Merrill’s US$564m fees top financial services arena

NEW YORK - Merrill Lynch, for the first time in at least three years, is leading Goldman Sachs, Citigroup and Morgan Stanley as the top investment bank to financial services firms, Wall St's biggest source of fees.

Merrill, the third-largest securities firm by market value, has earned as much as US$564 million ($772 million) so far this year arranging mergers and underwriting stock and bond sales for clients including Japan's UFJ Holdings and the Royal Bank of Scotland.

At the present rate, Merrill will more than double the revenue it collected from banks, insurers and money managers last year, when it ranked fourth among securities firms.

"The financial services industry has become a huge profit centre for investment banks," said Alan Fishman, chief executive officer of Independence Community Bank in Brooklyn that hired Merrill last year to help advise on its US$1.45 billion purchase of Staten Island Bancorp. "You're always talking to these guys about something."

Merrill's ascent occurred as short-term interest rates climbed in the US, fuelling demand for corporate advice on ways to refinance debt and make acquisitions to boost earnings. The Federal Reserve has tripled the overnight lending rate between banks to 3 per cent since June.

Financial services companies agreed to pay the 10 biggest investment banks more than US$3.2 billion in underwriting and advisory fees as of May 6, compared with about US$5.7 billion in all of 2004, according to disclosed fees and estimates based on regulatory filings.

More than US$170 billion of acquisitions have been agreed to so far this year, the busiest since 2000 when a record US$546 billion of financial-services deals were announced.

- BLOOMBERG