BHC Clearing Firm Shaken by Citi's Pullout

BHC Financial is struggling now that some of its largest bank clients are choosing other firms or deciding to do their own investment clearing.

The Philadelphia-based brokerage clearing firm's stock sank 30% last Friday after the news that its largest client, Citicorp, would do its own investment clearing.

Other clearing firms are feeling the pressure, too, especially now that many of the largest banks have the investment sales volume to clear transactions themselves. Bank merger frenzy has further whittled the client lists of many clearing firms.

BHC, with its many bank clients, appears to be in a tighter bind than most.

"While these large-client relationships give a firm scale and volume, many of them are susceptible to internalization," said Glen Casey, a consultant at Cerulli Associates, Boston. "It's going to have a huge impact on their revenue."

And last year, BHC reported that another large bank client would discontinue its clearing arrangement. For BHC, losing Citicorp and the other bank will mean a revenue loss of more than $17 million, or 26% of its 1995 total, the firm reported.

A source familiar with the company said the unnamed bank is First Chicago NBD Corp. Richard Hawes, president of First NBD Investment Services, confirmed that it would switch from BHC to Pershing before June.