Brokerages in Slight Rebound From Crash

Securities brokerages recovered from the stock market crash in the first quarter of the year, but their profit remained well below the level of last year’s first quarter, the New York Stock Exchange said Tuesday.

Net profit of NYSE member firms that do business with the public slumped to $745 million, from $1.1 billion a year ago.

But the industry’s performance reflected a rebound from the record loss of $1.48 billion in the fourth quarter of 1987, when the October stock market crash occurred.

Gains were limited, however, because of a drop-off in trading volume on Wall Street, which has been avoided by a wary public since last year.

To cope with reduced stock market interest, brokers have cut costs and diversified, according to the report. Expenses were cut by 2.7% to $11.89 billion from $12.22 billion in the fourth quarter when the crash occurred, due to estimated industrywide layoffs of nearly 20,000 people.

Specialists Firms Hit

The exchange said only 18.6% of revenue was derived from traditional commissions--the lowest share ever derived from that segment. Volume has been unofficially estimated to have dropped 15% to 20% from a year ago.

The firms derived an increasing share of business from other areas, including trading, investment banking and interest income.

Specialist firms, reported separately, also showed a decline from the year-ago period, but improvement from the last quarter of 1987.

The floor brokers earned $55 million, down 14% from the $64 million last year but better than the $7-million loss of the fourth quarter.

Among firms dealing with the public, not including the specialists, 269, or 68% of the 393 firms, were profitable, earning $908 million.

There were 328 firms profitable in 1987’s initial quarter, with earnings of $1.12 billion after taxes.

The figures also indicated that losses at 124 unprofitable firms totaled $163 million, a sharp rise from the 60 reporting red ink a year ago, when losses amounted to just $19 million.

For the industry, the decline was softened by a lower tax rate, as pretax profit dropped to $1.13 billion from $2.04 billion a year ago, a steeper decline than the after-tax loss.