NEW YORK, Oct. 12 /PRNewswire/ -- Merrill Lynch & Co., Inc. today reported
quarterly earnings of $572 million, its highest third quarter ever, up
$447 million from the 1998 third quarter -- excluding the $288 million
after-tax ($430 million pre-tax) special provision in the year-ago quarter for
costs related to staff reductions. Basic and diluted earnings per common
share were $1.52 and $1.34, respectively, versus $0.32 and $0.28 in the 1998
third quarter, excluding the special provision.
Annualized return on average common equity was approximately 20.2% for the
1999 third quarter, compared with 4.8% in the 1998 third quarter (excluding
the special provision) and 25.4% in the 1999 second quarter.
On a cash basis, which excludes goodwill amortization, net earnings for
the 1999 third quarter were $629 million. On the same basis, diluted earnings
per common share were $1.48 and return on average common equity was
approximately 21.3%.
Net earnings for the first nine months were a record $1.9 billion,
56% above the corresponding 1998 period, excluding the special provision. On
a comparable basis, nine-month 1999 earnings per common share were $4.97 basic
and $4.36 diluted, versus $3.27 basic and $2.85 diluted in the corresponding
1998 period. Annualized return on average common equity was approximately
23.3%.
Cash basis net earnings for the first nine months of 1999 were
$2.0 billion. On the same basis, diluted earnings per common share were
$4.77 and return on average common equity was approximately 24.4%.
"We achieved another strong quarter, as we continue to benefit from the
global strength and diversity of our businesses," said David H. Komansky,
Chairman and CEO. "Investment banking revenues and asset management and
portfolio service fees set records, and our Global Debt and Equity businesses
posted solid trading results despite a more difficult environment. Our
technology initiatives for retail and institutional clients are progressing
well, with Unlimited Advantage(SM), our new fee-based service for individual
investors, exceeding expectations."
Recent highlights include:
-- The Global Equity business continued its strong performance with record
revenues for the first nine months of 1999. Merrill Lynch was also
ranked first in worldwide initial public offerings for the third
quarter of 1999.
-- Investment banking revenues were a record in the 1999 third quarter led
by strong merger and acquisition activity. Additionally, in one
four-day period in July, Merrill Lynch's Europe, Middle East and Africa
equity capital markets group completed $13 billion worth of initial
public offerings.
-- Merrill Lynch maintained its position as the leading underwriter of
total debt and equity securities, with US and global third quarter
market shares of 17.1% and 13.7%, respectively, according to Thomson
Financial Securities Data.
-- The company's Global Securities Research and Economics Group continued
to garner top international awards, including Best Firm for Research,
All Categories from Euromoney, and first place in the Institutional
Investor All-America Fixed-Income Research Team survey.
-- Unlimited Advantage(SM), Merrill Lynch's new fee-based financial
service has been positively received and, since the June 1st
announcement date, has added nearly 100,000 new accounts and total
assets of more than $16 billion, approximately 20% of which is new
money. In addition, the firm's US Financial Consultant salesforce grew
by more than 200 during the quarter for a total of 14,100.
-- Client assets were $1.5 trillion at the end of the 1999 third quarter,
up 15 % or $195 billion from the end of the 1998 third quarter.
-- Merrill Lynch Japan Securities continued to build its private client
base during the quarter with client assets reaching nearly $8 billion,
up approximately 40%.
-- The Asset Management Group broadened its product offerings by
establishing Merrill Lynch Quantitative Advisors, which will use
state-of-the-art technology to create investment strategies now used by
the world's largest investors for all of our clients. The third
quarter also saw Merrill Lynch become the first US asset manager to
offer US-registered mutual funds in Australia.
-- Merrill Lynch further expanded its investment in electronic
communications networks by purchasing equity stakes in Archipelago and
Tradepoint, both of which are expected to provide retail and
institutional customers enhanced access to trading markets.
3rd Quarter Revenues
Net revenues rose 37% from the 1998 third quarter to $5.3 billion as
principal transactions revenues and net interest were sharply higher and
investment banking revenues and asset management and portfolio service fees
reached record levels.
Commissions revenues were down 1% from the 1998 third quarter to
$1.4 billion.
Principal transactions revenues were $1.1 billion, up $780 million from
the 1998 third quarter, when global market conditions negatively impacted debt
trading revenues. Equity trading revenues increased from the 1998 third
quarter as higher revenues from equity derivatives and US equities more than
offset a decline in non-US equity trading activity. Principal transactions
revenues were virtually unchanged from the 1999 second quarter.
Investment banking revenues increased 33% from the 1998 third quarter to
$948 million, led by higher underwriting revenues and record strategic
services fees. Both equity and debt underwriting revenues were up compared
with the year ago period, benefiting from improved market share and more
favorable market conditions. Strategic services revenues increased
significantly from both the 1998 third quarter and 1999 second quarter due to
higher levels of merger and acquisition activity, particularly in Europe.
Asset management and portfolio service fees rose 13% from the 1998 third
quarter to a record $1.2 billion. Higher portfolio service fees resulted in
part from an increase in the number of fee-based accounts during the quarter,
including those related to Merrill Lynch Consults(R) and Unlimited
Advantage(SM), Merrill Lynch's new fee-based financial service. Total assets
in fee-based accounts totaled $117 billion at quarter end. Asset management
fees were also up 9%, as assets under management grew 10% to $514 billion at
the end of the third quarter from $467 billion a year ago.
Other revenues declined 23% to $117 million, due in part to lower net
realized investment gains and the 1998 third quarter gain on the sale of a
residential real estate subsidiary.
Net interest profit was $521 million, up sharply from the 1998 third
quarter, primarily as a result of lower funding costs, changes in asset
composition, and a steepening yield curve.
3rd Quarter Expenses
Non-interest expenses, excluding compensation costs, were up 1% from the
1998 third quarter (excluding the special provision) and were down 3% from the
1999 second quarter.
Compensation and benefits, the largest expense category, rose $737 million
from the 1998 third quarter, or 37%, to $2.7 billion as increased
profitability led to significantly higher incentive compensation. Increased
headcount also contributed to the increase. Compensation and benefits as a
percentage of net revenues was 52.1% for the 1999 third quarter and 51.6% for
the 1999 nine months, in line with the ratios for each of the last three
years.
Communications and technology costs and occupancy and related depreciation
expense were $481 million and $230 million, respectively -- both virtually
unchanged from a year ago.
Advertising and market development expense was $190 million, down 6% from
the 1998 third quarter, principally due to reductions in sales promotion and
global travel and entertainment expenses. Brokerage, clearing, and exchange
fees decreased 9% to $170 million due in part to lower global trading volume.
Professional fees were $144 million, down 13% from the 1998 third quarter.
Goodwill amortization was $57 million in the 1999 third quarter. Other
expenses were $359 million, up 23% from a year ago, due in part to higher
provisions related to various business matters.
For the third quarter of 1999, the effective tax rate was 30.4%,
comparable to the 30.0% in the second quarter of 1999. The year-to-date
effective tax rate was 31.5%.
Merrill Lynch & Co., Inc.
Preliminary Unaudited Earnings Summary
For Three Months Ended %Inc/(Dec)(1)
(in millions, Sept. 24 June 25 Sept. 25 3Q99 vs.
except per share amounts) 1999 1999 1998 2Q99 3Q98
Net Revenues
Commissions $1,440 $1,592 $1,449 (9.6)% (0.7)%
Principal transactions 1,059 1,064 279 (0.5) 279.6
Investment banking 948 908 711 4.4 33.3
Asset management and
portfolio service fees 1,183 1,159 1,043 2.1 13.5
Other 117 175 151 (33.4) (22.7)
Subtotal 4,747 4,898 3,633 (3.1) 30.7
Interest and dividends 3,665 3,732 4,712 (1.8) (22.2)
Interest expense 3,144 3,190 4,496 (1.5) (30.1)
Net interest profit 521 542 216 (3.8) 141.3
Total Net Revenues 5,268 5,440 3,849 (3.2) 36.9
Non-Interest Expenses
Compensation and benefits 2,746 2,729 2,009 0.6 36.7
Comm. and technology 481 536 487 (10.3) (1.3)
Occupancy and related
depreciation 230 232 227 (0.9) 1.3
Advert. and market dev. 190 201 203 (5.6) (6.4)
Brok., clrg., exch. fees 170 170 186 (0.3) (8.9)
Professional fees 144 143 165 -- (12.9)
Goodwill amortization 57 56 55 2.1 3.6
Provision for costs
related to staff reductions -- -- 430 -- N/M
Other 359 342 292 5.0 23.0
Total Non-Int. Expenses 4,377 4,409 4,054 (0.8) 7.9
Earnings (Loss) Before
Income Taxes and Div.
on Pref. Sec. Issued
by Subsidiaries 891 1,031 (205) (13.5) N/M
Income tax expense(benefit) 271 310 (75) (12.6) N/M
Dividends on pref. sec.
issued by subsidiaries 48 48 33 0.9 48.6
Net Earnings(Loss) $ 572 $ 673 $ (163) (15.0) N/M
Preferred stock dividends $ 10 $ 9 $ 10 -- --
Net Earnings (Loss) Applicable
to Common Stockholders $ 562 $ 664 $ (173) (15.2) N/M
Earnings (Loss) per
Common Share
Basic $ 1.52 $ 1.80 $(0.48) (15.6) N/M
Diluted 1.34 1.57 (0.48) (14.6) N/M
Average Shares
Basic 370.3 368.3 357.6 0.6 3.6
Diluted 419.1 421.3 357.6 (0.5) 17.2
Cash Basis (2)
Net Earnings (Loss) $ 629 $ 729 $ (108) (13.7) N/M
Earnings (Loss) per
Common Share - Basic 1.67 1.95 (0.33) (14.4) N/M
Earnings (Loss) per
Common Share - Diluted 1.48 1.71 (0.33) (13.5) N/M
(1) Percentages are based on actual numbers before rounding.
(2) Cash basis excludes goodwill amortization.
Note: Certain prior period amounts have been restated to conform
to the current period presentation.
N/M Not meaningful.
Merrill Lynch & Co., Inc.
Preliminary Unaudited Earnings Summary
For Nine Months Ended
(in millions, Sept. 24 Sept. 25 %
except per share amounts) 1999 1998 Inc/(Dec)(1)
Net Revenues
Commissions $ 4,599 $ 4,375 5.1%
Principal transactions 3,568 2,439 46.3
Investment banking 2,489 2,440 2.0
Asset management and
portfolio service fees 3,452 3,156 9.3
Other 424 368 15.4
Subtotal 14,532 12,778 13.7
Interest and dividends 11,077 13,951 (20.6)
Interest expense 9,635 13,263 (27.4)
Net interest profit 1,442 688 109.7
Total Net Revenues 15,974 13,466 18.6
Non-Interest Expenses
Compensation and benefits 8,237 6,980 18.0
Comm. and technology 1,497 1,311 14.2
Occupancy and related
depreciation 689 645 6.7
Advert. and market dev. 543 580 (6.3)
Brok., clrg., exch. fees 494 509 (3.0)
Professional fees 404 459 (12.0)
Goodwill amortization 170 166 2.5
Provision for costs
related to staff reductions -- 430 N/M
Other 1,022 809 26.4
Total Non-Int. Expenses 13,056 11,889 9.8
Earnings Before
Income Taxes and Div.
on Pref. Sec. Issued
by Subsidiaries 2,918 1,577 85.0
Income tax expense 918 595 54.4
Dividends on pref. sec.
issued by subsidiaries 146 82 76.7
Net Earnings $ 1,854 $ 900 106.0
Preferred stock dividends $ 29 $ 29 --
Net Earnings Applicable
to Common Stockholders $ 1,825 $ 871 109.4
Earnings per
Common Share
Basic $ 4.97 $ 2.46 102.0
Diluted 4.36 2.14 103.7
Average Shares
Basic 367.6 354.1 3.8
Diluted 418.7 406.7 2.9
Cash Basis (2)
Net Earnings $ 2,024 $ 1,066 89.8
Earnings per
Common Share - Basic 5.43 2.93 85.3
Earnings per
Common Share - Diluted 4.77 2.55 87.1
(1) Percentages are based on actual numbers before rounding.
(2) Cash basis excludes goodwill amortization.
Note: Certain prior period amounts have been restated to
conform to the current period presentation.
N/M Not meaningful.
SOURCE Merrill Lynch & Co., Inc.
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CONTACT:
Media Relations: Richard T. Silverman,
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William L. Hartman, 212-449-8818, whartman@exchange.ml.com, both
of Merrill Lynch
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