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Merrill Lynch, PaineWebber, Bear Stearns post higher profits

October 14, 1997

NEW YORK (AP) _ The booming stock market and global merger frenzy fattened the wallets of Wall Street securities firms during the July-September quarter.

Merrill Lynch & Co., The Bear Stearns Cos. and PaineWebber Group Inc. on Tuesday became the latest brokerage houses on the Top 10 list to post healthy earnings for the period.

They join Morgan Stanley, Dean Witter, Discover & Co; Goldman Sachs & Co.; Lehman Brothers Holdings; Donaldson, Lufkin & Jenrette Inc., and Smith Barney in reporting exuberant gains as investors flood to Wall Street.

Merrill, the No. 2 securities firm behind Morgan Stanley Dean Witter, said its profits were up 49 percent. No. 5 Bear Stearns said its profits also rose 49 percent, while PaineWebber, at No. 6, had a 41 percent gain.

The results weren’t surprising. Healthy corporate profits and the potential for high returns continue to attract investors to Wall Street.

The rising demand for stocks coupled with low interest rates have encouraged many companies to raise cash by selling both stocks and bonds _ businesses that earn investment banks hefty underwriting fees.

Meanwhile, global consolidation in many industries has helped generate significant revenues for Wall Street firms that provide advice on mergers and acquisitions.

Merrill

The company that provides everything from investment banking to retail brokerage services earned $494 million, or $1.25 per share, in the third quarter ending Sept. 26, compared with $331 million, or 84 cents per share, in the same period a year ago.

The results beat Wall Street expectations of $1.21 per share, according to a survey by I.B.E.S. International Inc. Nevertheless, Merrill’s stock was down $1.44 at $75.56 per share in afternoon trading on the New York Stock Exchange.

``In a robust market environment, our earnings continued to show strength across the board,″ chairman and chief executive David Komansky and president and chief operating officer Herbert M. Allison Jr. said in a joint statement.

Merrill said revenues after interest expenses rose to $3.9 billion from $3.1 billion. The company said it set new revenue records in commission, investment banking and asset management fees.

The profits were driven by a 47 percent gain to $691 million in investment banking revenues. The company said it benefited from strong underwritings and robust mergers and acquisitions activity.

Merrill was No. 1 in the United States in mergers and acquisitions deals completed, with 30 percent of the market, and No. 2 globally, with 20.3 percent, according to Securities Data Co.

Commission revenues rose 45 percent to $1.2 billion due to increased stock market volume around the world and strong mutual fund activity, the company said.

Asset management and portfolio service fees rose 27 percent to $722 million. Assets under management rose $59 billion to $272 billion. Trading revenue rose 16 percent to $951 million, primarily from gains in trading stocks and bonds and derivatives.

Bear Stearns

The company earned $161.6 million, or $1.11 per share, in its first fiscal quarter ending Sept. 26, compared with $108.8 million, or 72 cents per share, a year ago.

The results were in line with analysts’ forecasts of $1.10 per share. Bear Stearns stock was down 25 cents at $44.50 in early trading on the New York Stock Exchange.

The company said revenues after interest expenses rose to $996.1 million from $688.7 million, led by gains in underwritings, stock and bond trading, and fees from mergers and acquisition advice.

Investment banking revenues, which includes fees from stock and bond underwriting and mergers and acquisitions advice, rose 108 percent to $219.3 million.

Revenues from trading for the firm’s own account rose 33 percent to $391.5 million, primarily because of gains in derivatives and bond dealings. Brokerage commissions and fees for clearing trades for other firms rose 32 percent to a record $213.4 million.

PaineWebber

The firm said its profits rose to a record $112.8 million, or $1.11 per share, compared with $80.2 million, or 79 cents per share, during the same period a year ago.

The results exceeded analysts’ forecasts of 87 cents per share. PaineWebber’s stock were up $1.56 1/4 at $50.75 per share in early trading on the NYSE.

Revenues after interest expenses rose 23 percent to $41.08 billion from $883 million, led by gains in the firm’s brokerage, trading, asset management and investment banking businesses.

Commission revenues, a big source of earnings for PaineWebber, rose 26 percent to $387 million.

Investment banking revenues rose 37 percent to $128.4 million, reflecting strong results in underwriting municipal bonds and real estate investment trusts.

Asset management fees gained 23 percent to $141.7 million. Assets under control also rose 23 percent to $234 billion. The company said its Mitchell Hutchins unit continues to make gains as its mutual funds receive high rankings.

Revenues from trading rose 20 percent to $289 million.

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