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Legg net up 34% in quarter; Assets shot up 49% to record $82 billion, lifting revenue, profit


Legg Mason Inc.'s net income soared 34 percent and revenue rose 11 percent in its fiscal third quarter as assets under management ballooned to record levels, the company said yesterday.

The Baltimore-based brokerage and money management firm made $22.8 million in the three months that ended Dec. 31 on revenue of $260.5 million. That compared with earnings of $17 million on revenue of $235.2 million in the year-ago period. Basic earnings per share increased 32 percent to 41 cents in the quarter, up from 31 cents a year earlier.

"The results were refreshingly strong and stable in an environment that has presented difficulty for other brokerage firms," said Michael Flanagan, a brokerage analyst at Philadelphia-based Financial Service Analytics.

Legg's earnings per share were 4 cents higher than Wall Street predicted, according to analysts queried by Zacks Investment Research. Legg's shares rose 12.5 cents to close at $28.875 yesterday.

The strong quarter was fueled by revenue from Legg's investment advisory business and brokerage commissions. Investment advisory revenue jumped 24.5 percent to $95.4 million in the quarter, and brokerage revenue rose 16 percent to $93.4 million.

Assets under management shot up 49 percent to a record $82 billion, compared with $55.2 billion from the same period in 1997.

"You had two of the three legs of the business having good rebounds in the quarter," said F. Barry Bilson, Legg's senior vice president of finance.

Bilson said the only weakness was the company's investment banking operations, which made $20.1 million in the quarter, down nearly 40 percent from the same period a year earlier.

"The market climate has really eroded" for investment banking, Bilson said.

For the first nine months of its fiscal year, Legg posted record revenue, net income and earnings per share.

Net income rose 31 percent to $68.9 million in the nine-month period that ended Dec. 31, compared with $52.6 million in the same period in 1997. Legg made $1.24 per share, up 28 percent, compared with 97 cents in 1997. Revenue rose 18 percent to $756.9 million, compared with $642.7 million a year earlier.

Flanagan expects investors to continue to pump money into Legg's mutual funds, particularly the Value Trust Fund, which has had a spectacular performance. Its manager, William H. Miller III, was recently named mutual fund "manager of the year" by Morningstar Inc., a Chicago-based mutual fund tracking firm.

"The performance of these funds feeds on itself," Flanagan said. "New money chases performance."

Pub Date: 1/21/99

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