updated 10/12/2004 11:50:15 AM ET 2004-10-12T15:50:15

Earnings at Merrill Lynch & Co. Inc. slipped 8 percent in the third quarter from a year ago due to a slowdown in transactions prompted by an extremely slow summer on Wall Street, the brokerage giant said Tuesday.

For the three months ending Sept. 24, Merrill Lynch earned $920 million, or 93 cents per share, compared with earnings of $1 billion, or $1 per share, for the same period a year ago.

Revenues were down 3 percent to $4.8 billion from $5 billion the prior year.

Analysts surveyed by Thomson First Call had expected earnings of 92 cents per share on revenues of $4.9 billion.

Merrill Lynch executives said that the lower revenues and earnings were expected due to unusually light equity trading in the summer months, prompted by higher oil prices, interest rate concerns and geopolitical uncertainties.

“Like the rest of the industry, we experienced very challenging market conditions and revenue pressures in the quarter,” chairman and chief executive Stan O’Neal said in a statement. O’Neal credited changes in the company’s business model and cost structure, along with revenue diversification programs, with keeping earnings on track despite the difficult quarter.

Analysts agreed with the assessment, noting that the weak activity on Wall Street in the third quarter had also hurt other brokerage earnings.

“Although this quarter’s results are lackluster at best, we believe they are more symptomatic of an increasingly challenging macro environment rather than a Merrill Lynch-specific problem,” said Jim Hoeg, a research analyst with Goldman Sachs.

The company’s Global Markets and Investment Banking division, which handles the bulk of the company’s client transactions, saw a 9 percent drop in revenues and a 22 percent drop in earnings. Likewise, the brokerage’s private client business had steady revenues, but saw earnings slip 10 percent from a year ago due to fewer customer transactions.

Merrill Lynch’s asset management division was a lone bright spot, continuing to grow both revenues and earnings despite difficult market conditions in the third quarter. Net revenues for asset management increased 10 percent, and earnings climbed 59 percent from a year ago.

While portfolio service and asset management fee revenues rose 13 percent for the quarter, commission revenues were flat and principal transaction revenues plummeted 45 percent due to the record-light volume in equity markets this summer.

“With the late Labor Day holiday and our quarter ending Sept. 26, we had a little over three weeks of higher volume trading to help make up for the slower summer period,” said Ahmass Fakahany, Merrill Lynch’s chief financial officer. “And the market environment is still difficult. But despite near term softness in the markets, long-term growth prospects for Merrill Lynch remain intact.”

Even with difficult quarter, Merrill Lynch posted record earnings for the first nine months of 2004. For the year to date, the brokerage reported earnings of $3.3 billion, or $3.21 a share, up from $2.6 billion, or $2.68 a share, a year ago. Nine-month revenue for to $16.2 billion from $15.1 billion a year ago.

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