Rea Brothers thrives in unusual climate

REA Brothers, the small merchant bank, more than doubled its pre-tax profits to pounds 2.05m for the year to 31 December after benefiting from conditions that come 'just once in a decade'.

Roger Parsons, managing director, said that while all four divisions made good profits last year from the fall in interest rates and recovering markets, this year was difficult to forecast.

'We are permanently looking for acquisitions, especially fund management groups, but they are still very expensive,' Mr Parsons said.

Rea's core private client banking division, which caters for businessmen and smaller institutions, increased profits from pounds 1.8m to pounds 2.1m. Lending is conservatively run, and the risk/asset ratio for the bank was a relatively strong 27 per cent.

The trust and company administrations side improved profits from pounds 410,000 to pounds 700,000.

Fund management and corporate finance both went from loss to profit. Mr Parsons said that the losses reflected start-up costs. The fund management operation, which only started four years ago, turned a pounds 90,000 loss into a pounds 647,000 profit. It increased funds under management by 22 per cent.

Rea's corporate finance team, acquired in 1991, changed a loss of pounds 130,000 in 1992 to a profit of pounds 430,000 last year.

Mr Parsons said Rea was highly geared to recovery because of a backlog of tax losses. The tax charge fell from pounds 482,000 in 1992 to pounds 458,000 last year, and he said he expected further benefits from this source.

Earnings per share rose from 0.82p to 4.05p and Rea increased its dividend from 0.50p to 0.75p. The shares rose 4p to 68p.