Merrill Lynch ( MER), the nation's biggest brokerage, said Tuesday that first-quarter profits nearly doubled due to a revival in its investment banking business. The strong performance from Merrill continues a trend that was set last month when the firm's Wall Street peers, Bear Stearns ( BSC), Goldman Sachs ( GS), Lehman Brothers ( LEH) and Morgan Stanley ( MWD), also reported sharp gains in profits. In the quarter, Merrill earned $1.25 billion, or $1.22 a share, compared to $643 million, or 67 cents, a year ago. The profit easily bested the Thomson First Call consensus estimate of $1.08 cents a share. The big Wall Street firm, which had its most profitable year in 2003 due to aggressive cost cutting and a surge in revenue from proprietary bond trading, scored huge gains in the first quarter in revenue from broker commissions and investment banking work. Commission revenue totaled $1.36 billion, up 27% from a year ago, as customers traded more stocks and mutual funds. Investment banking revenue rose 70% to $837 million due to a surge in stock underwriting and corporate advisory work. Stock underwriting revenue rose 83% to $672 million. Principal transactions, revenue from proprietary bond and stock trading, held steady from a year ago at $1 billion.
Meanwhile, in a sign that Merrill executives believe the economic revival has legs, the firm added 100 employees during the quarter. During the bear market, Merrill slashed nearly 30% of its workforce in a bid to maintain profitability. "The results demonstrate that the company's capabilities to grow revenue and maintain a strong market position are very much intact," said Merrill Chairman and Chief Executive Officer Stan O'Neal, in a press release. A number of banks also reported earnings on Tuesday, including State Street ( STT), AmSouth ( ASO) and BB&T ( BBT). State Street reported that its profits more than doubled as net income came in at $217 million, or 63 cents a share, compared to $96 million, or 29 cents a share, a year ago. The Boston-based processing and custodial bank reported operating earnings of 66 cents a share, a figure that excluded certain merger costs. The First Call estimate for the operating earning figure was 69 cents. AmSouth, a Southeast regional lender, said first-quarter profits rose slightly to $160 million, or 45 cents a share, from $155 million, or 44 cents, a year ago. The First Call estimate had the bank earning 45 cents. BB&T, another Southeast regional bank, also reported little change in first-quarter profits. Its earned $328.5 million, or 60 cents a share, compared to $327.7 million, or 69 cents a share, a year ago. The bank earned 61 cents in operating earnings. Using that figure, the bank came in two cents shy of the analysts' estimate. Commerce Bank ( CBH) earned $62 million, or 75 cents a share, in the quarter compared with $43 million, or 60 cents a share, last year. The bank's earnings matched the First Call estimate.