Difficult stock and bond trading conditions tempered secondquarter earnings at Merrill Lynch but profits still rose 10 per cent to $1.1 billion (€89 million), the company said yesterday.
Second quarter net revenue at the group, which employs 400 people in Dublin and is expanding its presence here, was $5.3 billion, up slightly from a year earlier. Earnings per share were $1.06 compared with $1 last year. Analysts had been expecting earnings of $1.09 per share and Merrill's stock was down $1.72, or 3.3 per cent, at $49.75 in afternoon trading.
Rival State Street fared worse as higher costs also saw it miss Wall Street forecasts and it warned that market conditions in the second half of the year may be less favourable.
Company executives told analysts that rising interest rates will likely weigh on the company's bottom line. Investors quickly reacted to the news by sending the company's shares down 9 per cent to trade at $45.12 on the New York Stock Exchange.
The bank, which employs 800 people in the Irish Financial Services Centre, reported second-quarter earnings of $220 million, or 65 US cents a diluted share, on revenue of $1.29 billion. Analysts, on average, had expected earnings of 68 cents.
"It seems that while revenues look good, the cost structure was a little high," said Mr Richard Bove, analyst at Hoefer & Arnett.
In the year-earlier quarter the company reported a net loss of $23 million, or 7 cents a diluted share, amid charges to cover the costs of a buyout package. Revenue totalled $1.08 billion.
"Favourable market conditions in the first quarter continued into the second, helping us to achieve record operating revenue," State Street's new chief executive officer, Mr Ron Logue, told analysts. But he added: "market conditions may not be as favourable in the second half of the year".
Merrill's chairman and chief executive Mr Stan O'Neal, said: "We navigated well through a progressively more challenging business environment during the second quarter."
Mr O'Neal has made a big push to cut Merrill's costs and diversify its sources of profit. Over the past year his strategy has started to pay off. - (Reuters)
