Fund management boosts Schroders

A BUMPER six months in fund management helped Schroders, the merchant bank, to shrug off the effects of the February bond market shake-out, and half-year profits rose 7.6 per cent to pounds 103.2m.

Schroders saw new customers in its pension and unit trust businesses and profits from fund management nearly doubled to pounds 40.6m. Despite falling stock markets the value of total funds under management rose from pounds 52.9bn to pounds 53.1bn.

George Mallinckrodt, chairman, said of the fund management expansion: 'There has been absolutely phenomenal growth in the Far East as well as increases in the US and elsewhere.'

Bonuses helped to push overall administrative expenses up by pounds 25m to pounds 157.2m and this, combined with a higher level of business, helped to squeeze margins.

On prospects the chairman said: 'Having achieved an encouraging start to 1994, and assuming relatively stable interest rates and settled equity markets, we look forward to a satisfactory result for the year as a whole.'

The bank increased its dividend for the half year to 30 June by 50 per cent to 6p. It stressed that the increase was intended in part to reduce the disparity in size between the interim and final payments.

The stock market was pleased by the fund management performance but disappointed by the investment and merchant banking side, where profits fell by pounds 11m to pounds 62.6m. The shares slid 25p to 1,478p.

Operating income rose by pounds 22m to pounds 264.9m, most of which came from fees and commissions, which rose by pounds 37m to pounds 187.3m. Net dealing income, in contrast, nearly halved from pounds 32.8m to pounds 18.4m. The culprits were foreign exchange and the bank's overall interest rate positioning.

Corporate finance activity picked up. Schroders handled the pounds 577m bid for Westland by GKN and Huntsman's dollars 850m purchase of Texaco's assets in the US. It also advised BAT Industries on its expansion into developing markets.