Streak Continues at Bear Stearns

Bear Stearns(BSC Quote) reported Wall Street's second stellar quarter in as many days, saying profits in the three months to Aug. 31 rose 34% from a year ago thanks to strong stock trading and underwriting revenue.

The New York investment bank earned $378.3 million, or $2.69 a share, in the third quarter, compared with $283.3 million, or $2.09 a share, a year ago. Analysts were expecting earnings of $2.38 a share, according to the mean estimate compiled by Thomson First Call.

Net revenue rose 18% from a year ago to $1.81 billion, about $50 million ahead of the analyst consensus. By segment, capital market revenue rose 15% from a year ago to $1.4 billion; net revenue in clearing services rose 15% to $258 million; and net revenue in wealth management rose 21% to $169.6 million.

"Bear Stearns continues to perform well in every area," the company said. "Our fixed-income division is more diversified, our banking effort broader, our client relationships stronger and our talent pool deeper than ever before. The balanced nature of our business mix remains a driver of our excellent results throughout shifting market cycles."

Within capital markets, revenue in institutional equities, where Bear Stearns makes markets for clients like mutual funds and pensions, revenue rose 43% to $333.6 million. The performance reflected strong results in takeover speculation, equity derivatives and domestic and international sales.

Fixed-income revenue slipped 4% from a year ago to $774.0 million, as strong results marketing interest-rate derivatives were partially offset by slightly weaker credit and mortgage-related businesses.

In investment banking, revenue rose 65% to $229.9 million, as underwriting and merger services sold briskly.

Within its clearing business, where Bear provides back-office stock trading services to hedge funds and other institutional clients, higher margin debt and short-sale balances were partially offset by lower commission revenue from prime brokerage. Short balances averaged $81.3 billion in the quarter, up from $75.6 billion last year.