Legg Mason Inc.'s profit surged 16.5 percent to $40.4 million in the company's fiscal first quarter, making it the second most profitable quarter in the company's 101-year history.
The Baltimore-based brokerage and money-management firm said yesterday that it made 60 cents per diluted share in the quarter ended June 30, up 15.4 percent from the 52 cents per diluted share the company made in the corresponding period a year earlier.
Profit in the quarter was reduced by a $2 million charge for expenses associated with Legg Mason's acquisition of Perigee Inc., which was completed in May. The charge reduced earnings per share by 3 cents.
Perigee is Canada's seventh largest pension fund manager with $14.3 billion in assets under management.
Legg Mason's profit met Wall Street estimates, according to First Call Corp., which surveyed four analysts. Its shares closed down 93.75 cents to $53.125.
Although Legg Mason's earnings were strong, profit trailed the blockbuster March 31 quarter's record 78 cents per diluted share.
"The numbers held up well against a record quarter amidst much turmoil in the market," said Michael Flanagan, a brokerage analyst at Financial Service Analytics Inc. in Philadelphia.
"It was a tough environment for the industry. Everything considered, Legg Mason had a very good quarter."
Many of the closely watched stock market indexes were down in the first half of the year, including the Dow Jones industrial average, which was off by about 9 percent.
"This was not a quarter for the brokerage industry because the market was not overly cooperative," said Raymond A. "Chip" Mason, chairman and chief executive of the company. "But we came out all right."
Despite the market conditions, assets managed by Legg Mason jumped 35.5 percent to $126.6 billion in the quarter, from $93.4 billion a year earlier.
Assets under management increased $14.8 billion, primarily because of the Perigee acquisition.
Net revenue rose 16.8 percent to $343.1 million, compared with $293.7 million in the 1999 quarter.
Investment advisory fees, which made up nearly 46 percent of Legg Mason's net revenue, rose 21.3 percent to $157.5 million, compared with $129.8 million a year earlier.
And revenue generated from commissions on securities transactions was up 12.8 percent to $125.1 million, compared with $110.9 million in the year-earlier period.
Investment banking revenue was up 1.4 percent to $22.4 million, compared with $22.1 million a year earlier.
Legg Mason is well positioned to weather sharp drops in the stock market because its revenue comes largely from managing assets and it is less reliant on brokerage commissions that fluctuate with market conditions, Flanagan said.
"Legg Mason's revenue structure is such that the company will be better insulated than most in the industry," he said.
"There is no reason to believe that Legg Mason could not sustain its current pace for the remainder of the year."