Bear Stearns profit up 15 percent in fourth quarter, agrees to settle mutual funds case

Thursday, December 15th 2005, 11:08 am

By: News On 6

NEW YORK (AP) _ Wall Street firm Bear Stearns Cos. said Thursday its profit rose 15 percent in its fourth quarter, pushing its full-year earnings up 9 percent on strong proprietary stock trading revenue and an increase in its global clearing business.

The investment firm also said it has reached a tentative settlement with the U.S. Securities and Exchange Commission and the New York Stock Exchange over improper mutual fund trading practices. The company agreed to pay $250 million in fines and said it will hire independent consultants to review its trading procedures.

The settlement will not have an effect on earnings, according to Chief Financial Officer Sam Molinaro.

``Other than the significant distraction of focusing on getting this matter resolved, I don't think it's had any impact on our ability to expand the franchise,'' Molinaro said in a conference call with analysts.

In the fourth quarter ended Nov. 30, Bear Stearns had record net income of $407 million, or $2.90 per diluted share, up from $352.6 million, or $2.61 per diluted share, in the year-ago quarter. Revenue rose 3 percent to $1.9 billion from $1.8 billion in the fourth quarter of 2004.

Analysts had forecast earnings in the most recent quarter of $2.63 per share on revenue of $1.798 billion.

Shares of Bear Stearns rose $4.25, or 3.8 percent, to $114.75 in late morning trading on the New York Stock Exchange. The stock has traded between $91.27 and $115.86 over the past 52 weeks.

The company's quarterly earnings reflected Bear Stearns' traditional strengths in fixed-income trading, particularly in credit derivatives and leveraged finance. Despite rising interest rates, Molinaro said the company's mortgage business remained strong.

``Seeing what we've achieved in a very difficult environment, there's a lot of opportunity for us going into 2006,'' Molinaro said.

For the full year, Bear Stearns earned $1.5 billion, or $10.31 per diluted share, compared with $1.3 billion, or $9.76 per diluted share, in 2004. Revenue rose 9 percent to $7.4 billion from $6.8 billion last year.

Analyst surveyed by Thompson Financial expected full-year earnings of $10.12 per share on revenue of $7.313 billion.

The company's institutional equity trading business soared 32 percent in 2005, and fixed-income trading climbed 2 percent for the year, which helped offset a 9 percent slide in investment banking fees. Revenue in its clearing business, which deals in facilitating other stock trades, rose 15 percent for the year.

Bear Stearns' board authorized an additional $500 million to be used in stock buybacks, bringing the firm's total buyback commitment to $1.5 billion. Molinaro said the extra money did not mean the company would accelerate repurchases in the near future.

The board also declared a regular quarterly cash dividend of 28 cents per share, payable Jan. 27 to shareholders of record on Jan. 17.