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Merrill Lynch earnings rise 46% in '06

Gains from its private equity business, robust stock trading and underwriting fees help drive the record profit.

January 19, 2007|From the Associated Press

NEW YORK — Merrill Lynch & Co., the nation's largest retail brokerage, said Thursday that robust stock trading and gains from its private equity business catapulted 2006 profit to a record.

Fees from underwriting stock and bond offerings also helped lift the New York-based financial company's profit last year 46% to a staggering $7.5 billion.

In the fourth quarter alone, Merrill's earnings leapt 68% to $2.3 billion.

The company posted the second-highest profit on Wall Street last year -- trailing only Goldman Sachs Group Inc.

"By virtually any measure, our company completed the most successful year in its history," Chief Executive Stan O'Neal said.

Merrill stock hit a record high of $98.68 in intraday trading before falling back to close at $95.40, down $1.40. The stock soared nearly 38% last year and is up 2.5% this year.

The company said it would raise its quarterly cash dividend payment 40%, from 25 cents a share to 35 cents.

O'Neal, 55, has led Merrill through two straight years of profit growth since taking control from longtime CEO David Komansky in 2002.

When he took the job, O'Neal set to work reorganizing the company, first eliminating 20,000 jobs in a bid to cut costs and improve profit margins.

He then began acquiring companies in lines where Merrill had been lagging behind its rivals; about 17 deals later the firm has caught up in areas such as commodities and bond trading.

It used deals including last year's investment in money manager BlackRock Inc. to beef up high-growth businesses such as asset management.

The company also reaped huge fees from advising on leveraged buyouts in 2006, and put its own capital into the largest LBO in history: the $21-billion purchase of hospital provider HCA Inc. by two private equity firms.

In the fourth quarter Merrill booked gains from its investment in rental car company Hertz Global Holdings Inc., which went public in November.

"We had a great year in private equity, and there's more in the pipeline," said Chief Financial Officer Jeff Edwards during a conference call. "Clearly, this has become a focus and one that is very rewarding."

Merrill's fourth-quarter profit of $2.3 billion, or $2.41 a share, was up from $1.39 billion, or $1.41, a year earlier. Revenue rose 27% to $8.61 billion.

The results far surpassed Wall Street expectations for a profit of $1.92 a share on revenue of $7.73 billion.

For the full year, Merrill earned $7.5 billion, or $7.59 a share, up from $5.05 billion, or $5.16, in 2005. Revenue rose 33% to $34.7 billion.

The company said its global wealth management business accounted for about one-third of revenue last year. Merrill has almost 16,000 retail brokers.

Merrill was the last major Wall Street firm to report 2006 earnings. Goldman Sachs, Morgan Stanley Inc., Lehman Bros. Holdings Inc. and Bear Stearns Cos. in December all posted record results.

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