Underwriting Profits

Much as it might like to, the public cannot possibly invest in big security underwriting houses like Morgan, Stanley & Co., Kuhn, Loeb & Co. or Lehman Brothers.

They are, of course, strictly private affairs. The only top-flight underwriters with stock outstanding in public hands are First Boston Corp. and Bancamerica-Blair Corp.

In volume of business First Boston is the biggest underwriter of them all. Stemming from the divorced securities affiliate of Boston's First National Bank and the old Chase Harris Forbes organization, First Boston Corp.

last year originated or participated in bond or stock flotations footing up to nearly $4,000,000,000. Its share of these underwritings was $318,532,000. Last week, like any corporation president, First Boston's Colonel Allan Melvill Pope, who learned to dispense with an office desk during his 17 years in the Army, mailed out his annual report for 1936.

First Boston's reports are interesting to a far wider group than its 9,500 stockholders. Now that Ferdinand Pecora and the Senate Committee on Banking & Currency are occupied with other things than Wall Street, First Boston's figures are the primest clue to banking house profits. In 1936 First Boston took in $7.348.000 from underwriting and trading operations, another $1,253,000 from interest and dividends, $229.000 from commission, service charges and miscellaneous sources. General expenses were $4,000.000.

interest costs $400,000. After taxes and a few minor deductions the year's profit was $3,172,351.19. This profit was earned on total capital & surplus of less than $13,000,000. Like all banking houses, like many a good merchant. First Boston operates to a large extent on borrowed money, loans payable amounting to some $55,000,000 at the year end. As one of the biggest government bond dealers in the U. S., First Boston had $30.000,000 worth of Treasury issues on its shelves. Other securities, including those in joint trading accounts, footed up to $15,400,000. It had sold short about $2,000.000 worth of securities, carried under the liability item, "Securities Sold Not Yet Purchased." For other investment bankers as well as Colonel Pope, 1936 was a fine year. Total corporate financing, reported the Commercial & Financial Chronicle, amounted to $4,600,000,000, over twice the figure for the year before and about twelve times the total for 1933 when the Securities Act went into effect. Most of it was refunding --swapping new money for old--but the volume of fresh capital was above $1,000,000,000 for the first time since 1931.

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