Brokerage Industry -- Deutsche Bank's Glenn Schorr Launches Research Coverage of the Sector.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 22, 2002

Deutsche Bank Securities Inc. analyst Glenn Schorr, CFA, launched coverage of the brokerage sector today with the initiation of five brokerage firms: Lehman Brothers (NYSE: LEH), Merrill Lynch (NYSE: MER), and Morgan Stanley

According to Schorr, there are currently a combination of cyclical and structural issues that are weighing on the brokerage industry. "While a better economy would help cure cyclical issues, structural issues such as excess capital and competition, ongoing margin compression, and the disintermediation of the cash equity business will likely weigh on profitability and valuations for the foreseeable future."

Schorr believes that while the sector has been battered by a host of issues, on a positive note, independent broker dealers have sustained double-digit ROEs and respectable pre-tax margins throughout the downturn. In addition, he notes that there is some pent-up demand to raise both debt and equity, the M&A outlook will ultimately turn positive, and certain businesses such as derivatives and prime brokerage are still in a growth phase.

"Given this environment we recommend exposure to companies with a more balanced business mix that can be defensive should the fixed income cycle extend, yet would fully participate in a recovery in equities," said Schorr.

About Deutsche Bank:

With roughly EUR 900 billion in assets and approximately 84,500 employees, Deutsche Bank offers its 12 million clients unparalleled financial services in 75 countries throughout the world. The Bank aspires to be a leading global provider of integrated financial solutions for demanding clients and the pre-eminent bank in Germany generating exceptional value for its shareholders and people.

Deutsche Bank ranks among the global leaders in corporate banking and securities, transaction banking, asset management, and private wealth management, and has a significant private & business banking franchise in Germany and other selected countries in Continental Europe.

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