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GM Reports Loss; Merrill Profit Falls 77%

Brokerages: Wall Street firm will cut 3,400 jobs. DLJ, PaineWebber also see drops.

October 14, 1998|From Times Wire Services

NEW YORK — Merrill Lynch & Co., in a serious sign that Wall Street is cutting back after months of global economic turmoil, said it will eliminate 3,400 jobs, or 5.2% of its work force, as it reported a 77% drop in profit for the third quarter.

Donaldson, Lufkin & Jenrette Inc. and PaineWebber Group Inc. also reported lower earnings.

Merrill, the world's biggest brokerage, said it took an after-tax charge of $288 million for the period because of the job cuts. Excluding the charge, Merrill earned $124 million, or 28 cents a share, down from $502 million, or $1.24, a year ago. Analysts had expected 45 cents. Merrill's shares rose $1.06 to close at $44.94 on the New York Stock Exchange. Investors said the stock, down 59% in the last three months, is inexpensive.

Merrill said it expects the job cuts to save $500 million a year.

Revenue fell 7% to $3.8 billion at Merrill, and revenue from trading for its own account plunged 71%. Commissions jumped 9% and asset management fees grew 38%. Return on equity fell to 5% from 27.1%.

DLJ said its net income fell 79% to $25.7 million, or 15 cents a share, beating analysts' estimate of 13 cents. A 26% rise in commissions and 51% jump in fees, its biggest source of income, helped offset trading losses of $234 million. Overall revenue fell 30% and revenue from underwriting dropped 59%. Return on equity fell to 3.4% from 27.7%. DLJ leads in underwriting high-yield bonds, a market that suffered notably in August.

PaineWebber, whose largely U.S. business provided insulation from foreign markets, said profit fell 27% to $82.9 million, or 51 cents a share, 1 cent higher than estimates. Overall net revenue fell 4.7% to $1.03 billion. Trading revenue fell 47% and investment banking fell 6.8%. Commissions, its No. 1 income source, rose 6.1%, and revenue from asset management grew 30%. Return on equity fell to 14% from 24.3%.

DLJ shares rose 38 cents to close at $25.88, and PaineWebber fell $1.06 to $24.06, also on the NYSE.

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