Salomon finishes strongly

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The Independent Online
SALOMON INC, parent of the Wall Street securities firm Salomon Brothers, rebounded from a weak third quarter to close the year with record pre-tax earnings of dollars 1.1bn ( pounds 762m). In the fourth quarter of 1992 Salomon earned dollars 143m, or dollars 1.06 a share, compared with a loss the year before of dollars 29m or 41 cents a share.

Salomon Brothers recorded an outstanding fourth quarter thanks to exceptionally strong trading results, earning dollars 503m pre-tax compared with dollars 27m in the same period of 1991. Despite paying a dollars 185m fine to settle charges relating to the US Treasury auction scandal, it reported 1992 earnings of dollars 1.4bn, a 34 per cent increase over the dollars 1bn of 1991.

Salomon Inc had reported a profit of just dollars 6m for the third quarter of 1992, causing considerable alarm on Wall Street, which is in the midst of an earnings boom. But the firm's results are notoriously volatile, largely because of the effect of marking its huge dollars 900bn arbitrage portfolio each quarter.

Salomon is guaranteed profits when the holdings reach maturity, but market fluctuations can result in sharp declines in their paper value in the interim. The explosion of profits in the final quarter is thus just as misleading as the dismal results of the third.

'The results from any one Salomon quarter are meaningless,' said one brokerage official. 'What is important is the performance year on year.'

For 1992 Salomon Inc's dollars 550m after-tax profit was up about 8 per cent on the previous year. The shares rose dollars 2.25 to dollars 39.25.

Salomon's Phibro energy trading and oil refining units continued to show losses. The energy trading division lost dollars 181m, bringing the year's deficit to dollars 194m.