Securities industry performance remained stable through the first quarter of 2001, as historical profit trends reasserted themselves in the marketplace.

According to lasted Securities Industry Performance report issued by the Investment Dealers Association, industry profits were lower by 41% when compared to the same quarter a year ago. It notes, however, that the first quarter of 2000 saw abnormally strong revenues.

When the historical highs of a year ago are discounted, the operating profits of the current quarter were only 9% lower versus the fourth quarter of 2000.

Retail firms were the hardest hit during the quarter, with operating profits coming in at just $5 million, slightly higher than last quarter but still far below the record $217 million in revenues seen in the same period a year ago. This trend of decreasing profits also spilled over into the integrated firms, which showed a 13% drop in operating profits quarter-over- quarter.

The report suggests retail investors are becoming more cautious. An 11% gain in mutual fund commissions, quarter-over-quarter, reflects consumer shift from owning stocks directly to owning them through mutual funds.

Client debt margin dropped to $9.7 billion during the quarter. That’s the lowest level since the IDA began collecting monthly data in April 2000.

Fixed income revenues helped offset the drop in equity revenues and contributed strongly to the stability of operating revenues. The fixed income markets rebounded strongly in the quarter, allowing the industry to realize revenues of $310 million, double those of the previous quarter and 56% above the first quarter of 2000. The sudden gains came due to the easing trend by the Fed and the short-term opportunities it created for bond dealers. Unfortunately, there is no indication that this trend will continue.

Investment banking earned $497 million in revenue, $2 million higher than in the previous quarter but down 7% year-over-year.

The M&A market was slow with deals worth $38 billion, which was up 38% over the previous quarter but down over 50% year-over-year when compared with the $69 billion in deals seen in the first quarter of 2000.