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Gleacher & Company Reports Second Quarter 2012 Financial Results

Stocks in this article: GLCH

1 This business segment was formerly referred to as “MBS/ABS & Rates.”

2 This business segment was formerly referred to as “Corporate Credit.”

Investment Banking

Net revenues were $8.7 million for the quarter ended June 30, 2012, an improvement of $4.2 million compared to the first quarter of 2012 and relatively flat compared to the second quarter of 2011. Net revenues were $13.3 million for the six-months ended June 30, 2012, a decline of $3.3 million compared to the prior-year period. Investment banking revenue for the three and six months ended June 30, 2012 benefitted from advisory fees of $7.5 million relating to an engagement on a transaction that closed during the quarter.

The composition of the division’s investment banking revenues was as follows:

Three Months Ended Six Months Ended
June   March   June June   June
(In thousands) 2012 2012 2011 2012 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Advisory $ 8,251 $ 2,530 $ 8,203 $ 10,781 $ 11,835
Capital Markets   479   2,003   753   2,482   4,765
Total: $ 8,730 $ 4,533 $ 8,956 $ 13,263 $ 16,600

MBS & Rates (formerly referred to as “MBS/ABS & Rates”)

Net revenues were $5.3 million for the quarter ended June 30, 2012, a decline of $15.0 million compared to the first quarter of 2012 and $18.5 million compared to the second quarter of 2011. The decrease in net revenues was primarily attributable to a leadership transition within the division accompanied by significant employee turnover during the current quarter. During this period, the segment’s headcount fell to a low of 35 compared to headcount of approximately 70 at April 1, 2012. New leadership, which was announced in the beginning of May 2012, has substantially rebuilt the division, and headcount stood at approximately 50 at June 30, 2012, which is 80% of the division’s target. This turnover led to a disruption in sales and trading activities and a re-positioning of inventory, resulting in a decline in net revenues. Net interest income also declined approximately $5.5 million, compared to the first quarter of 2012 and $3.8 million compared to the second quarter of 2011, due primarily to lower inventory levels. Partially offsetting these declines were approximately $1.5 million of other revenue recorded in the second quarter of 2012, related to the clawback of certain stock-based compensation grants subject to non-competition provisions.

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