FleetBostonundefined and other commercial banks that have branched into the brokerage business in search of higher profits may find things aren't always greener on the investment banking side.

A slowdown in capital markets activity and a scarcity of stock offerings in recent months have already

hurt fourth-quarter profits at some

brokerage houses. So some banks in that business could also be singing the blues when earnings season kicks off next week.

FleetBoston will likely feel the squeeze through its investment banking business,

Robertson Stephens

, a turbo-charged earner when the technology market was hot but a laggard recently as IPO deals have dwindled. Recent data from

CommScan Equidesk

showed Robertson Stephens sank to 10th place in IPO underwriting in 2000, down from seventh place in 1999. It acted as lead manager for 29 deals in 2000, compared with 44 in 1999.

"They were riding on all eight cylinders earlier in the year but business is down from the blistering pace over prior quarters," says Mark Fitzgibbon, analyst and managing director at

Sandler O'Neill

. (He rates Fleet a buy, and his firm hasn't done underwriting for the bank.)

Falling Estimates

In mid-December, Fitzgibbon modestly reduced his fourth-quarter estimate for the bank by 2 cents to 83 cents, saying capital-markets revenue, which includes trading revenue as well as underwriting fees, looked softer than originally projected. Where he had previously expected a 3.9%, or $29 million, decline from the third to the fourth quarter, he now believes it could be as much as 9%, or $70 million. He also revised his 2001 capital market projection based on the assumption of a more challenging environment.

Fleet inherited Robbie Stephens through its 1999 merger with


, which had purchased the investment bank for a hefty $800 million the year before. The purchase proved profitable as the investment bank's revenue more than doubled in the ensuing years. But the atmosphere for equity underwriting changed dramatically after the

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went into a tailspin in April. Fleet declined to comment for this story.

"They had a couple of unbelievably good quarters when they first closed the deal that really helped pay for the transaction," says Kevin Timmons, banks analyst at

FAC Equities

in Albany, N.Y. "Everyone is in a situation where if you are a technology-related IPO firm, we're seeing them down across the board." (He rates FleetBoston a buy, and his firm hasn't done underwriting for the bank.)

Recent rankings from

IPO SECrets Newsletter

showed Robbie Stephens at the head of the list for "Bottom 5 Lead Underwriters by Aftermarket Performance" with a 37% drop. The second worst was

J.P. Morgan Chase's

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unit with a decline of 24%.

Other Businesses

Still, some analysts are reassured by the breadth and depth of Fleet's other businesses, notably in Latin America, says Fitzgibbon at Sandler O'Neill. The bank also has won kudos for its strong franchise and solid credit quality at a time when many other banks are struggling with bad loans.

Sharada Krishnappa, banks analyst at


in Pittsburgh, says the slowdown in capital markets has been taken into account and isn't expected to have an outsize impact on results this quarter or in the year ahead. (She rates Fleet a buy, and her firm hasn't done underwriting for the bank.) Krishnappa estimates that about 9% of total revenue for Fleet comes from banking fees and commissions, and says that Robertson Stephens is only one part of that.

And unlike J.P. Morgan Chase, which recently

warned of a fourth-quarter shortfall, Fleet's venture capital business doesn't involve a mark-to-market method of accounting, which requires that firms account for fluctuations in holdings regardless of their initial investment, one analyst points out.

Still, the fourth quarter could be tough for investors to swallow, now that the easy IPO money and lucrative trading commissions have leveled off. Says Krishnappa, "You're just not going to see the deal flow-through they had before. Fleet has made considerable investments in Robertson Stephens and probably expected to see a little more growth in those businesses. It's definitely experiencing a slowdown."