The profits of dollars 230.1m ( pounds 135m), up by 44 per cent from the same period last year, coincided with another record third-quarter performance from Paine Webber, where profits of dollars 51.7m showed a 35 per cent improvement. But Smith Barney, part of the Primerica Corporation financial services group, saw earnings slip by 7 per cent to dollars 33.4m.
Merrill benefited from its position as the largest underwriter of debt and equity in the US, raking in large underwriting fees as corporate America continued its stampede to issue debt and take advantage of the lowest interest rates in 30 years.
But Merrill's biggest gain came in principal transactions, where revenues rose by 26 per cent to a record dollars 610m. It was helped by heightened client activity in foreign exchange, swaps and other derivatives. Retail commission revenues were up by 8 per cent over the third quarter of last year, reflecting strong mutual fund and other investment product business.
Paine Webber, which has added 400 brokers over the past year to bring its total to more than 5,000, achieved its own record earnings with the help of strong results from retail broking services, trading activities and underwriting. During the quarter it managed or co-managed 35 corporate debt offerings, raising dollars 8bn.
Smith Barney failed to join in the bonanza because of a combination of lower trading results and higher expenses, the latter a result of opening new retail branches, establishing a Hong Kong office, and expanding the company's futures businesses in London. These factors helped offset a 21 per cent improvement in asset management fees, as well as 16 per cent higher revenues from investment banking.