NEW YORK -- Pinching pennies helped Bear Stearns Cos. (BSC) post better-than-expected third-quarter earnings, even as strength in the company's institutional equities and mortgage-backed securities sectors helped offset weakness in investment banking.
The brokerage on Wednesday said net income rose 22% to $164.4 million, or $1.23 a share, for the quarter ended Aug. 31, from $134.6 million, or 95 cents share, a year earlier.
A survey of analysts conducted by Thomson First Call yielded a mean estimate of $1.21 a share.
Revenue, however, slipped 4.2% to $1.15 billion from $1.2 billion for the third quarter of 2001.
In a prepared statement, Bear Stearns chairman and chief executive James E. Cayne credited a "balanced business mix and rigorous expense management" for the strong performance.
"Operating profits were up, despite a decline in net revenues, largely due to the fact that expense reductions from our margin improvement program have now been realized and incorporated into our earnings," Mr. Cayne said. "As markets continue to be challenging, we believe our disciplined approach to risk and spending is the most prudent way to operate our businesses."
Looking more closely at revenue streams, the company saw revenue for the capital markets segment decline 1.7% to $859.5 million.
Within that segment, institutional equities revenue jumped 22% to $298 million as a result of increased customer volume in active markets during the quarter. Fixed income revenue edged up 2.8% to $427.6 million as mortgage-backed securities activity continued to be strong. Difficult credit markets led to a decline in the investment grade, distressed and high yield areas.
By contrast, revenue from investment banking tumbled 37% to $133.9 million, reflecting an overall weak investment banking environment, with less activity in both the initial public offering and mergers and acquisitions areas.
Bear Stearns said a decline in average customer margin debt balances pushed down net-interest profits, which were then partly responsible for a 2.8% drop in global clearing-services revenue to $186.6 million.
Wealth management revenue fell 3.1% to $124 million. Private client services revenue remained relatively unchanged. Bear Stearns said retail investor activity continues to be weak, as individual investors remain inactive in the marketplace.
Total assets under management as of Aug. 31 stood at $23.2 billion, down 1.3% from $23.5 billion a year earlier. Alternative investment products under management increased 6.9% to $6.2 billion. Mutual funds under management dropped 13% to $4.9 billion.
Meanwhile, Bear Stearns said its board boosted the company's regular quarterly dividend to 17 cents from 15 cents. The dividend is payable Oct. 31, to shareholders of record Oct. 17.
