Brokerages Merrill Lynch & Co., PaineWebber Group Inc. and Jefferies Group Inc. on Tuesday reported record second-quarter earnings that exceeded expectations, driven by strong commission income and fat fees from advising corporations on mergers and takeovers.
The bumper profits, which follow a string of record earnings by investment banks, show Wall Street's money machine is humming. The profits kept coming even as fears of higher U.S. interest rates briefly dampened Americans' enthusiasm for stocks and caused some companies to shelve plans to sell bonds.
Merrill, the nation's largest broker, said its profit jumped 23% to $673 million, or $1.57 a share, in the period ended June 25, from $549 million, or $1.31 a year ago, beating the $1.46 a share forecast by First Call Corp. Net revenue increased 12% to $5.44 billion, a record. Commissions rose 8.8% and trading revenue was up 7.6%.
"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 U.S. interest rates," said Merrill Chief Executive David Komansky.
At PaineWebber, profit jumped 26% to a record $163.5 million, or $1.02 a share, exceeding analysts expectations of 94 cents a share.
Net revenue grew 16% to a record $1.35 billion. Commissions rose 22%. Revenue from asset management, PaineWebber's fastest-growing business, gained 23%.
Los Angeles-based Jefferies posted a 47% jump in profit from continuing operations to a record $14.8 million, or 61 cents a share, well above forecasts of 49 cents.
The results excluded contributions from Investment Technology Group Inc. which runs an electronic stock matching system. Jefferies spun off the unit in April.
Jefferies' brokers try to match big buy and sell orders for stock --by calling a network of institutional investors. Commissions from such services jumped 18% to $49.7 million. Revenue from making a market in stocks and bonds jumped 41% to $58.6 million.