Merrill Lynch Profit Dives 66.4% During 3rd Quarter

Wall Street giant Merrill Lynch & Co. reported a 66.4% slide in third-quarter earnings Thursday, attributing it to the post-crash stock slump and an extraordinary gain in the year-earlier period.

Merrill Lynch also announced a major accounting change in its employee retirement program that will free $220 million in excess pension funds that have accumulated over the past few years and return the money to the company.

Executives briefing reporters about the pension plan change said the 32,700 employees affected would continue to receive equivalent benefits under the new arrangement and would be able to participate in a stock ownership plan that takes effect next year.

Courtney Jones, chief financial officer, said the company would use the $220-million surplus for various purposes but did not elaborate. He said the change would be reflected in fourth-quarter earnings results but did not estimate them.

Third-quarter earnings totaled $65.6 million, down from $195.1 million in the same period a year earlier, the company said.

Drop in Demand

Revenue for quarter ended Sept. 30 rose to $2.79 billion, up 4.8% from a year earlier. But commission revenue tumbled 33.9%.

The results partly reflected a severe decline in investor demand for stocks in the aftermath of the October, 1987, market crash, which has devastated stock trading volumes and brokerage commissions of many Wall Street investment firms.

Merrill Lynch said in its earnings statement that the decline in third-quarter results also reflected an extraordinary $100.3-million after-tax gain in the comparable 1987 quarter, when the company sold a partnership interest in its Manhattan headquarters.

While the results were sharply lower, they were fairly consistent with the 60% average drop in third-quarter earnings that the securities industry has been experiencing.

Daniel P. Tully, Merrill Lynch president and chief operating officer, called the results “positive in an environment marked by an industrywide decline in activity, particularly among individual investors.”

9-Month Decline

Other Merrill Lynch officials said the company’s effort over the past several years to diversify into other areas, such as investment banking, bond trading and corporate takeover financing, had helped defray the impact of the stock market slump.