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Broker earnings boom
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April 13, 1998: 11:15 a.m. ET
Merrill Lynch, DLJ surprise an already-gaping financial service sector
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NEW YORK (CNNfn) - A buoyant stock market and overseas growth helped two of the nation's big investment houses on Monday post better-than-expected quarterly profit, adding to an already-boiling pot in the financial services sector.
New York-based Merrill Lynch & Co., the nation's largest investment bank, said first quarter 1998 earnings rose to a record $518 million, or $1.30 a diluted share, up from $467 million, or $1.17 a share, in the same period a year ago.
Analysts had been expecting Merrill to post earnings of $1.14 share. Merrill shares (MER) rose 2-11/16 to 975/8 in early trading Monday.
"These record earnings reflect the robust growth of our businesses around the globe and the continuing strength in the financial markets," said Chairman and Chief Executive Officer David Komansky and President and Chief Operating Officer Herbert Allison, Jr. in a statement Monday.
"They result from the successful execution of our strategy to build the Merrill Lynch brand worldwide," they said.
Revenues for the 1998 first quarter were $9.1 billion compared with $7.5 billion in the same quarter a year earlier.
Revenues from investment banking operations at Merrill rose to $801 million, up nearly one-third from the $608 million in the first quarter a year ago. And its asset management fees hit a record $970 million, up 50 percent from $646 million a year ago.
Meanwhile, New York-based Donaldson, Lufkin & Jenrette Inc. posted record earnings of $134.2 million, or $2.00 a diluted share, in the first quarter 1998, up 55 percent from $86.4 million, or $1.37 a share, reported for the same period last year.
Analysts had been expecting $1.49 per share. As a result, DLJ shares (DLJ) climbed 4-1/8 to 98 on Monday.
"All of the firm's businesses contributed to these record results, with particularly outstanding performances by our investment banking groups in the United States and abroad," said Joe Roby, DLJ's president and chief executive officer, and John Chalsty, its chairman, in a joint statement.
Underwriting revenues rose 84 percent to $320.8 million, and fee income and climbed by 75 percent to $255.4 million. Both were new records, DLJ said.
"These results reflect both the tremendous momentum DLJ has achieved in the United States and the correctness of our decision to build our Pan-European investment banking and capital markets franchises aggressively," said Roby and Chalsty.
"DLJ once again moved nimbly to take advantage of consolidation and disruption in our industry in the United States and abroad," they added.
DLJ also said it underwrote the first high-yield offering denominated in the new euro currency and the largest-ever offerings in British sterling and German Deutsche marks.
The quarterly reports came amid several big merger deals in the past week. BankAmerica Corp and NationsBank Corp. agreed to a $60 billion merger on Monday that will lead to the creation of the nation's first coast-to-coast bank.
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