Big Quarter for Merrill Lynch

The brokerage sees earnings rise 6.5% from a year ago.
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Merrill Lynch


posted a 6.1% jump in second-quarter earnings from a year ago, boosted by across-the-board revenue improvement and the avoidance of big problems in its bond trading unit.

The brokerage earned $1.14 billion, or $1.14 a share, in the quarter, compared with earnings of $1.07 billion, or $1.05 a share, a year ago. Net revenue rose 20.5% from a year ago to $6.32 billion. Analysts had been forecasting earnings of $1.08 a share on revenue of $5.79 billion.

Among segments, second-quarter revenue in Merrill's asset-management unit rose 6.5% from a year ago to $1.43 billion, while commission revenue rose 7.2% to $1.24 million and principal transaction revenue shot up 45.3% to $921 million. Investment banking revenue rose 17% from last year to $894 million.

Merrill's global markets unit, which includes stock and bond trading and underwriting, had second-quarter revenue of $2.65 billion, up 33% from a year ago, reflecting a 30% revenue gain in debt operations and a 39% jump in equity. Merrill said the gain in debt markets reflected solid returns in bond and commodities trading partially offset by a decline in interest rate products.

On the equity side, the revenue gain reflected a $325 million revaluation of a private-equity investment that was triggered by the receipt of cash from a recapitalized company. Lower stock trading revenue offset the gain partially.

In investment banking, second-quarter revenue rose 21% from last year, reflecting gains from equity and debt underwriting and mergers advice. "Sequentially, strong growth in advisory and debt origination revenue more than offset a decline in equity originations," Merrill said.

The company paid $3.1 billion in employee compensation in the quarter, or roughly 49.5% of net revenue. It was 49.3% a year ago.