Alex. Brown Inc. reported more sparkling financial results yesterday as its revenue for the third quarter soared by 45 percent compared with the same period last year and its profit rose by even more: 73 percent.
Lifted by corporations eager to issue stock and investors equally keen to buy it, Brown is headed toward one of its best years ever.
The Baltimore-based investment house has earned $4.06 per share for the year through September -- a record. And some Wall Street analysts say that Brown could beat its all-time full-year high of $5.61 per share set in 1993, according to I/B/E/S Earnings Estimates.
The company's stock has risen by two-thirds since the beginning of the year, and analysts expect strong profits to continue through 1996.
But Brown's fortunes are closely tied to the stock market, which hovers near historic highs and which some experts believe is poised for a stumble. Brown executives "remain mindful of the fragility of market conditions and attendant consequences," cautioned A. B. "Buzzy" Krongard, the company's chairman and chief executive.
Yesterday, Brown's stock fell by 88 cents per share to $50.63. Its financial results were disclosed after stock trading ended for the day.
For the quarter, Brown earned $22.9 million in profit, or $1.45 per share, on $210.3 million in revenue. Analysts had expected $1.46 per share, according to Zacks Investment Research.
For the year through September, Brown has earned $62.3 million, a 23 percent increase from the same period in 1994. Revenue for the year so far is $562.7 million, up 25 percent.
CSeveral divisions contributed to profits last quarter, as virtually every cylinder in the Alex. Brown motor fired cleanly and rapidly.
Investment banking revenue increased by 68 percent, to $76.4 million, as more corporations lined up to have Brown issue their stock.
Brown is a relatively small firm, but it ranks No. 2 in the country in the handling of initial public offerings so far this year and No. 3 in total common stock flotations.
In addition, private investors not only bought and sold more stock through Brown last quarter, they borrowed more money from Brown to do it.
Partly as a result, the company's commission revenue rose by 34 percent and its interest and dividend revenue rose by 51 percent, compared with the third quarter of 1994.
Margin loans, sometimes cited by analysts as evidence of an overheated stock market, rose by 50 percent in the quarter to $1.2 billion. In margin lending, brokerage clients use the value of their stock holdings as borrowing collateral, often buying more stock with the proceeds.
Advisory and other revenue rose by 46 percent for the quarter, Brown said. Principal transaction revenue went up by 16 percent.