Magazine article American Banker

Big-Name Investment Banks Post Big 3Q Declines

Magazine article American Banker

Big-Name Investment Banks Post Big 3Q Declines

Article excerpt

Three investment banks reported double-digit third-quarter earnings declines Tuesday that reflected a downturn in trading and a slower new-issues market.

Merrill Lynch & Co., the nation's second-largest brokerage, posted net income of $572 million, down 15% from the second quarter but up 451% from the year earlier, when underwriting and trading ground to a halt after Russia defaulted on its domestic debt. Earnings per share of $1.34 beat analysts' consensus estimate by 5 cents.

"Merrill has done a good job rebalancing their trading revenues since last year," said Dean Eberling, a managing director at Putnam, Lovell, de Guardiola & Thornton. "They've been focusing on more liquid instruments and taking less proprietary risk."

At Donaldson, Lufkin & Jenrette Inc., the sixth-largest brokerage, profits fell 26%, to $122 million, though earnings per share of 85 cents beat analysts' consensus by 9 cents.

PaineWebber Group Inc., the seventh-largest brokerage, reported net income of $138.2 million, down 15% from the previous quarter but 67% better than a year earlier. Earnings per share of 86 cents exceeded analysts' consensus by 3 cents.

Analysts said revenues at all three firms were relatively strong for a period that was beset by interest rate uncertainty and a falloff in issuance of instruments such as junk bonds.

Despite the relatively languid period, trading at Merrill was off less than 1% from the second quarter. Its investment banking revenues rose by $40 million. …

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