NEW YORK, July 13 /PRNewswire/ -- Merrill Lynch & Co., Inc. today reported
record quarterly net earnings of $673 million, 22% above the 1998 second
quarter and 11% above the previous record of $609 million in the 1999 first
quarter. Earnings per common share were $1.80 basic and $1.57 diluted,
compared with $1.52 basic and $1.31 diluted in the 1998 second quarter and
$1.65 basic and $1.44 diluted in the 1999 first quarter.
Annualized return on average common equity was approximately 25.4% for the
1999 second quarter, compared with 23.6% in the 1998 second quarter and
24.6% in the 1999 first quarter.
On a cash basis, which excludes goodwill amortization, diluted earnings
per common share were $1.71. Return on average common equity on this basis
was 26.4%.
For the 1999 first half, net earnings reached a record $1.3 billion, 21%
above the corresponding 1998 period. Six-month 1999 earnings per common share
were $3.45 basic and $3.02 diluted, versus $2.96 basic and $2.57 diluted in
the corresponding 1998 period. Annualized return on average common equity was
approximately 25.0%.
"These record results demonstrate the strength and global diversity of our
franchise, with all of our businesses -- Private Client, Asset Management,
Investment Banking and Debt and Equity Markets -- contributing strongly.
Performance in the second quarter was particularly impressive given the market
weakness during part of May and June resulting from uncertainty over the
direction of US interest rates. We are continuing to meet our objective of
delivering strong results for shareholders as we invest in the future growth
of our businesses," said Chairman and CEO David H. Komansky.
Recent highlights include:
-- Merrill Lynch announced dramatic initiatives it believes will set a new
standard for personal financial services in the Digital Age. These
programs include Unlimited AdvantageSM, a new one-fee, total access
account that couples professional advice with the convenience of
Internet trading, as well as other on-line trading options. The
company also announced Direct Markets, an electronic commerce
initiative for corporate and institutional clients.
-- The global Debt and Equity businesses continued to perform strongly,
with revenues at record levels for the first half of 1999. The global
Equity business also produced record revenues in the second quarter.
-- Investment Banking achieved record revenues in the second quarter of
1999 and the company maintained its position as the leading underwriter
of total combined debt and equity securities, with US and global second
quarter market shares of 13.9% and 11.6%, respectively, according to
Securities Data Co.
-- Merrill Lynch ranked #2 and #3, respectively, in US announced and
completed mergers and acquisitions with market shares of 34.5% and
20.4%, according to Securities Data Co. During the quarter, the
company also ranked #2 and #3, respectively, in global announced and
completed mergers and acquisitions, with market shares of 30.6% and
19.8%.
-- In the Private Client businesses, US net revenues were a record in the
1999 second quarter and first half, and US Financial Consultants grew
by 200 during the quarter to approximately 14,000. Momentum continued
to build in Japan, with client assets surpassing $5 billion at quarter-
end and net revenues doubling from the 1999 first quarter.
-- Client assets reached a record $1.5 trillion at the end of the 1999
second quarter, up $150 billion from the end of the 1998 second quarter
and $46 billion from the end of the 1999 first quarter.
-- The Asset Management Group achieved strong investment performance year-
to-date. Merrill Lynch Asset Management mutual funds containing over
80% of client assets outperformed their Lipper medians. For
institutional clients, Merrill Lynch Mercury significantly outperformed
its benchmarks according to the most recently available data.
-- Merrill Lynch's Global Securities Research and Economics Group
continued to rank at the top of key surveys, including Institutional
Investor's Latin America survey and the Wall Street Journal's annual
"all-star" analyst review.
2nd Quarter Revenues
Net revenues reached a new high of $5.4 billion, with records in most
categories, including commissions, investment banking, asset management and
portfolio service fees, and net interest.
Commissions revenues were $1.6 billion, up 9% from the 1998 second
quarter, primarily due to increases in global listed securities volume
especially on non-US exchanges.
Principal transactions revenues rose 8% from the 1998 second quarter to
$1.1 billion, but were down 26% from the record 1999 first quarter. Debt
trading results benefited from improved market conditions particularly in Asia
compared with the year ago period, while equities and equity derivatives
revenues were down, primarily related to lower revenues from non-US trading
activities.
Investment banking revenues were $908 million, up 1% from the 1998 second
quarter and 44% from the 1999 first quarter on the strength of strategic
services fees. Strategic services revenues increased significantly from both
the 1998 second quarter and 1999 first quarter, benefiting from higher levels
of merger and acquisition activity. Equity underwriting revenues were sharply
higher versus the 1998 second quarter and nearly double 1999 first quarter
levels. However, underwriting fees in most debt categories declined compared
with the year ago period as the anticipated rise in US interest rates led to
an industrywide slowdown in new issues.
Asset management and portfolio service fees rose 7% from the 1998 second
quarter to a record $1.2 billion, as a result of continued growth in fee-based
products, including Merrill Lynch Consults(R) and Financial Advantage(SM).
Assets under management grew to $516 billion at the end of the second quarter
from $491 billion a year ago.
Other revenues increased 28% to $175 million, due in part to distributions
from partnerships.
Net interest profit was $542 million, up 91% from the 1998 second quarter,
primarily due to higher dividend revenues as well as a reduction in funding
costs.
2nd Quarter Expenses
Non-interest expenses were $4.4 billion in the 1999 second quarter, up
12% from the comparable 1998 period and 3% from the first quarter of 1999.
Higher communications and technology spending contributed to the increases in
both periods.
Compensation and benefits, the largest expense category, increased 10% to
$2.7 billion in the 1999 second quarter, due to higher incentive and
production-related compensation. Compensation and benefits expense as a
percentage of net revenues was 50.2% in the 1999 second quarter, below second
quarter 1998 and first quarter 1999 levels.
Communications and technology expense was $536 million, up 24% from the
1998 second quarter, principally as a result of increased systems consulting
costs, partly related to the Year 2000 initiative, and higher
technology-related depreciation. Occupancy and related depreciation rose
7% to $232 million due in part to global expansion.
Advertising and market development expense was $201 million, up 1% from
the 1998 second quarter as increased costs for advertising campaigns were
partially offset by a reduction in global travel and entertainment expenses.
Brokerage, clearing, and exchange fees rose 2% to $170 million due to higher
global trading volume.
Professional fees and goodwill amortization were $143 million and
$56 million, respectively, both virtually unchanged from a year ago.
Other expenses were $342 million, compared with $254 million in the year
ago quarter. This increase was due in part to higher provisions related to
various business matters.
The effective tax rate was 30.0% in the 1999 second quarter, compared with
37.1% in the corresponding 1998 period, benefiting from tax-advantaged
financing and higher tax-exempt and non-US income.
Merrill Lynch & Co., Inc.
Preliminary Unaudited Earnings Summary
For Three Months Ended % Inc/(Dec)(1)
June 25 Mar. 26 June 26 2Q99 vs. 2Q99 vs.
[in millions, 1999 1999 1998 1Q99 2Q98
except per
share amounts]
Net Revenues
Commissions $1,592 $1,567 $1,463 1.6% 8.8%
Principal
transactions 1,064 1,444 989 (26.3) 7.6
Investment
banking 908 633 898 43.5 1.1
Asset management and
portfolio service fees 1,159 1,110 1,084 4.4 6.8
Other 175 132 137 32.3 28.1
Subtotal 4,898 4,886 4,571 0.3 7.2
Interest and dividends 4,018 3,965 5,010 1.3 (19.8)
Interest expense 3,476 3,585 4,726 (3.0) (26.4)
Net interest profit 542 380 284 42.6 90.9
Total Net Revenues 5,440 5,266 4,855 3.3 12.0
Non-Interest Expenses
Compensation and
benefits 2,729 2,762 2,473 (1.2) 10.4
Comm. and technology 536 480 431 11.8 24.3
Occupancy and related
depreciation 232 227 217 2.4 7.0
Advert. and market dev. 201 152 200 32.1 0.5
Brok., clrg., exch. fees 170 154 167 10.6 2.0
Professional fees 143 117 143 22.2 0.5
Goodwill amortization 56 57 55 (1.3) 1.0
Other 342 321 254 6.5 34.5
Total Non-Int. Expenses 4,409 4,270 3,940 3.3 11.9
Earnings Before
Income Taxes and Div.
on Pref. Sec. Issued
by Subsidiaries 1,031 996 915 3.4 12.6
Income tax expense 310 338 339 (8.6) (8.8)
Dividends on pref. sec.
issued by subsidiaries 48 49 27 (1.7) 82.0
Net Earnings $673 $609 $549 10.5 22.5
Preferred stock dividends $ 9 $ 10 $ 9 -- --
Net Earnings Applicable
to Common Stockholders $664 $599 $540 10.7 22.9
Earnings per
Common Share
Basic $1.80 $1.65 $1.52 9.1 18.4
Diluted 1.57 1.44 1.31 9.0 19.8
Average Shares
Basic 368.3 364.0 355.3 1.2 3.7
Diluted 421.3 415.7 411.4 1.3 2.4
(1) Percentages are based on actual numbers before rounding.
Merrill Lynch & Co., Inc.
Preliminary Unaudited Earnings Summary
For Six Months Ended % Inc/(Dec)(1)
[in millions, June 25 June 26
except per share amounts] 1999 1998
Net Revenues
Commissions $ 3,159 $2,926 8.0%
Principal transactions 2,509 2,160 16.1
Investment banking 1,540 1,729 (10.9)
Asset management and
portfolio service fees 2,268 2,114 7.3
Other 308 217 42.1
Subtotal 9,784 9,146 7.0
Interest and dividends 7,983 9,824 (18.7)
Interest expense 7,061 9,352 (24.5)
Net interest profit 922 472 95.3
Total Net Revenues 10,706 9,618 11.3
Non-Interest Expenses
Compensation and benefits 5,490 4,971 10.4
Comm. and technology 1,016 823 23.4
Occupancy and related
depreciation 459 418 9.7
Advert. and market dev. 353 377 (6.3)
Brok., clrg., exch. fees 324 323 0.5
Professional fees 261 295 (11.5)
Goodwill amortization 113 111 1.9
Other 663 517 28.3
Total Non-Int. Expenses 8,679 7,835 10.8
Earnings Before
Income Taxes and Div.
on Pref. Sec. Issued
by Subsidiaries 2,027 1,783 13.7
Income tax expense 648 670 (3.2)
Dividends on pref. sec.
issued by subsidiaries 97 50 95.2
Net Earnings $ 1,282 $ 1,063 20.5
Preferred stock dividends $ 19 $ 19 --
Net Earnings Applicable
to Common Stockholders $ 1,263 $ 1,044 20.9
Earnings per
Common Share
Basic $3.45 $2.96 16.6
Diluted 3.02 2.57 17.5
Average Shares
Basic 366.2 352.4 3.9
Diluted 418.5 405.8 3.1
(1) Percentages are based on actual numbers before rounding.
SOURCE Merrill Lynch & Co., Inc.
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