|
Bear Stearns beats target
|
 |
June 20, 2001: 6:10 p.m. ET
Firm is latest broker to see operating earnings fall from year-ago level
|
NEW YORK (CNNfn) - Bear Stearns Co. on Wednesday became the latest major Wall Street broker to report a drop in earnings, though it beat forecasts for the fiscal second quarter.
Before the U.S. stock markets opened Wednesday, Bear Stearns said it earned $169.5 million, or $1.18 per share, during its fiscal second quarter ended May 25. That was down from $1.40 per share during the same quarter a year earlier but 9 cents better than the $1.09 per share analysts had generally expected, according to a survey conducted by earnings tracker First Call.
Last year's results excluded a charge of $96 million, or 63 cents a share, to increase the firm's litigation reserve to deal with a $164 decision against Bear Stearns. Canadian investor Henryk de Kwiatkowski sued the firm for alleged negligence in handling his account. Including this charge, Bear Stearns' net income was up 43 percent in the second quarter.
Shares of Bear Stearns rose more than 3.3 percent in New York Stock Exchange trade Wednesday, ending the session $1.77 higher at $55.13.
The company saw net revenue edge up to $1.4 billion, a 4 percent gain from year-earlier results. Its capital markets division saw revenue increase 23 percent to a record $1 billion, as a near-tripling of revenue from fixed-income operations overcame a decline in investment banking and global equities revenue. Revenue from clearing services and wealth management also declined during the quarter, Bear Stearns said.
The company said it was pleased with the results, given the downturn in the industry overall. It said that it is starting to see improved margins due to cost cuts and outsourcing. The company announced it was cutting 400 jobs at the beginning of the recently completed period.
"Much of the expense of these programs is recorded as one time costs in this quarter with corresponding savings to be achieved going forward," it said in a statement. There was no specific charge broken out to represent the one-time costs, however.
Click here for a look at financial stocks
"I'm not terribly excited about the company ... but it was a good quarter," said Ken Worthington, an analyst at CIBC World Markets. Bear Stearns is struggling to make inroads in Europe while its rivals have already become more established abroad, he said.
"I think (the European investments are) something they need to do, but we haven't seen the benefits from their investment yet," Worthington said. "I've seen better progress at other firms."
Other major brokers, including Lehman Brothers (LEH: up $3.40 to $75.90, Research, Estimates), Goldman Sachs (GS: up $0.22 to $88.40, Research, Estimates), and AG Edwards & Sons (AGE: up $0.05 to $43.30, Research, Estimates), reported reduced profits for the recent period Tuesday, although Lehman Brothers also beat forecasts for the period.
With the equity markets still unsettled because of the uncertain future of the U.S. economy, few companies chose to go public in the quarter, fearing their stocks would get knocked down in the weak environment. The value of initial public offerings (IPOs) dropped 59 percent to $12 billion, according to Thomson Financial Securities Data.
However, the firm cited the Federal Reserve's interest-rate cuts as a catalyst for its bond underwriting business, which posted revenue of $514.3 million, compared with $183 million during the same quarter a year ago.
Commission revenue fell nearly 10 percent, to $290.8 million. Revenue from processing trades fell 28 percent, to $207.4 million, while wealth-management revenue dipped 14 percent, to $133.9 million.
Bear Stearns' compensation continues to be higher than its rivals. Compensation as a percentage of net revenue was 54.3 percent, compared with 53.3 percent a year ago, the company said. In the first half of 2001, Goldman's compensation rate was only 49 percent.
In a teleconference Wednesday, Sam Molinaro, the firm's chief financial officer, said uneven results across its different business units and the hiring for its European expansion contributed to the high compensation rate
"I think you'll see them starting to come down in the next several quarters," Molinaro said.
Bear Stearns has cut its staff to 10,850 from 11,200 at the end of last November, and it may have to make more cuts, Molinaro said. 
|
|
|
|
|
|
Bear Stearns
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
