July 21, 2010 / 12:20 PM / 7 years ago

UPDATE 3-Piper Jaffray profit falls short

* EPS of $0.36 vs. $0.59 a year earlier

* Total revenues of down 3 percent to $127 mln

* Shares up 0.4 pct (Updates stock price. Adds comments from analyst call.)

By Joe Rauch

CHARLOTTE, N.C., July 21 (Reuters) - Piper Jaffray Cos Inc's (PJC.N) second-quarter profit fell short of expectations as sluggish trading and institutional businesses overshadowed a spike in investment banking revenue.

Net income fell 36 percent to $7.4 million, or 36 cents per share, from $11.6 million, or 59 cents per share, a year earlier.

Analysts had projected earnings of 49 cents per share, according to Thomson Reuters I/B/E/S.

Net revenue declined 3.5 percent to $127.7 million, while analysts had expected $129.0 million.

Piper Jaffray benefited from the resurgent market for initial public offerings, which accelerated through the spring and early summer. But its institutional business suffered as clients became less aggressive in a sluggish stock market.

The smaller firm, which caters to mid-size clients, said investment banking revenue increased 14 percent from a year earlier to $72.3 million and was up 64 percent from the first quarter.

Piper Jaffray particularly benefited from smaller IPOs conducted during the quarter.

This quarter, the company completed 28 equity financings totaling $3.5 billion, 11 merger and acquisition deals valued at $4.6 billion and 121 tax-exempt issuances totaling $1.6 billion.

But the company's trading and brokerage businesses that cater to institutional clients dragged.

Total institutional sales and trading declined 43 percent to $37.2 million from $65.5 million.

The dip in the company's institutional business is expected to continue, Chief Executive Officer Andrew Duff said during the conference call with analysts, because of the challenges U.S. municipalities are facing as they issue debt.

"The primary driver of revenues for them is real-estate related taxes based on assessed valuations," he said. "Our view is the marketplace is shifting regularly."

New debt issuances, he said, were relatively flat for the first half of 2010.

"All issuers have been able to access the market, but the secondary trading and credit spreads have been volatile," Duff said.

Total compensation declined 2 percent from a year earlier to $77.6 million from $79.3 million, but was up 10 percent for the first half of 2010 over last year.

Chief Financial Officer Debbra Schoneman said the company expects its compensation ratio to remain around a previously disclosed 60 percent target for the year.

Piper Jaffray shares were up 11 cents to $30.33 on the New York Stock Exchange. The company's stock dropped 20 percent during the second quarter, falling further than industry rivals such as Raymond James Financial Inc (RJF.N), whose stock fell 8 percent. (Reporting by Joe Rauch, editing by Lisa Von Ahn and Derek Caney)

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