Merrill Lynch’s global private client business reported its first quarter 2005 results yesterday, which showed no pre-tax profit rise on a y...

Merrill Lynch’s global private client business reported its first quarter 2005 results yesterday, which showed no pre-tax profit rise on a year-on-year basis. Total assets in GPC accounts (Merrill does not break out assets under management) rose by 4 per cent year-on-year, to $1.4 trillion. Total net new money increased by $10.9 billion, the highest net inflows in 13 quarters, according to the bank. Fee-based revenues were strong in the first quarter, but transactional revenues were affected by weaker equity markets. The net new money figure is impressive, but the profitability of the group might be causing some concerns for James Gorman, president of Merrill’s GPC division. The US stock market looks to be losing its lustre, with the Dow Jones Industrial Index looking to be heading below the psychologically important 10,000 mark. This will place further pressure on transactional revenues and inevitably feed through to fee-based revenues as asset levels fall. Merrill will continue to be extremely competitive in the race to gather assets, as the first quarter results show, but net new money flows cannot continue to grow with a falling stock market.