Merrill Lynch & Co., PaineWebber Inc. and Donaldson, Lufkin & Jenrette surprised analysts with better-than-expected third-quarter earnings, benefiting from a rebound in securities markets and higher asset-management fees.
Merrill, the nation's largest brokerage, said its profit from operations more than quadrupled to $1.34 a share, beating the $1.29 forecast by nine analysts surveyed by First Call Corp.
PaineWebber's 86 cents a share beat the 83-cent estimate, and DLJ topped forecasts with 85 cents versus the 76-cent prediction.
All three posted gains in revenue from trading their own securities, recovering from last year when Russia's debt default sent investors fleeing all but the safest government bonds, leaving securities firms with losses on emerging-market and corporate debt.
Merrill and PaineWebber also posted gains in asset-management fees, gathering more funds to invest for clients in an effort to develop steadier income sources. DLJ got a boost from advising on more mergers and acquisitions.
Merrill said its profit from operations climbed to $572 million, or $1.34 a share, from $125 million, or 28 cents, a year ago. Trading revenue soared to $1.1 billion.
Net revenue, which includes interest income minus interest expense, rose 39% to $5.3 billion. Return on shareholders' equity, a key measure of profitability, was 20.2% versus 4.8% a year ago.
Revenue from asset management rose 13.5%. Investment banking revenue edged up 4.4% at Merrill, while commission revenue was unchanged.
PaineWebber said its profit rose 67% to $138.2 million, or 86 cents a share. Revenue net of interest expense rose 20% to $1.24 billion. Return on shareholders' equity rose to 19.2% from 14% a year ago.
Trading revenue rose 58% and revenue from asset management rose 28%. Investment banking revenue rose 12%, while commission revenue rose 9.7%.
Donaldson, Lufkin & Jenrette's earnings rose fourfold to $122.2 million, or 85 cents a share, from $25.7 million, or 15 cents, a year ago, as fees from underwriting and advising on mergers increased and trading rebounded from a loss.
Net revenue rose 91% to $1.3 billion. Return on equity was 14.3%, compared with 3.4% a year ago.
Revenue from underwriting securities more than doubled to $245.4 million.
Fees for advising on mergers and acquisitions rose 41%. Commission revenue rose 19% and merchant banking revenue rose 29%.
MORE EARNINGS: C7