NEW YORK, Jan. 25 /PRNewswire/ -- Merrill Lynch & Co., Inc. (NYSE: MER)
today reported record quarterly net earnings of $764 million, up $405 million
from the 1998 fourth quarter. Earnings per common share were $2.03 basic and
$1.80 diluted, compared with $.97 basic and $.86 diluted in the 1998 fourth
quarter.
Earnings for 1999 were a record $2.6 billion, up 69% from the $1.5 billion
reported in 1998, which excludes 1998's $288 million after-tax special
provision. Basic and diluted earnings per common share were $7.00 and
$6.17, respectively, compared with $4.24 and $3.71 for 1998, excluding the
special provision.
Annualized return on average common equity was approximately 23.8% for the
1999 fourth quarter, compared with 14.8% in the 1998 fourth quarter and
20.2% in the 1999 third quarter. Return on average common equity was
23.5% for 1999.
"A strong fourth quarter capped a very strong year. Investors embraced
our new choice platform combining technology with advice and guidance, and
brought new assets to Merrill Lynch at an accelerating rate. Our corporate
and institutional businesses had a record year, led by robust M&A,
underwriting and market-making activity. The strategic investments we have
made to build our business globally -- in asset management, investment
banking, private client and the debt and equity markets - are producing solid
results, with a growing proportion of our business coming from outside the US.
We want to thank all of our clients and employees for making 1999 another
bullish year for Merrill Lynch," said David H. Komansky, Chairman and Chief
Executive Officer.
Recent highlights include:
-- Investment banking revenues were a record in the 1999 fourth quarter
led by continued strong equity underwriting activity and M&A advisory
fees. During the fourth quarter, Merrill Lynch was the lead manager
for both the largest US telecom IPO (Infonet Services Group) and the
largest US internet financing ever (Internet Capital Group).
-- Merrill Lynch retained its position as the leading underwriter of total
debt and equity securities, both in the US and globally, with fourth
quarter market shares of 17.6% and 14.0%, respectively, according to
Thomson Financial Securities Data. The company also retained its
position as leading global debt underwriter.
-- In the two fastest growing regions in the world for investment banking,
Merrill Lynch ranked #1 in European IPOs and #2 in Japanese announced
M&A.
-- Total client assets climbed to $1.7 trillion on strong flows of net new
money and market appreciation, up $250 billion, or 17%, from year-end
1998. US Private Client assets advanced to $1.3 trillion, up 15% for
the year, with net new money in the fourth quarter of $36 billion, or
over $500 million per business day.
-- US Private Client assets in fee-based accounts rose 29% in the recent
quarter to $151 billion, or 11% of its total assets, on strong gains in
ML Consults(R) and Unlimited Advantage(SM). Unlimited Advantage(SM)
had total client assets of more than $63 billion at year end, up
58% from September. New money into Unlimited Advantage(SM) accounts
was nearly $6 billion in the fourth quarter and $9 billion since its
inception in June. Unlimited Advantage(SM) has attracted assets at a
rate more than 20 times faster than previous fee-based products.
-- US Private Client continued its steady growth in building its Financial
Consultant team, with a fourth-quarter increase of 165 to 14,200, up
more than 600 from the prior year.
-- International Private client assets reached $137 billion, up 17% for
the quarter and 40% for the year, with positive client asset growth in
all regions. Private Client asset gathering accelerated in Japan, with
assets reaching $12 billion at year-end, up from $8 billion at the end
of September and $2 billion at the end of 1998. The Japanese Private
Client business contributed significantly to both asset management and
equity underwriting in that market.
-- Assets under management grew to a record $557 billion, up 8% during the
fourth quarter and 11% for the year. In the recent quarter, net new
money totaled $9 billion. The Asset Management Group made significant
progress by establishing an integrated, global organization, hiring top
flight talent, broadening investment products and improving
performance.
-- ML Direct(SM), the robust new online service for self-directed
investors, was launched on schedule in December, and the company began
to roll-out components of its Direct Markets internet platform for
corporate and institutional clients during the fourth quarter.
-- Merrill Lynch's strength in research continued to be recognized. The
Global Securities Research and Economics Group was again named #1 in
Institutional Investor's All-American Research Survey, and continues to
be the only firm rated #1 in five of the magazine's six regional
surveys: US (Equity and Fixed-Income), Europe, Asia and Latin America.
Merrill Lynch further expanded its commitment to provide global market
intelligence by entering into a partnership with Multex.com to jointly
develop global research and information websites.
On a cash basis, which excludes goodwill amortization, net earnings for
the 1999 fourth quarter were $821 million. On the same basis, diluted
earnings per common share were $1.93 and annualized return on average common
equity was approximately 24.4%. For the full year, net earnings on a cash
basis were $2.8 billion, or $6.71 per diluted common share. ROE was
approximately 24.4% on a comparable basis.
Revenues
Net revenues reached a new quarterly high of $5.9 billion, achieving
records in most categories, including commissions, investment banking, asset
management and portfolio service fees, and net interest.
Commissions revenues were up 22% from the 1998 fourth quarter to
$1.7 billion, primarily due to increased volume in global listed securities on
non-US exchanges, mutual funds sales, and over-the-counter securities
transactions.
Principal transactions revenues increased $583 million from the 1998
fourth quarter, when global market conditions negatively impacted debt trading
revenues. Equity trading revenues benefited from increased trading volume in
both US and non-US equities, as global market conditions improved,
particularly in Europe and Japan. Debt trading revenues were up sharply
across all regions, benefiting from improved global markets compared to the
1998 fourth quarter.
Investment banking revenues rose 37% from the 1998 fourth quarter to
$1.1 billion, as a result of record underwriting revenues and strategic
services fees. Both equity and debt underwriting revenues were up
significantly compared with the year ago period, benefiting from improved
market share and more favorable market conditions. Strategic services revenues
increased from both the 1998 fourth quarter and 1999 third quarter as a result
of higher levels of merger and acquisition activity, particularly in Europe.
Asset management and portfolio service fees increased 24% from the 1998
fourth quarter to a record $1.3 billion. Asset management fees were up
24% from fourth quarter 1998, as assets under management grew 8% during the
quarter to $557 billion at the end of 1999. Higher portfolio service fees
resulted from an increase in fee-based assets during the year, including those
related to Merrill Lynch Consults(R) and Unlimited Advantage(SM).
Other revenues were up 16% year-over-year to $296 million, reflecting
higher investment gains.
Net interest profit was $644 million, up sharply from the 1998 fourth
quarter, primarily as a result of changes in asset composition, higher margin
lending, higher dividends and efficiencies in financing activities.
Expenses
Non-interest expenses, excluding compensation costs, were 30.4% of net
revenues for the full year, down from 33.2% in 1998 (excluding the special
provision).
Compensation and benefits, the largest expense category, rose $698 million
from the 1998 fourth quarter, or 31%, to $2.9 billion as increased
profitability led to significantly higher incentive compensation. Increased
headcount and employee benefit costs also contributed to the increase.
Compensation and benefits as a percentage of net revenues was 49.5% for the
1999 fourth quarter and 51.0% for the full year, compared with 54.3% for the
1998 fourth quarter and 52.4% for 1998.
Communications and technology expense was $541 million, up 24% from the
1998 fourth quarter, as a result of higher technology-related depreciation and
increased communication maintenance costs, partially due to the new online
initiatives. Occupancy and related depreciation rose 14% to $252 million
principally due to higher rent expense resulting, in part, from increased
business activity.
Advertising and market development expense increased $129 million, to
$236 million, partially due to higher advertising costs related to the launch
of a new ad campaign in the fourth quarter. Expenses in this category were
lower than usual in the 1998 fourth quarter because of cost containment.
Brokerage, clearing, and exchange fees increased 6% to $184 million due in
part to volume-driven increases in exchange and clearing fees. Professional
fees were $163 million, up $70 million from the 1998 fourth quarter, due in
part to higher consulting and employment service fees.
Goodwill amortization was $57 million in the 1999 fourth quarter. Other
expenses were $386 million, up 55% from the 1998 fourth quarter, due in part
to increased expenses for office supplies and higher provisions related to
various matters.
The effective tax rate was 29.8% in the 1999 fourth quarter, and the
annual effective tax rate was 31.0%.
SOURCE Merrill Lynch & Co.
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