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Merrill Lynch enjoys strong Q2 in private client and MLIM ventures

In the second quarter of 2006, Merrill Lynch's global private client (GPC) business achieved record pretax earnings and pretax profit margin, the Wall Street titan said. This came despite a market environment that became less favorable midway through the period.

GPC’s second-quarter 2006 net revenues were $3.0 billion, up 19% from the year-ago quarter. The increase was primarily driven by fee-based revenues, including record fees from annuitized-revenue products, record net interest profit, and higher transaction and origination revenues. GPC’s second-quarter pretax earnings of $701 million increased 53% from the year-ago quarter, as the pretax profit margin of 23.0% improved by more than five percentage points.

Turnover among financial advisors (FAs), particularly top-producing FAs, remained near historical lows. FA headcount reached 15,520 at quarter end, Merrill Lynch said.

Total client assets in GPC accounts increased 11% from the year-ago quarter, to approximately $1.5 trillion. Second-quarter net inflows of client assets into annuitized-revenue products were $10 billion, the bank’s statement said.

Merrill Lynch Investment Managers (MLIM) meanwhile continued its positive momentum during the second quarter of 2006, as strong relative investment performance drove solid net flows despite a market environment that became less favorable midway through the period. MLIM also remained focused on broadening distribution and maintaining operating discipline, while working toward completion of the pending merger with BlackRock.

MLIM’s second-quarter 2006 net revenues were $630 million, up 56% from the 2005 second quarter. The year over year increase in net revenues was driven principally by net inflows and higher long-term asset values. Pretax earnings were $240 million, nearly double those of the year-ago quarter, due to significantly higher net revenues and strong operating leverage, which was enhanced by net benefits related to the pending merger. MLIM’s pretax profit margin for the quarter was 38.1%.

Firm-wide assets under management totaled $589 billion at the end of the second quarter, up 23% from a year ago.