Weak market conditions will result in second-quarter 2001 revenues lower than the first-quarter 2001, says Merrill Lynch, particularly in equity and debt trading. As a result, earnings for the second quarter are expected to be significantly lower than analysts’ current estimates.

Earnings per diluted share are expected to be between 52 cents and 57 cents, compared with earnings of 87 cents per diluted share in the first-quarter 2001 which excluded a five-cent gain on the sale of certain energy trading assets as previously disclosed.

Equity-trading revenues will be lower than the first-quarter 2001 due to reduced trading volumes, lower volatility and the impact of decimalization on trading spreads in the Nasdaq market, says the firm. The secondary equity and equity-derivatives businesses are significant components of the firm’s business mix and comprised 22% of total net revenues in 2000. In addition, equity-market conditions affect revenues across other businesses, including private client and investment management.

Debt-trading revenues will also be lower than the first-quarter 2001, which included the gain on the sale of certain energy-trading assets and reflected a particularly favorable interest-rate environment. Merrill Lynch does not derive significant revenues from trading
commodities or energy.

In investment banking, the firm has increased market share in equity and equity-linked origination and maintained a leading position in announced mergers and acquisitions. However, industry volume is substantially lower than last year’s record levels.

The U.S. private client business is making significant headway in operating results and margin improvement. The firm has continued to reduce expenses across all businesses.

“While we are disappointed with the quarter’s results to date, they are set against the backdrop of very difficult market conditions, particularly in our secondary equity business,” said David H. Komansky, chairman and chief executive officer. “Although the outlook for third-quarter revenues remains weak, we are making solid progress on resource allocation and expense-reduction initiatives. We continue to execute our margin-improvement plans.

“These actions will position us for increased profitability when market conditions improve. Given the demographic and other powerful drivers of growth in our industry and our strategic position, we remain confident that we can achieve our stated 2003 financial goals.”