The firm, which employed a company record 6,951 brokers at year-end, earned $100.4 million, or 63 cents a share, in the fourth quarter ended Dec. 31. The results fell below the $108.7 million earnings, or 68 cents a share, PaineWebber posted in the year-ago quarter, but surpassed Wall Street expectations of 55 cents a share.

Principal transactions — revenues from market making in securities and trading for the firm's own account — dropped 22 percent in the fourth quarter to $199.2 million, from $254.6 million, as the firm wrestled with the aftershocks of this summer's financial turmoil. Investment banking revenues also declined to $109.7 million, from $122.9 million in the year-ago quarter.

On the plus side, commission revenues rose 7 percent to $420.2 million, from $392.3 million in the year-ago quarter, thanks to strong stock trading volumes on U.S. exchanges. Asset management fees rose 21 percent to $188.0 million, from $154.8 million, as the firm increased its assets under management nearly 20 percent to a record $58.5 billion.

In all, PaineWebber's clients held a record of $352 billion in their accounts at year end, up 18 percent from the $297 billion a year ago. The firm's client assets have grown by an annual compounded rate of 20.4 percent in the last five years.

For the full year, the 119-year-old firm posted record profits of $433.6 million, or $2.72 a share, compared with net earnings of $415.4 million, or $2.56 a share, in 1997. Net revenues rose 7 percent to a record 4.4 billion in 1998, up from $4.1 billion in 1997.