Revenues from subprime mortgage-related activities comprise less than 1% of net revenues for the five quarters.

This is an asset class that will continue to be significant, both in the U.S. and worldwide. The strategic importance of the First Franklin acquisition was evident, as having both origination and servicing capabilities enabled to see trends emerge sooner and adjust underwriting standards and pricing more rapidly. Risk management capabilities are better than ever, and crucial to success in navigating turbulent markets.

The company manages FIC businesses in aggregate as a portfolio and that portfolio delivered record revenues. On a broader basis, most FIC markets experienced a continued favorable environment characterized by both high levels of client activity and opportunities for proprietary trading, enabling outstanding results as it continues to build out capabilities in areas that are poised for growth.

The company had a broad-based performance in rates business, including strength in derivatives and exotics.

- In credit, the company saw particular strength in trading distressed assets in emerging markets.
- In commercial real estate, the company saw solid gains on principal investments and in CMDS conduit business.
- The company had a strong trading performance in commodities, especially in the core gas and power areas, where it is a market leader both in Europe and the U.S.
- Regionally, the company set revenue records in both the Pac Rim and EMEA regions, complementing strong double-digit growth in the U.S.

Equity markets net revenues increased at $2.4 billion, up 35% from the fourth quarter and 50% from the year ago quarter.

Every major revenue category increased both sequentially and year on year, with the exception of private equity, which was down from the fourth quarter. In particular, the equity-linked trading business showed the strongest absolute and relative growth among the trading areas, setting a new quarterly record as client demand for derivatives products continues to accelerate.

In the cash trading business, growth was driven by improvements in electronic trading, demonstrating the impact of the investments the company has been making, combined with favorable market conditions. The strategic risk group, which is dedicated to proprietary trading, registered a record quarterly result for the second consecutive period as it continues to build out that unit.

Revenues from the financing and services business, which includes prime brokerage, were up as this business continues to gain momentum as evidenced by recent ranking as the number 2 prime broker in Europe by Global Custodian.

While down sequentially, revenues from private equity were still robust and up year on year, as publicly traded investments continue to perform well.

From a regional perspective, EMEA was a clear standout.

The company believes EMEA now represents the largest and fastest-growing market within equities and it is well-positioned with EMEA contributing nearly a third of global equity markets revenue. Across global markets businesses, capabilities have never been stronger and the company is in a better position than ever to drive growth and manage risk across global franchise.

Investment banking generated net revenues of $1.4 billion, up 4% from the fourth quarter and 47% year on year.

This quarter’s revenues were particularly strong in merger and acquisition advisory and leveraged finance, two core areas of focus and were achieved despite the typical seasonal slowdown in broader market volumes. Regionally, EMEA stood out in terms of growth, also setting a quarterly record for investment banking revenues.

M&A advisory revenues were $399 million, up 55% year on year and 40% sequentially.

- Merrill Lynch was number 2 in global completed M&A volume and debt origination revenue set a new record up 38% from the prior year period and 9% from the previous record set in the fourth quarter of 2006.
- Strength in this category was driven by leveraged finance where the company set a new revenue record as it ended the quarter number 2 in the global high yield lead tables.
- Equity origination was up 53% from the year-ago period, but down 24% from the particularly strong fourth quarter as activity levels moderated around the globe.

The company advised Freeport McMoRan on the transaction, arranged $17.5 billion in debt financing, which included the largest high yield note transaction ever at $6 billion, and led $5.8 billion in equity and equity linked financing, setting a record for an already public U.S. company.

Beyond these strong results, investment bankers are increasing adding value to other areas of the firm, sourcing revenues in the derivatives, commodities and principal investments and introducing clients to private wealth advisors. These non-traditional sources of revenue will continue to be area of focus as the company works to maximize the revenue potential from the high quality relationships investment bankers have with their clients.

The environment for investment banking remains constructive, particularly for large multi-product transactions. Even after this strong first quarter, pipeline closed the quarter at a new period-end record. The sequential increase in the pipeline was driven primarily by debt and equity origination, the year-on-year increase was broader across all three product areas and all three primary regions.

GWM comprises Global Private Client and global investment management businesses.