NEW YORK Neuberger Berman Inc., a New York money management firm that has fired nearly 2% of its staff this year, said on Wednesday that it will not meet second-quarter profit expectations because of lower fee and commission revenue.
The company said profits could be modestly lower than the consensus estimate of 71 cents a share because fees would be based on a lower level of assets and commission revenue has declined as trading has slowed. Neubergers shares fell 5%, or $4.03, to $76.51 in early trading Wednesday.
Neuberger, which manages money for people with a net worth of more than $1 million, also makes markets in about 150 stocks, making it vulnerable to lower trading activity and smaller spreads brought about by decimalization of stock trading.
The pure asset management side of the business is doing quite well, but its these secondary businesses that have impacted earnings, said Ken Worthington, an analyst at CIBC World Markets Inc. in New York; he has a hold rating on the stock. Im sure theyre being impacted by decimalization as well.
The new one-penny trading increments, replacing fractions, squeeze revenue as the spreads between bid and asked prices have narrowed. The New York Stock Exchange and Nasdaq Stock Market switched to decimals this year.
Neuberger makes markets primarily in Nasdaq-listed stocks.
It said it expects to meet the 2001 earnings consensus of $2.95 a share from 10 analysts contacted by First Call/Thomson Financial.
Its assets rose to $59.2 billion at May 31, up from $54.8 billion at March 31. The companys private asset management unit, which produced 61% of its first-quarter profit, had assets of $24.6 billion at the end of May, up from $22.8 billion at March 31. The company had 14,000 accounts at yearend, averaging $3.9 million each.