NEW YORK (HedgeWorld.com)–Increased profits were reported for the first half of the year at Bear Stearns Cos. Inc., although the specter of a Securities and Exchange Commission action from the mutual fund trading scandal remains.
Overall net income for the firm grew by 24% in the second quarter with the fixed-income revenues of US$844.4 million leading the way, thanks to a growing mortgage-related business and interest rate products.
Second quarter net revenues for the global clearing services unit were US$223.7 million, which is an increase of 19.4% from the last year. Margin debt balances were up 18.2% to total US$46.7 billion as of May 31. Bear’s prime brokerage unit reported higher margin debt, customer shorting and stock borrow balances.
Still the clearing unit will still need to deal with the cleanup following the investigation by the SEC into mutual fund trading practices. In Bear Stearn’s quarterly earnings statement, officials said they received notice that SEC staff might recommend that the commission bring a civil injunctive action and/or a cease and desist order against the clearing firm.
The Boca Raton, Fla., offices of Bear Stearns were closed earlier this month, sparking rumors that the firm was preparing to settle with the SEC. One Bear Stearns clearing client located in Boca Raton was Kaplan & Co., the company that handled mutual fund trades from Canary Capital.
Officials at Bear Stearns characterized the small office’s closure as a simple cost-cutting move resulting in the laying off of seven employees. “We continually seek to improve our operations and this action is in line with improving the efficiency of our operations,” said Bear Stearns Spokesman Russell Sherman.