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Merrill Lynch, Primerica, PaineWebber Earnings Up

October 14, 1992

NEW YORK (AP) _ Merrill Lynch & Co. on Tuesday reported a 44 percent rise in third-quarter profits, boosted by record levels of stock and bond underwriting. PaineWebber Group Inc. posted a 35 percent gain.

Primerica Corp. said quarterly net income rose 33.5 percent. But the diversified financial services company’s Smith Barney, Harris Upham & Co. subsidiary saw profits decline slightly.

Charles Schwab Corp. said its third-quarter profit fell 41 percent and attributed the drop to expansion-related expenses and to investor caution in an uncertain economy.

Wall Street is projected to show a drop from record-level profits in the first and second quarters of 1992 to the industry’s smallest earnings since late 1990, around $1 billion overall.

In that regard, the gains at Merrill and PaineWebber were better than expected, and analysts said they reflected the importance of having broad business lines, with a renewed focus on customer service.

″Both firms have made strong efforts at diversifying their revenue base and the efforts are obviously paying off,″ said Michael Flanagan, an analyst with Lipper Analytical Securities Corp.

Looking ahead, firms face some uncertainty as the presidential election and the declining level of stock offerings cloud the outlook for the last three months of 1992. Merrill Lynch

The nation’s biggest brokerage said after-tax profits rose to $230.1 million, or $2.05 per share, in the July-September period, from $160.2 million, or $1.37 per share. Revenue rose 12 percent to $3.39 billion from $3.04 billion.

Merrill Lynch said it benefited from strong performances in almost all business lines.

Revenues from princiapl transactions rose 26 percent to a record $610 million, due partly to foreign exchange trading profits during a turbulent period in the world’s currency markets.

Investment banking revenue rose 25 percent from a year ago to $365 million. During the third quarter, Merrill remained the top underwriter of corporate debt and equity. In the first nine months of 1992, Merrill earned $1 billion in underwriting fees - 20 percent of Wall Street’s total.

Merrill’s expenses rose 14 percent in the quarter to $1.76 billion, but the firm said the increase was largely due to high business volume, which is typical on Wall Street.

Nine-month earnings rose 40 percent to $735 million, or $6.42 per share, from $525 million, or $4.57 per share. Revenue rose to $10.2 billion from $9.24 billion in the 1991 period.

Merrill stock rose $3.50 a share to $52.50 on the New York Stock Exchange. PaineWebber

The brokerage said it earned $51.7 million, or $1.06 per share, up from $38.4 million, or 81 cents per share, in the same 1991 period. Revenue rose 18 percent to $625.8 million from $529.2 million a year earlier.

PaineWebber, the nation’s fifth-largest brokerage, said retail brokerage was stronger than a year ago and in the 1992 second quarter. The firm said it added about 400 brokers in the last year, bringing its total to about 5,000.

Capital markets business posted a 50 percent gain over a year ago. PaineWebber’s strength in that field was led by trading in mortgage-backed and government securities. Investment banking posted sharp gains, thanks to Wall Street’s record quarter in corporate underwriting.

Low interest rates sent the firm’s interest revenues plunging 21 percent.

For the first nine months of 1992, PaineWebber’s profits totaled $171.8 million, or $3.52 per share, up 66 percent from $103.7 million, or $2.19 per share a year ago.

Nine-month revenue was up 23 percent to $1.88 billion from $1.52 billion.

On the NYSE, PaineWebber closed up $1.37 1/2 a share at $18.37 . Primerica

The diversified financial services company said third-quarter profits were $165 million, or $1.46 per share, up from $123.5 million, or $1.11 per share. Operating revenue totaled $1.25 billion, down from $1.28 billion a year ago.

″We were pleased to report higher earnings this quarter, despite the persistent sluggishness of the economy,″ Primerica Chairman Sanford I. Weill said.

Primerica has operations in insurance, brokerage and consumer finance. During the quarter, Primerica agreed to pay $722.5 million for a 27 percent stake in The Travelers Corp.

Smith Barney earned $33.4 million in the third-quarter, down from $35.9 million a year earlier. The firm posted revenue declines in trading and interest income, and recorded slightly higher expenses. Revenue increases were posted in investment banking and asset management fees.

The company’s insurance units - Primerica Financial Services, Speciality Life and Health, and Gulf Insurance property and casualty - earned $60.9 million, up from $59.1 million a year ago.

Gulf Insurance took a $2 million provision for losses from Hurricane Andrew in Florida.

Primerica’s nine-month earnings were $536.3 million, or $4.79 per share, up from $346.7 million, or $3.11 per share, a year earlier.

Primerica stock fell 25 cents a share to $42.25 on the NYSE. Charles Schwab Corp.

The San Francisco-based parent of the nation’s leading discount brokerage earned $7.8 million, or 20 cents a share, in the three months ended Sept. 30. That compared with $13.2 million, or 34 cents a share, for the same period of last year.

Revenue dipped 2.7 percent, to $196.8 million from $202.3 million.

″Investors in the period were trading less considering the amount of new assets,″ said Schwab senior vice president Hugo W. Quackenbush.

The average number of daily trades in the quarter was 18,800, up from 17,000. The average commission per trade, however, dropped to $74.11 from $77.86.

The company said it added 127,000 new accounts during the quarter, a 43 percent gain over a year ago. Net assets in customer accounts reached a record $58 billion, compared with $42.3 billion in 1991′s third quarter.

Schwab also said non-interest expense rose 17 percent to $144.3 million. For the first nine months of the year, Schwab’s profit rose 67.7 percent to $56 million, or $1.43 per share, from $33.4 million, or 85 cents per share.

Revenues rose 19 percent to $680.9 million from $572.1 million.

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