Warburg's record year allays City worries

THE INVESTMENT bank S G Warburg Group doubled pre-tax profits last year to a record pounds 297m, dispelling fears that it had fallen victim to turbulence in the bond markets.

The shares rose 32p on the news but fell back with the rest of the market and ended the day 4p down at 699p.

Bonuses formed much of the 40 per cent rise in staff costs of pounds 469.9m, said Lord Cairns, Warburg's chief executive.

Staff numbers, including Mercury Asset Management, rose from 4,317 to 4,749 last year. Including bonuses, the average cost per employee rose from around pounds 80,000 to roughly pounds 100,000. Lord Cairns said the rise in staff remuneration 'reflects the very good year we have had'.

MAM, 75 per cent owned by Warburg, was one of the best performing divisions. Costs rose pounds 29m to pounds 133m after bonuses to staff. Hugh Stephenson, chairman, said the figure also included the effect of sharply increased processing volumes. There were no pounds 1m- plus bonuses in MAM, he added.

Including the rise in value of existing funds, MAM had pounds 60.4bn under management compared with pounds 49.7bn a year ago, said Mr Stephenson. Taxable profits at the fund management group were 33 per cent higher at pounds 109.5m.

For the Warburg group as a whole fees and commissions contributed more than two-thirds of revenues. Pre-tax profits from investment banking rose from pounds 77.5m to pounds 187.5m. Warburg advised on 90 merger and acquisition transactions throughout the world in 1993, valued at dollars 34bn. It also did well in equity issues, raising pounds 23.6bn in 87 transactions.

Earnings per share doubled to 82.4p and net assets per ordinary share increased to 456.3p. Total dividends rose 16 per cent to 22p, covered three and a half times.

Lord Cairns said profits from overseas operations were growing faster than those in the UK. About half last year's profits came from outside Britain compared with less than a quarter three years ago.