Drexel Burnham Lambert lost about $40 million in 1989 because of investigation-related expenses and one-time charges from discontinued operations, the New York-based investment banking house said Sunday.
The losses are sharply lower than in 1988, when Drexel lost $167 million, primarily because it agreed to pay $650 million in penalties and fines to settle criminal fraud charges in connection with the Wall Street insider trading scandal.
Drexel said it expects to return to profitability in 1990. "Given our strong positions in our markets," the privately owned firm said in a press release, "even if revenues only remain flat, our results in 1990 should be very profitable."
Drexel was catapulted to prominence on Wall Street in the 1980s by Michael Milken, who headed the firm's lucrative junk bond operations in Beverly Hills. Milken, who no longer works there, is currently under federal indictment on 98 counts of racketeering, insider trading and other securities violations. He has pleaded not guilty.
Drexel said it earned an operating profit of $67 million last year, an amount that reflected write-offs in its securities portfolio, including its high-yield junk bonds, and more than $200 million in other unspecified one-time charges.
But the operating profits were wiped out by other expenses and charges, including $75 million in investigation costs, the firm said. The company also noted that the 1989 results were based on "preliminary unaudited figures."
Drexel last made money in 1987, when it earned $130 million on revenue of $3.9 billion, according to company spokesman Steven S. Anreder. The firm's revenue jumped to $4.4 billion in 1988 but fell to $4.1 billion last year.
Drexel put a favorable spin on its losses, saying they were "relatively slight" in light of the turmoil that surrounded the company. Drexel is smaller today, with 5,300 employees compared to 9,100 a year ago. Some of the businesses discontinued include its retail brokerage operations and trading and research in foreign securities, Anreder said.