(April 18 – 10:20 ET) – Merrill Lynch today reported lower first quarter net earnings, with its retail brokerage division taking the hardest hit and the non-U.S. retail brokers getting much of the blame.

Merrill’s first quarter earnings reached $874 million, 21% lower than the record $1.1 billion it reported in the first quarter of 2000 and essentially unchanged from the fourth quarter of last year. (All numbers in U.S. dollars.)

The pre-tax profit margin for the quarter was 21%, compared with 22.4% in the first quarter of 2000 and 20.9% in the fourth quarter of 2000. The annualized return on average common equity was approximately 18.4%.

“We achieved solid results in a difficult market environment,” said Merrill Lynch chairman and CEO David Komansky. “Our first-quarter performance underscores the value of our diverse business mix and fee-based revenues, and our success in containing expenses. We are cautious about the near-term outlook, and are accelerating our actions to reallocate resources. We are confident in our ability to manage effectively during weak markets and remain focused on our long-term strategic and financial objectives.”

Earnings were down 19% in Merrill’s institutional business, and down just 5% in asset management. Its retail business took the hardest hit. Retail earnings fell 27% to $355 million. Lower trading volumes pushed retail revenues down 20%. Merrill notes that the rise in fee-based business helped offset the impact of declining trading revenues. Cost cutting also helped the bottom line “As the weakening environment reinforced the value of advice and guidance provided by Merrill Lynch’s financial advisors, net new money flows remained strong during the quarter.”

Although Merrill doesn’t break out numbers for its Canadian brokers, it says, “A continuing trend of the past three quarters has been relatively strong performance in the United State offset by weaker results outside the U.S.” The retail group’s margin was just 13.1%, although it was 16.4% in the U.S.

“Compared with the year-ago quarter, Private Client revenues declined more sharply outside the U.S. due to a greater reduction in transaction volumes and significantly lower demand for new equity and mutual fund products. Additionally, the Private Client business outside the U.S. currently generates a lower proportion of recurring revenues than the U.S. business.”

Merrill Lynch’s worldwide sales force totals 19,400, down from 20,200 at year-end. A drop it attributes to normal attrition, slower hiring, and the consolidation or sale of selected offices.