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Merrill Lynch’s quarterly profit up 30 percent

Merrill Lynch & Co., the nation’s largest retail brokerage, on Tuesday said stronger investment banking results and fees from stock transactions boosted second-quarter profit by 30.2 percent from a year earlier.
/ Source: The Associated Press

Merrill Lynch & Co., the nation’s largest retail brokerage, on Tuesday said stronger investment banking results and fees from stock transactions boosted second-quarter profit by 30.2 percent from a year earlier.

Profit after paying preferred dividends rose to $2.07 billion, or $2.24 per share, from $1.59 billion, or $1.63 per share, in the year-ago period. Revenue rose 19 percent to $9.73 billion from $8.17 billion.

The results easily beat Wall Street projections for earnings of $2.02 per share on revenue of $9.25 billion, according to analysts polled by Thomson Financial.

Profit at the New York-based investment house was driven by robust investment banking fees, and sharp growth in its business overseas.

“We delivered another strong quarter in a volatile and, at times, hostile market environment,” Chairman and Chief Executive Stan O’Neal said in a statement. “These results reflect our revenue diversification, which makes possible strong performance despite uneven market conditions.”

The record pace of takeovers during the quarter helped push revenue from investment banking up 41 percent to $1.4 billion. This was a key component to the company’s global markets business, where revenue spiked 36 percent to $6.19 billion.

Revenue from fixed income, currencies and commodities surged 55 percent to $2.6 billion. The company said those results benefited from trading credit and interest rate products. However, there was a decline in net revenue from structured finance and investments business, which includes mortgage-related activities.

The investment bank, like others on Wall Street, has been hurt in the fallout from delinquencies and defaults in the subprime loan market. Investment banks package mortgage loans and sell them as investments.

During the quarter, Bear Stearns disclosed massive losses stemming from mortgage-backed securities in two hedge funds it managed. Merrill Lynch, which had about $850 million tied into one of the hedge funds, seized collateral and sold about $100 million of the assets in an auction.