Merrill Lynch


, the nation's biggest brokerage, reported a 6% rise in first-quarter profits on Wednesday, even as net revenues fell 5% from year ago levels.

The firm earned $685 million, or 72 cents a share, in the quarter, compared to $647 million, or 67 cents a year ago. The firm easily beat the First Call consensus estimate of 61 cents a share.

The big Wall Street firm, using a formula it relied on for much of last year, generated higher profits through cost-cuts and higher revenues from propriety trading -- mainly bond trading.

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Indeed, Merrill posted higher earnings, even as many of its bread-and-butter operations continued to show the strain of the bear market. Total net revenues $4.85 billlion compared to $5 billion a year ago.

Commission revenues earned by its army of stockbrokers were $1.1 billion, down 14% from a year ago. Core investment banking activities like underwriting and merger advisory work also fell. Underwriting revenues were $368 million, down 21%, while corporate advisory work plummeted 32% to $125 million.

But on the plus side, the firm revenues from principal transaction, which includes proprietary trading for its own behalf, soared to $1 billion, a gain of 15%. Merrill, like other investment banks, prospered from the volatility in the market for bonds and other fixed-income products in the first quarter.

Cost-cutting also continues to play a big part of Merrill's success story. The firm now employs 49,600 people, some 1,300 fewer employees than it had at the end of 2002. Compensation and benefits in the quarter totaled $2.5 billion, some 6% less than a year ago.

Non-compensation expenses also fell 7% to $1.3 billion.