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Brokerage profits tumble
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December 20, 2001: 9:55 a.m. ET
Goldman, Lehman, Bear Stearns and A.G. Edwards all post lower 4Q profits.
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NEW YORK (CNN/Money) - Four of Wall Street's major brokerage houses reported sharp drops in fourth-quarter profit Thursday as the industry coped with curbed trading and merger activity in the face of an ebbing economy.
Goldman Sachs, Bear Stearns and Lehman Brothers all recorded double-digit declines in their fourth quarters as they all cited the effects of the Sept. 11 terrorist attacks on the economy, which had been in decline for most of the year.
Industry-wide merger activity and trading volume have dropped considerably, leaving financial firms scrambling to cut costs in hopes of making up for the falloff in business.
On Wednesday, Morgan Stanley (MWD: up $0.31 to $56.10, Research, Estimates) led off the bad news, posting a 28 percent drop in its fiscal fourth quarter.
Additionally, A.G. Edwards (AGE: down $0.36 to $44.20, Research, Estimates) logged a 61 percent drop in third-quarter results as the brokerage firm said it is considering staff cuts and selling real estate in efforts to boost the bottom line.
Goldman Sachs (GS: down $1.71 to $92.70, Research, Estimates) posted a 17 percent decline in fourth-quarter results, but still managed to edge Wall Street estimates.
For the quarter ended Nov. 30, Goldman reported earnings excluding items of $497 million, or 93 cents a share, down from $601 million, or $1.16 a share, a year earlier. Analysts on average expected a profit of 90 cents a share, according to earnings tracker First Call.
Fourth-quarter revenue was flat at $3.4 billion.
For the full-year, Goldman earned $2.31 billion, or $4.26 a share, down from $3.25 billion, or $6.35, in 2000. That's ahead of analysts' expectations for a $4.23 a share profit. Full-year revenue slipped 7 percent to $15.3 billion from $16.4 billion.
"Looking ahead, while we remain cautious about the near-term operating environment, we are confident in the strength of our franchise and the firm's longer-term growth prospects," CEO Henry Paulson said.
Meanwhile, Lehman Brothers (LEH: up $0.29 to $66.82, Research, Estimates) recorded a whopping 50 percent earnings drop from a year ago, matching Wall Street estimates as it too struggled with lower trading and merger and acquisition activity.
For the quarter ended Nov. 30, Lehman, whose headquarters were located across the street from the World Trade Center and were damaged in the Sept. 11 terrorist attacks, reported earnings excluding one-time items of $201 million, or 73 cents a share, down from $399 million, or $1.46 a share, a year earlier. Analysts on average forecast a profit of 73 cents a share, according to First Call.
For the year, Lehman posted earnings of $1.3 billion, or $4.64 a share, excluding a one-time charge related to the attacks. That's well below the $6.38 a share it earned in 2000 and in line with analysts' expectations.
Lehman took a $127 million charge related to the Sept. 11 attacks in the quarter and said it is pursuing insurance claims related to the displacement of its employees from downtown Manhattan.
Revenue plunged 29 percent to $1.2 billion from $1.7 billion. For the year, revenue fell 13 percent to $6.7 billion from $7.7 billion.
Bear Stearns (BSC: down $0.23 to $58.75, Research, Estimates) also said its fourth-quarter profit sank 21 percent from a year ago, but the company beat forecasts as it slashed expenses.
For the quarter ended Nov. 30, Bear Stearns earned $154.9 million, or $1.08 a share, down from $195.2 million, or $1.36 a share, a year earlier. Analysts expected 87 cents a share, according to First Call.
For the year, the company earned $4.27 a share, down from $5.35 a share in 2000. Analysts had projected $4.11 a share profit, according to First Call.
Fourth-quarter revenue fell to $1.1 billion from $1.4 billion. Full-year revenue fell 10.4 percent to $4.9 billion from $5.5 billion.
Separately Thursday, A.G. Edwards said it earned $22.2 million, or 28 cents a share, in its third quarter ended Nov. 30. That's well below the $57.2 million, or 69 cents a share, a year earlier. Analysts expected the company to post a profit of 43 cents a share, according to First Call.
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A $20 million reserve taken against a $37 million partially unsecured margin loan dented quarterly results by $12.6 million, or 16 cents a share after taxes. Edwards said it is trying to collect its money.
Edwards said it is looking at a series of cost-cutting measures, including job cuts, selling real estate and deferring raises. The goal is to save $21 million a year.
"Unfortunately, these difficult decisions are necessary in light of business conditions," CEO Robert Bagby said. 
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