(Janurary 24) – “The largest brokerage firm In the United States seems to be weathering the recent market storm better than some rivals,” writes Charles Gasparino in today’s Wall Street Journal.

“Merrill Lynch & Co. said earnings for the fourth quarter rose 11% despite a wobbly stock market that has hampered other big Wall Street players. Merrill, with nearly 15,000 brokers in the U.S., recorded net income of $877 million, up from $793 million in the year-earlier quarter.”

“Earnings per diluted share of 93 cents easily exceeded analysts’ consensus of 88 cents a share, as compiled by First Call/ Thomson Financial. In the 1999 period, per-share earnings were 91 cents. The solid earnings report lifted Merrill shares by $4.88, to $80 in 4 p.m. composite trading on the New York Stock Exchange, a record. Other brokerage-firm shares surged on the news.”

” ‘We made great strides toward many of our strategic and financial goals,’ said Merrill Chief Executive Officer David Komansky. ‘The strength of our fourth-quarter performance, in the midst of challenging markets, underscores the breadth of our global franchise.’ “

“The prospects of many big Wall Street firms have dimmed considerably in recent months as the stock market has stumbled and lucrative businesses, such as high-yield bonds and telecommunication financings, have slowed. Late last year, one of Merrill’s biggest rivals, Morgan Stanley Dean Witter & Co., announced that earnings for the third and fourth quarter were down by a total of about $90 million because of soured junk-bond deals it holds on the books. Other firms also felt the pinch of falling revenues.”

“Merrill, certainly, also has felt pressure because of the falling stock market: During the fourth quarter, commissions from its brokerage sales force, which buys and sells stocks for small investors, fell 11.3% from the year earlier. Merrill has made up for the declines in other ways, such as an increase in trading revenue and a firmwide effort to cut costs, which has begun yielding results.”

“In May, for instance, Mr. Komansky announced a plan to boost pretax profit margins to 24% by the end of 2003 from about 19% at the time. Tuesday, analysts said that Merrill’s recent string of cost cuts — ranging from selected layoffs of analysts and other personnel to the shedding of certain “noncore” businesses such as a chunk of its mortgage unit — helped the company raise its pretax margins to 21.3% by the end of 2000.”