Investment bank

Bear Stearns

( BSC) reported Thursday that its profits in the third quarter dropped nearly 6%, as revenue from underwriting sagged, but earnings per share rose almost 11% because of stock repurchases.

Bear Stearns, the 77-year-old New York-based financial firm, said that its net income fell to $181.4 million in the third quarter ending Aug. 25 from $192.3 million in the comparable quarter of last year.

But the company posted earnings of $1.32 a share in the latest quarter, up from earnings of $1.19 a share in 1999. Analysts polled by

First Call/Thomson Financial

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had predicted earnings of $1.19 a share.

In a 12-month period ending Aug. 20, Bear Stearns bought back roughly 20 million shares, according to the company.

James E. Cayne, president and chief executive of Bear Stearns, said in a statement that the results "were quite solid," despite a sluggish performance in investment banking, the business of underwriting stock offerings and advising companies on mergers and acquisitions.

Citing an unfavorable environment for equity and fixed-income capital markets, the company said that its investment banking revenue declined 11% to $236.9 million. But it added that its merchant banking revenue jumped to $34.3 million from $7.6 million in the previous year.

Bear Stearns also explained that compensation given to employees was higher in the latest quarter, totaling 52.2% of net revenue, as opposed to 50.4% of net revenue in the comparable period of last year. Commission revenue rose 9.8% to $262 million, the company added.

Shares of Bear Stearns were up $1.50, or 2%, at $70.50 in afternoon trading Thursday.