Legg Mason profit up 35% Quarter, 9 months 'most successful' in firm's history

Financial services

January 22, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Legg Mason Inc. yesterday said strength across its three HTC major businesses resulted in a 35 percent increase in profit during the third quarter.

For the quarter ending Dec. 31, the Baltimore-based investment firm reported net income of $20.7 million, up from $15.3 million in the year-earlier period. Sales were $227 million, a 36 percent increase. Basic earnings per share increased by 33 percent, to 84 cents.

"The quarter and nine months ended Dec. 31 were the most successful in Legg Mason's history," said Raymond A. Mason, the company's chairman and chief executive officer. "Our strong results are attributable to substantially higher revenues in each of our principal businesses -- securities brokerage, investment advisory and investment banking."

Michael Flanagan, analyst and owner of Philadelphia-based Financial Service Analytics, had expected the stock market's October tumble to restrain earnings growth of investment banks. He had projected Legg to boost earnings by about 20 percent. "Legg Mason not only survived the October market crisis," he said. "It thrived in spite of it."

Legg shares rose 56.25 cents to $49.75 yesterday. Flanagan said the shares may meet with some resistance because of two factors.

"One is continued uncertainty surrounding the Asian markets," he said. "Secondly, brokerage firms continue to carry very healthy valuations, which include takeover premiums in most firms."

Driving Legg's earnings increase are "investment banking and asset management, both of which continue to gain momentum," Flanagan said.

For the nine months ending Dec. 31, Legg Mason reported earnings of $55.3 million, up 31 percent. Revenue was $619 million, up 34 percent. Diluted earnings per share increased 25 percent to $2.12. In the third quarter, investment-advisory revenue grew to $68.6 million, up 47 percent. Investment banking revenue rose to $33.3 million, a 53 percent increase.

But it might be difficult for Legg to sustain its growth rate.

"The industry is going to face a more challenging environment going forward in 1998," Flanagan said. "These earnings may be difficult to replicate in the company's fiscal fourth quarter. But I wouldn't preclude the possibility."

Pub Date: 1/22/98

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