US brokerage Merrill Lynch posted a 17 per cent rise in quarterly earnings - including an expected $100 million payment to settle an investigation into its stock research.
In May, the New York-based firm agreed to pay $100 million to settle charges that it misled investors by issuing overly bullish and biased research. It cut 1,800 jobs, or 3 per cent of its staff, during the quarter and chopped total non-interest expenses 15 per cent from a year ago.
Merrill, which has $1.2 trillion in private client assets, posted second-quarter earnings of $634 million, or 66 cents a share, including the $100 million charge. That compares with a profit of $541 million, or 56 cents a share, in last year's second quarter.
Total net revenue fell 11 per cent, to $4.95 billion, as underwriting revenue fell 25 percent and advisory revenue fell 38 percent. Weak stock markets meant companies were less likely to sell shares or pull the trigger on mergers, activities that carry fat investment banking fees.
Merrill's shares took a beating during the second quarter as New York State Attorney General Mr Eliot Spitzer's investigation into its research department dragged the stock down nearly 27 per cent.
Trading revenue fell 18 per cent, to $728 million while commissions revenue dropped nearly 12 per cent, as customers traded less amid the bear market.
Mr Spitzer's 10-month inquiry uncovered e-mails in which the firm's Internet analysts bad-mouthed stocks they touted in public reports. Merrill did not book the payment as a charge, as some analysts had predicted.