NEW YORK, April 13 /PRNewswire/ -- Merrill Lynch & Co., Inc. (NYSE: MER)
today reported record quarterly net earnings of $609 million, up 18% and 70%
from the $514 million and $359 million reported in the 1998 first and fourth
quarters, respectively. These results also surpassed the previous quarterly
record of $549 million set in the 1998 second quarter.
Earnings per common share were $1.65 basic and $1.44 diluted, compared
with $1.44 basic and $1.26 diluted in the 1998 first quarter and $0.97 basic
and $0.86 diluted in the 1998 fourth quarter.
Annualized return on average common equity was approximately 24.6%,
compared with 24.0% in the year ago quarter and 14.8% in the 1998 fourth
quarter.
On a cash basis, which excludes goodwill amortization, diluted earnings
per common share were $1.58. Return on average common equity on this basis
was 25.8%.
"The first quarter's record performance is indicative of the power of our
franchise," said David H. Komansky, Chairman and Chief Executive Officer, and
Herbert M. Allison Jr., President and Chief Operating Officer. "By recording
new highs in commissions, both debt and equity trading revenues, as well as
asset management and portfolio service fees, we have demonstrated that we can
grow earnings while making important, strategic investments for future growth.
Our global business strategy is right on target, and is being carried out with
skill and foresight by Merrill Lynch people around the world, for the benefit
of our clients."
Messrs. Komansky and Allison also noted they were especially pleased with
the record quarterly results and market leadership of the Global Debt Markets
group, complementing the continued strength in the other core businesses.
Highlights of recent activity:
-- The global debt business had a record quarter, up sharply from the 1998
fourth quarter and up 14% over the 1998 first quarter.
-- The global equities business experienced another record quarter, up 15%
from both the first and fourth quarters of 1998. Global equity trading
continued its consistent rapid growth achieved since 1996, with
particular strength in non-U.S. trading.
-- U.S. Private Client revenues set a new record, increasing 10% from the
1998 first quarter.
-- Client Assets reached a record $1.5 trillion at the end of the 1999
first quarter, an increase of $122 billion from the end of the 1998
first quarter and $36 billion from year-end 1998.
-- Assets under management increased $25 billion and $14 billion from the
end of the 1998 first and fourth quarters, respectively, to a record
$515 billion at the end of the 1999 first quarter. Growth in this area
was derived from market appreciation and net new inflow of assets.
-- Mercury Asset Management continued to build momentum, with a record
quarter in new institutional mandates, over $1 billion in mutual fund
sales outside the U.S., and the introduction of two additional U.S.
mutual funds which raised over $810 million.
-- Merrill Lynch Japan Securities (MLJS) achieved results in line with its
1999 expectations. Client accounts and asset inflows increased each
month, reaching approximately 40,000 accounts and $4 billion in assets.
-- Merrill Lynch Canada continued the integration of its institutional
businesses, and its private client business performed strongly during
the quarter, with profitability up over a year ago.
-- In Europe, Merrill Lynch strengthened its competitive position by
helping clients accomplish a smooth transition to the new Euro currency
and by achieving leadership in research, ranking No. 1 in Institutional
Investor's 1999 All-Europe survey.
-- Merrill Lynch advanced its commitment to technology in the first
quarter by introducing on-line trading and by acquiring the financial
technology assets of D.E. Shaw Financial Technology, L.P. The firm
also announced a partnership with the Massachusetts Institute of
Technology to explore future financial applications of technology.
1st Quarter Revenues
Net revenues were a record $5.3 billion, up 11% from the 1998 first
quarter as commissions, principal transactions, asset management and portfolio
service fees, and net interest all reached quarterly highs.
Commissions revenues were a record $1.6 billion, up 7% from the 1998 first
quarter, benefiting from increases in global listed and over-the-counter
securities transactions.
Principal transactions revenues rose 23% from the 1998 first quarter and
over $1.2 billion from the weak 1998 fourth quarter to a record $1.4 billion
as both debt and equity trading revenues set records in the quarter. Debt
trading revenues benefited from improved results in both liquidity and credit
products and were up across the board from the 1998 fourth quarter as credit
spreads tightened, emerging markets stabilized, and general market conditions
improved. Equities and equity derivatives trading revenues rose sharply from
both the 1998 first and fourth quarters, primarily due to growth in global
equity derivatives and consistent strength in secondary trading, particularly
in the U.S. and Europe. Non-U.S. debt and equity trading revenues represented
69% of total principal transactions revenues.
Merrill Lynch remained the leading underwriter of total debt and equity
securities with U.S. and global market shares of 16.0% and 11.7%,
respectively, according to Securities Data Co. Industrywide equity issuance
volume was down from the 1998 first quarter, which contributed to a 24%
decline in investment banking revenues to $633 million for the 1999 first
quarter. Revenues from strategic service fees were down slightly from last
year's first quarter.
Asset management and portfolio service fees reached a record $1.1 billion,
up 8% from the 1998 first quarter, due in part to significant growth in fee-
based products, including Merrill Lynch Consults(R) and Financial
Advantage(SM). Assets under management rose 5% from the 1998 first quarter to
a record $515 billion because of higher asset values and net cash inflows.
Other revenues increased 66% to $132 million due in part to higher net
realized investment gains and income from partnership investments.
Net interest profit was $380 million, up 102% from the 1998 first quarter,
primarily due to changes in asset composition and a reduction in funding
costs.
1st Quarter Expenses
In terms of its cost base, the company has achieved its objectives in
repositioning resources consistent with market opportunities and strategic
investment for future growth. Non-interest expenses were up 10% from the 1998
first quarter to $4.3 billion, as higher compensation and benefits expense and
increases in technology costs more than offset cost savings in professional
fees and advertising and market development. Non-interest expenses were up
only 7% excluding the impact of MLJS.
Compensation and benefits, the largest expense category, was up 11% from
the 1998 first quarter to $2.8 billion, due to higher incentive and
production-related compensation and increased headcount. However, non-
producer salary expense was down slightly from the 1998 fourth quarter.
Compensation and benefits as a percentage of net revenues was 52.4% for the
1999 first quarter, compared with 52.5% in the 1998 first quarter. The
percentage of non-interest expenses, excluding compensation and benefits costs
and goodwill amortization, to net revenues was 27.6% in the 1999 first
quarter, the lowest in ten quarters.
Communications and technology expense was $480 million, up 22% from the
1998 first quarter because of increased systems consulting costs related in
part to the Year 2000 initiative and higher technology-related depreciation.
Occupancy and related depreciation advanced 13% to $227 million due to
continued global expansion. MLJS accounted for a significant portion of the
increase.
Advertising and market development expense was down 14% to $152 million as
a result of reductions in travel and entertainment and sales promotion costs.
Brokerage, clearing and exchange fees were $154 million, virtually
unchanged from a year ago. Professional fees decreased 23% to $117 million,
primarily due to reduced legal and consulting costs.
Goodwill amortization was $57 million. Other expenses increased 22% to
$321 million due in part to higher loss provisions related to various business
matters.
The effective tax rate was 34.0% in the 1999 first quarter, in line with
the full-year 1998 rate.
Merrill Lynch & Co., Inc.
Preliminary Unaudited Earnings Summary
For Three Months Ended % Inc/(Dec)
(In millions, Mar. 26 Dec. 25 Mar. 27 1Q99 vs.
except per share amounts) 1999 1998 1998 4Q98 1Q98
Revenues:
Commissions $ 1,567 $ 1,424 $ 1,463 10.0 7.1
Interest and dividends 3,965 4,411 4,814 (10.1) (17.6)
Principal transactions 1,444 211 1,171 583.6 23.3
Investment banking 633 824 831 (23.3) (23.9)
Asset management and
portfolio service fees 1,110 1,046 1,029 6.1 7.8
Other 132 256 80 (48.2) 65.9
Total Revenues 8,851 8,172 9,388 8.3 (5.7)
Interest expense 3,585 4,091 4,626 (12.4) (22.5)
Net Revenues 5,266 4,081 4,762 29.0 10.6
Non-Interest Expenses:
Compensation and benefits 2,762 2,218 2,499 24.5 10.5
Comm. and technology 480 438 392 9.5 22.5
Occupancy and related
depreciation 227 222 201 2.1 12.5
Advert. and market dev. 152 107 177 42.2 (14.0)
Brok., clrg., exch. fees 154 174 156 (11.6) (1.2)
Professional fees 117 93 152 26.8 (22.7)
Goodwill amortization 57 61 55 (6.2) 2.9
Other 321 249 263 29.0 22.3
Total Non-Int. Expenses 4,270 3,562 3,895 19.9 9.6
Earnings Before
Income Taxes and Div.
on Pref. Sec. Issued
by Subsidiaries 996 519 867 91.9 14.8
Income tax expense 338 119 330 185.5 2.5
Dividends on pref. sec.
issued by subsidiaries 49 41 23 17.4 110.1
Net Earnings $ 609 $ 359 $ 514 69.7 18.4
Preferred stock dividends $ 10 $ 10 $ 10 -- --
Net Earnings Applicable
to Common Stockholders $ 599 $ 349 $ 504 71.6 18.8
Earnings per
Common Share:
Basic $1.65 $0.97 $1.44 70.1 14.6
Diluted $1.44 $0.86 $1.26 67.4 14.3
Average Shares:
Basic 364.0 359.9 349.5 1.2 4.2
Diluted 415.7 404.9 400.2 2.7 3.9
Note: Percentages are based on actual numbers before rounding.
SOURCE Merrill Lynch & Co., Inc.
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CONTACT:
Media Relations - Richard T. Silverman,
212-449-9205, or Investor Relations - William L. Hartman,
212-449-8818, both of Merrill Lynch & Co., Inc.
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