Merrill Lynch & Co. said gains in revenues from investment banking and trading helped its fourth-quarter profits rise 11% from a year earlier, to $877 million, or 93 cents a share.
By contrast, Merrill competitors including Morgan Stanley Dean Witter & Co. and Charles Schwab Corp. reported profit declines for the period that they blamed on market volatility.
"Our investment banking pipeline is at a record level," Tom Patrick, Merrill's chief financial officer, told analysts on a conference call Tuesday.
Revenues from equity underwriting and advisory rose more than 30%, Mr. Patrick said. Though he attributed the gain largely to increased activity outside the United States, the company also pointed to notable domestic deals, including FleetBoston Financial Corp.'s $7 billion deal to buy Summit Bancorp of Princeton, N.J., an acquisition set to close in early March.
Elsewhere, Merrill said that its U.S. bank deposits rose to $55 billion by yearend. Diana P. Yates, an equity analyst with A.G. Edwards & Sons in St. Louis, said the company wants that figure to reach $70 billion soon. Thus far Merrill has moved money from its other existing accounts to the deposit accounts; the challenge will be attracting new money to these accounts, Ms. Yates said.
However, there were some not-so-bright spots in Merrill's report.
Increased revenues from equity trading and equity and debt origination were offset by a drop in debt trading, and Merrill's private client operations were hurt. "Revenues were adversely affected by reduced market volumes that were much more pronounced among individual clients than institutional investors," Mr. Patrick said.
However, private client assets at yearend were virtually unchanged, at $1.5 trillion, despite the declines in all the major equity markets.
Mr. Patrick also discussed the company's ongoing "resource allocation," which has resulted in divestitures and outsourcing agreements that are part of a plan favoring more profitable business lines.
Mr. Patrick told analysts to expect more of the same and sought to shoot down speculation that the moves are part of a broader cost-cutting.
Dean Eberling, an equity analyst with Keefe, Bruyette & Woods Inc. in New York, said that the fourth quarter was "a great quarter" for Merrill "given the volatility in the equity markets and the choppiness in the retail business," and that the company's figures "really reflect their diversity."