Sanders Morris Harris Group announced on July 28 its plans to close its high-grade corporate bond and mortgage-backed agency businesses. This announcement comes just more than eight months after the establishment of the New York group, which was staffed with some 30 former Advest Group bond department employees at the end of 2005.
The closures of the businesses were mainly due to waning returns. "The actual revenues in the first quarter and then in the second were significantly less than what the [businesses have] done in the past and what they planned to do," said George Ball, chairman of the company, in an interview.
The company estimates its second quarter losses in the New York fixed income division were approximately $2.2 million or $0.07 after tax per diluted share. "The losses were a function of the bond turnover and revenues being sharply, even dramatically, less than anybody in the unit, or we, had anticipated," Ball said. No other factors besides operating losses influenced the closings, he said.
However, it looks like Sanders' high yield business is still safe. The Houston-based company said the core high yield and syndicate activities, based in New York, will continue, as will the profitable fixed income division in Houston.
Notably, Sanders' primary operating business - asset/wealth management and capital markets - did well in the second quarter, the company reported. It expects to release earnings results, including the effects of the recently closed and impaired activities, on or near August 9.
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