Salomon slump lowers shares

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The Independent Online
New York

Salomon yesterday reported a 58 per cent fall in third-quarter earnings, a stark contrast to the high-profits trend being enjoyed by its Wall Street rivals.

Shares of the company, the parent of the Salomon Brothers securities house, fell 8 per cent in early trading on news of the diminished profits, which came in below analysts' estimates.

"Quarter-to-quarter trading results are variable," Robert Denham, chairman of Salomon Inc, said in a statement.

Salomon's net income for the quarter ending 30 September was $112m (pounds 70m) compared with $268m in the same quarter in 1995.

"This was a relatively quiet quarter for our sales and trading business," said Dryck Maughan, chairman of Salomon Brothers, which has itself staged an impressive turnaround since its disastrous run in 1994. "Our investment banking business continued to show good momentum."

Others among the largest securities firms, such as Goldman Sachs and Morgan Stanley, have reported stellar quarterly earnings thanks to the healthy conditions on the Wall Street markets.

Salomon emphasised, however, that over the full nine months ending in September, income rose to $679m compared with $289m for the previous nine- month stretch. "Overall Salomon Inc results for the first nine months of 1996 are very strong," Mr Denham said.

Earnings results at Salomon are prone to unusual volatility in part because of the importance of its proprietary trading unit. "This is a company that does not hit quarter after quarter after quarter because of those bets made with its own capital, remarked Richard Strauss of Goldman Sachs.

In the third quarter, revenue from investment banking showed an increase of 46 per cent to $187m. The company was number three among US underwriters of stocks and bonds, number six in advising on mergers.