Merrill Lynch Drop in Profit Isn't All Bad --- Net Falls 37%, but Industry Strength Is Seen
NEW YORK -- As Wall Street tries to pick its way out of the rubble of last October's crash, first-quarter results are expected to prove surprisingly good for some major securities firms not heavily tied to the retail trade, Wall Street executives and analysts predict.</br></br>But an unusually strong 1987 first quarter and special charges at some firms will depress year-to-year comparisons.</br></br>Thus few Wall Street professionals were surprised yesterday when Merrill Lynch & Co., which has the industry's largest retail brokerage network, reported a 37% drop in first-quarter earnings, to $68.3 million, or 62 cents a share, largely because of a big drop in retail and institutional commissions. Merrill earned $108.6 million, or $1 a share, in the year-ago quarter. Revenue dropped 5% to $2.4 billion from $2.5 billion.</br></br>As other firms report first-period results in the next few weeks, a pattern is expected to emerge: a booming mergers and acquisitions business, strong arbitrage profits, a big bond market rally in January and February and some serious cost cutting should help many securities firms withstand the continuing slump in stock market volume.</br></br>Merrill Lynch was the first major firm to report first-quarter results. And while earnings were down, portions of its performance confirmed some generally positive trends. Merrill Lynch posted a 20% increase in trading profits for its own account, and the firm's compensation and benefit expenses were down 14% because of previously announced layoffs and other cutbacks. The stock market gave a slight nod of approval to the results.