Keefe Bruyette Earnings Soar

Keefe Bruyette & Woods(KBW Quote) shares surged 16% Tuesday after the boutique investment bank said profit tripled in its first quarter as a public company.

In the fourth quarter, the firm made $25.4 million, or 87 cents a share, compared with $7.3 million, or 26 cents a share, in the year-earlier period. Revenue rose 32% to $120.2 million.

Analysts were predicting the firm would make 35 cents a share on revenue of $96 million.

Investment-banking revenue rose 69% from a year earlier to $67.2 million. Equity commissions rose 14% to $30.6 million.

"Revenue growth was driven by a record year in investment banking. Investment banking experienced very strong growth in our structured products area ... and our equity capital markets area," says John Duffy, Keefe Bruyette's chairman and CEO, during a conference call.

Keefe Bruyette also made big bucks from advising on M&A deals. Keefe advised North Fork Bancorp when it was acquired by Capital One(COF Quote) for $13.2 billion in December, and advised Texas Regional Bancshares when it was acquired by BBVA(BBV Quote) for $2.1 billion.

"Our substantial improvement in profitability in 2006 was a function of our growth in revenues and the operating leverage we have created through controlling compensation and other expenses," Duffy said.

Keefe Bruyette's compensation expenses fell 8.1% in the quarter to $49.6 million. During the quarter, the firm implemented noncash compensation for the first time, which has not yet hit the expense line, Duffy said.