|
Merrill, Schwab top marks
|
 |
April 17, 2000: 2:50 p.m. ET
Both post records on strong trading volume during first quarter's bull market
|
NEW YORK (CNNfn) - Two major brokerage firms - Merrill Lynch & Co. and Charles Schwab Corp. - both reported record earnings for the first quarter that topped forecasts. But after last week's stunning stock market decline, they may find it a tough performance to repeat, analysts said.
Merrill Lynch, one of the nation's leading full-service brokers, posted net income of $1 billion, or $2.38 a diluted share, up 70 percent from the $609 million, or $1.44 a share It earned a year ago. Analysts surveyed by First Call had forecast $1.83 a share for the quarter. The company's previous record was the $764 million it earned in the fourth quarter of 1999.
Schwab, the nation's leading discount broker, also announced a strong quarterly performance, topping its own earnings guidance that it provided to analysts earlier this month. Excluding acquisition costs, Schwab earned $297 million, or 35 cents a share, above the First Call estimate of 32 cents a share, and the 26 cents it initially forecast. Schwab had initially expected to earn between 31 cents and 33 cents a share in the period.
Wall Street banks and brokerages involved in securities businesses profited during the latest quarter as investors flooded their trading desks with buy orders, and companies all over the world scrambled to strike merger deals and issue stock, boosting underwriting activity to near-record levels.
Is the party over?
Still, the most recent quarter may be the last for record earnings among the country's financial institutions, cautioned analysts. Rising interest rates and a decline in underwriting activity could lead to less at the bottom line, according Steve Eisman, a banking analyst with CIBC World Markets.
 "The underwriting cycle is rolling over right now, which probably means we'll see a second quarter that isn't as strong as the first," he said.
Merrill also said it raised its quarterly dividend to 30 cents a share, up 11 percent from the 27 cents it paid out previously.
Net revenue reached a record of $7.2 billion, up 38 percent from the year-earlier period, as the company hit highs in most categories, including commissions, principal transactions, asset management, portfolio service fees and net interest.
The best performer among its divisions was investment banking, where revenue rose 57 percent in the quarter to $996 million, as a result of an increase in equity underwriting. Revenue from commissions rose 37 percent to $2.2 billion, driven by higher global trading volume and mutual fund sales.
Schwab tops its guidance range
Including acquisition charges, Schwab posted net income of $284 million, or 33 cents a share, up from $143 million, or 17 cents a share, a year earlier. Revenue rose to $1.6 billion from $951.6 million a year earlier.
 Schwab was helped by strong investor interest in U.S. stocks during much of the first quarter. Customers brought $44 billion in net new assets to Schwab during the quarter and opened 494,000 new accounts, both new records for the company.
But Schwab, along with its Wall Street brethren, may find it difficult to match their earnings performances in the second quarter in the wake of last week's sell-off that sheared 25 percent off the Nasdaq composite index in five days - an event that many analysts are suggesting will damp enthusiasm for merger and acquisition activity and spur companies to think twice about going public.
Schwab (SCH: Research, Estimates) shares slipped 1/2 to 40 in mid-afternoon trade after falling 17 percent Friday. Merrill Lynch (MER: Research, Estimates) stock fell 4-5/16, or almost 5 percent, to 85-11/16. That followed an 8.7 percent decline in its stock price Friday. 
|
|
|
|
|
|
Merrill Lynch
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
