive, was pleased with the performance despite the decline.

"We produced a good solid quarter in spite of the adverse market conditions," he said.

Alex. Brown's shares closed yesterday at $59.42, up 42 cents.

The Alex. Brown-Bankers Trust deal is expected to close in the fourth quarter.

It is valued at about $1.7 billion.

Krongard and Mayo A. Shattuck III, Alex. Brown's president and chief operating officer, will become vice chairmen of Bankers Trust. Both have agreed to stay on for two years as Bankers Trust employees.

For the quarter, Alex. Brown's investment banking business reported revenues of $74.9 million, down 26 percent from the year-earlier period.

The decline was attributed to lower revenues from merger and advisory fees, and to the fact that fewer companies went public.

Krongard said it is difficult to plan public offerings when the stock market is volatile.

"If it goes down and stays down, or if it goes up and stays up it is easier to plan," he said. "What makes it hard is when the market is bouncing all over the place."

Principal transaction revenues fell 39 percent to $32 million because of decreases in equity trading.

"It was a tough environment, and Alex. Brown was up against very difficult comparison with the year-ago quarter," said Michael Flanagan, an analyst with Financial Services Analytics Inc. in Fort Washington, Pa. "A vulnerability of Alex. Brown is that it is so closely tied to underwriting."

Not every business segment was down. Alex. Brown's commission revenues increased 12 percent to $58.2 million, driven by gains in institutional and private client business and the company's mutual fund business.

Revenues from interest and dividends rose 8 percent to $35.7 million due to growth in margin loans from private clients. Margin loan balances reached $1.6 billion, up 9 percent from the same period a year ago.

Pub Date: 4/18/97

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