Bottom Line: Schroders results confound the critics

FORGET the recession. Forget the fact that 1992 was one of the worst years for corporate finance activity in recent memory. Forget the generally depressing noises coming from the merchant banking sector. Schroders has increased its disclosed after-tax profits by 23 per cent to pounds 64m - which means the real pre-tax figure is more like pounds 100m. Its dividend has gone up to 22p.

These results confound the critics. Schroders, they say, relies too much on mergers and acquisitions, does not have critical mass in the European securities markets and is too reliant on the UK.

True, Schroders has gained at least its fair share of what M&A business is around. But it appears that the group's success has come from traditional merchant banking, its 50 per cent-owned US side, Wertheim Schroder, and an exceptional performance from Schroders Investment Management.

SIM's funds under management grew by pounds 8.4bn to pounds 36.1bn last year. The extra funds alone would make it one of the top 25 fund managers. It is now the UK's third largest unit trust company. And no, Schroders is not thinking of floating it off.

The other reason for Schroders success is what it does not do. Perhaps more by luck than judgement, it did not build up a substantial securities business in the UK. This may have to change as European clients demand the ability to distribute their paper.

Since returns here are not all that good, this is the only dark cloud on an otherwise rosy horizon. Despite rising 40 per cent this year, Schroders' share price jumped 115p to 1,890p on the figures. Assuming about pounds 120m of pre-tax profits next year, when Schroders will at last be forced to reveal the figures in full, the shares trade on 15 times earnings, which does not seem expensive.