Its business in mortgage-backed securities was cited as part of the reason for the investment bank's success.
Piper Jaffray Cos. shares jumped 7 percent to a 52-week high in heavy trading Wednesday after the Minneapolis-based investment bank reported strong third-quarter results with a positive nod toward the future.
Piper Jaffray, relying on a growing mortgage-backed securities trading niche and solid investment banking performance, posted a $19.7 million profit in the third quarter as year-over-year revenue rose 34 percent to $140 million. Earnings came in at $1.11 per share, including $6.8 million in income from the company's Hong Kong office, which Piper shuttered after five mostly unsuccessful years.
Shares rose $1.93 to close at $28.46.
"Our continuing operations performed well and we are pleased with our results," Chief Executive Andrew Duff said. "Our performance reflects robust fixed-income institutional brokerage revenues -- particularly strategic trading, our decision to exit the Hong Kong capital markets business, additional cost reductions ... and solid market share in public finance and public equity offerings."
Piper posted a third-quarter 2011 loss of $3.4 million.
Piper's biggest surge was in fixed-income institutional brokerage, where revenue from client and proprietary bond trading jumped 105 percent compared with the third quarter of last year.
Analysts questioned whether the trading surge could backfire downstream. Duff acknowledged in a conference call that trading revenue could be "lumpy," but he was confident additional sales people and the "ramp up" of the business in recent months were promising. Still, Duff said the third-quarter fixed-income institutional brokerage revenue should not be considered the "run rate" for future quarters.
"However, we expect [the mortgage-backed business] could generate $25 million in revenue, on average, per quarter," he said.
Duff also ticked off possible impediments, including the presidential election, the so-called fiscal cliff and tax reform next year. A hike in interest rates would hurt that business as well.
Meanwhile, Piper's investment banking revenue rose 16 percent to $51 million over the year-ago quarter.
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