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Brokerages beat estimates
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January 18, 2000: 3:03 p.m. ET
Paine Webber, Schwab profits up more than 60%; revenue sharply higher
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NEW YORK (CNNfn) - Paine Webber Group Inc., and Charles Schwab Corp., two of the biggest U.S. brokerage houses, both reported large jumps in fourth-quarter net income Tuesday, beating Wall Street's forecasts.
Paine Webber, the New York-based brokerage and financial services company, said fourth-quarter earnings rose to $166.3 million, or $1.07 a diluted share, from $100.4 million, or 63 cents a share, a year earlier. The latest results beat the First Call consensus forecast of 92 cents a share.
Including the effect of a special charge of $59.9 million, or 40 cents per diluted share, associated with the redemption of preferred stock by GE Capital Corp., net income for the latest quarter was $106.4 million, or 67 cents a diluted share.
Fourth-quarter net revenue rose 27 percent to $1.4 billion.
For the full year, net income jumped to $628.6 million, or $3.95 a diluted share, from $433.6 million, or $2.72 a share, in 1998. Revenue rose 20 percent to $5.3 billion.
Schwab, which told investors on Dec. 29 to expect a record fourth quarter, hit the higher end of its guidance, posting fourth-quarter net income of $170.5 million, or 20 cents a share. That is up 60 percent from the $106.4 million, or 12 cents a share, made in the year-earlier period.
The consensus estimate of analysts surveyed by First Call was 19 cents a share, which rose from an estimate of 17 cents a share after the Dec. 29 statement.
Fourth-quarter net revenue at Schwab rose 43 percent to $1.1 billion.
For the full year, Schwab's net income climbed to $588.9 million, or 70 cents a diluted share, from $348.5 million, or 42 cents a share, in 1998. Revenue for the year was up 44 percent to $3.9 billion.
Analysts attributed the brokerage gains to the strong gains on Wall Street during the fourth quarter, particularly among technology stocks and initial public offerings, defying predictions that activity would abate because of Y2K concerns.
"The Y2K concern just never really came to be," said Diana Yates, an analyst with A.G. Edwards & Sons Inc. "There doesn't appear to be any slowdown. It's definitely looking like this is going to be a trend."
Donald Marron, Paine Webber's chairman and chief executive officer, agreed.
"I think the asset flow continues into the industry ... and we think that's going to continue throughout the year 2000 and that provides a really good base for continued growth," he told CNNfn.
Marron also said he did not believe the current expectations for higher interest rates throughout the year would stymie future economic growth.
"If higher interest rates are the function of inflation that would be an issue," he said. "If they are a function of the Fed trying to moderate the economy, most people that would think that's relatively healthy. So far inflation has stayed at a pretty low level ... and we think it's going to continue at a low level."
Paine Webber (PWJ) stock inched up 5/8 to 38-9/16 in mid-afternoon trading Tuesday, while Schwab (SCH) fell 2 to 39. 
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