Wall St. Raked In Record Pretax Profits of $2.43B in Third Quarter

average past the 5,000 mark, the securities industry enjoyed record revenue and earnings in the third quarter Pretax profits for all New York Stock Exchange member broker-dealers climbed to a record $2.43 billion for the quarter, while revenue rose to a record $25.7 billion, the Securities Industry Association reported. The pretax profits from the third quarter equaled those for the first two quarters combined. "The third quarter was without a doubt an excellent quarter," said Katrina Blecher, an analyst at Gruntal & Co. "Companies were running on all cylinders," with high mergers and acquisitions activity, higher volumes, and a full underwriting calendar, she said. Indeed, the average daily volume on the New York Stock Exchange in the third quarter was 341 million shares, 17% above 1994's full-year record daily volume. Nasdaq volume reached 443 million shares daily in the third quarter, 50% above 1994's full-year average. "Several positive trends in the fixed-income and equity markets combined to make this a stellar year for investors and issuers raising new capital," said Jeffrey M. Schaefer, chief economist at the securities association. Revenue from fixed-income markets is up because long-term interest rates for Treasuries have fallen about 20% from January, Mr. Schaefer said. "The success of issuers - and particularly investors - translated into a very strong year for the securities industry, which will raise more than $1 trillion in capital worldwide for the fourth consecutive year." Professionals executing many of these transactions benefited as commissions hit a quarterly high of $4.2 billion, up 6% from the second quarter and 33% from a year earlier. Revenue gains from securities trading reached a record $4.8 billion in the third quarter, up 18% from the previous quarter and 25% from a year earlier. Underwriting revenue reached $2.11 billion, up 9% from the second quarter and 72% from a year earlier. The underwriting volume for the quarter was second only to the record fourth quarter of 1993, when revenue reached $2.78 billion. Corporate underwriting volume through October is heading toward an annualized figure of $740 billion, about 30% below the 1993 peak. The only slower areas in the quarter were asset-backed bonds and initial public offerings. Asset-backed bonds were running at an annualized pace of $146 billion, less than one-third 1993's total. A flat yield curve slowed collateralized mortgage obligations. The repackaging of credit card receivables have constituted the bulk of this year's asset-backed transactions. Initial public offerings were down as well. The volume of closed-end fund deals, in particular, fell off considerably, with only two deals so far this year valued at $200 million. In 1993, these funds made up $16 billion of 1993's record IPO year. Industry expenses also rose, by 11% to $23.2 billion, compared with a 15% gain for revenue.