Salomon profits almost halve

Hurt by the return of rising interest rates, Salomon Inc, the parent of Salomon Brothers, reported a 44 per cent drop in first-quarter profits yesterday. The news contrasted with a 13 per cent rise in earnings to a first-quarter record at Merrill Lynch.

Salomon was badly hit in its bond trading division, where revenues tumbled, and in its commodities trading arm, Phibro. Overall, earnings fell to $173m (pounds 106m), or $1.44 a share, from $310m, or $2.75 a share in the same quarter a year earlier.

"Overall first-quarter performance was satisfactory, with market conditions that were more difficult than generally prevailed in 1996," said Robert Denhman, the chairman of Salomon Inc.

Some decline in Wall Street earnings compared with last year, when most of investment banks turned in record performances, has been widely predicted.

JP Morgan last week reported a 3.4 per cent decline in profits because of stock and bond market troubles in the second half of March.

For now, however, Merrill Lynch appears to be bucking the trend. The largest of America's securities firms turned earnings of $465m, or $2.34 a share, from $410m, or $2.03 a share, in the same quarter last year.

The Salomon bond trading operation, the biggest in the world, saw a 29 per cent decline in revenue to $519m.