- The Equity Markets net revenues dipped 21% from the prior-year quarter to $1.9 billion, as increases from most client-related businesses were more than offset by declines from the principal related businesses.
- The net revenues for financing and services and cash equity trading increased year-over-year while equity-linked trading was down from its strong performance in the Q1 of 2007.
- The private equity business recorded negative net revenues of $207 million, a decrease of about $650 million from the prior-year quarter, and net revenues from the Strategic Risk Group and hedge fund investments declined about $450 million year-over-year.

- The Investment Banking net revenues were $805 million, a decrease of 40% from the strong performance in the 2007 first quarter. This was a reflection of lower net revenues in debt and equity origination, as deal volumes for leveraged finance and IPOs markedly dipped during the quarter versus the high activity levels in the last year quarter.
- Despite revenues in strategic advisory also declining slightly from the year-ago quarter, the business showed strength, outperforming the decline in industry transaction volumes from the year-ago quarter.

- The Global Wealth Management (GWM) posted record first quarter net revenues, due to continued positive momentum in Global Private Client (GPC) and Global Investment Management (GIM).
- GWM’s first quarter 2008 net revenues were a record at $3.6 billion, an increase of 8% from the same period last year.
- GWM’s pre-tax earnings of $720 million decreased 8% year-over-year as the firm fully reserved for an $80 million client receivable.
- The pre-tax margin profit margin was 20% down from 23.5% in the prior-year period.
- GPC recorded net revenues for the first quarter of $3.3 billion, 7% higher than last year quarter. This was due to increases across all revenue lines and the inclusion of First Republic revenues.
- Year-on-year, performance was helped by the addition of First Republic and increased deposits currently totaling $100 billion.
- GIM’s quarterly net revenues increased 15% year-over-year to $229 million due to increased revenues from the company’s investment in BlackRock.
- The net inflows of client assets into annuitized-revenue products were $9 billion for the quarter and total net new money was $4 billion, reflecting GWM’s consistent ability to attract client assets despite market volatility and depreciation.
- The total client assets in GWM accounts at the end of the 2008 first quarter were $1.6 trillion, unchanged year-over-year as the market depreciation from the end of the first quarter of 2007 was offset by net new money inflows.

Key questions and answers from the first quarter fiscal 2008 earnings call conducted by Merrill Lynch & Co Inc. on April 17, 2008.

Glenn Schorr (UBS): Concerning the securities in the bank portfolio, a lot of the marks go to the OCI line. What differentiates a mark and the marking to market in the securities portfolio that would go to the P&L versus anything else?

Nelson Chai: In our investment portfolio, we''ve invested in some ABS, some prime, but mostly Alt-As. We''ve done our analysis of the positions, and we believe we have the ability and intent to hold until maturity, which we intend to do. There obviously are differences between the individual pieces. We continue to monitor each of the positions if there are any price fluctuations. This is meant to determine whether or not we would maintain them in OCI or whether or not they move over. In the quarter, we had about $400 million that we took into OTTI.

Glenn Schorr (UBS): Can you comment on what the gross and net adjusted leverage ratios were?

Nelson Chai: The adjusted leverage ratio got reduced from about 17.7 times at year end to 16.2 times.

Glenn Schorr (UBS): There''s pressure that leverage ratios need to move lower, as imperfect a measure as it is. What is your comment?

Nelson Chai: We''ll continue to focus on reducing our illiquid positions. We''ve taken our risk weighted assets down 7% in the quarter. It''s a big focus of ours, and it also is one of the drivers and we continue to do a very good job on our risk weighted assets. The line for well capitalized is 10% and we are doing very well relative to that.

Glenn Schorr (UBS): There was a large refinancing need in the last quarter, meaning debt coming due over the balance of 2008. Can you give update on how much has been done, your plans for the rest of the year on the debt side and how much of the higher funding costs are direct impact versus an offset on the asset side?

Nelson Chai: The excess liquidity pool was $82 billion at quarter end and it''s greater than our funding obligations. In the 10K we talked about $44 billion of debt maturities coming due in 2008. We obviously continue to roll commercial paper and repurchase agreements, but we obviously will continue to be active in the markets and look for opportunities. We talked about capitalization and debt. We have funded some of the stuff by reducing the balance sheet and we continue to do that. In the first quarter, given where the credit markets were, the returns are much better to do that, and obviously we focus very much on continuing to do both. We’ll continue to look at reducing the balance sheet, which obviously reduces the need for the funding, but importantly, we will be looking at the markets in the back quarters of the year.

Michael Mayo (Deutsche Bank): Concerning the decline in the brokerage margin, you mentioned that on a core basis, it would have been closer to 22% to 23%. Are you looking to improve that or you need better markets for that to improve?

Nelson Chai: There''s a seasonal thing in terms of payroll taxes and where some of that stuff comes in. We also mentioned that we took an $80 million reserve against a client receivable as well. We''re always looking to improve our margin.

Michael Mayo (Deutsche Bank): BlackRock''s worth $13 billion and yet it''s on the balance sheet for $8 billion. What''s the unique synergy that you need to maintain that investment, and why not monetize that unrealized gain of $5 billion?

John A. Thain: There''s a great relationship between our two companies and the ability for them to create products that we then distribute through our system is working very well. We wouldn''t want to disturb that relationship, and frankly, the earnings that are being generated from BlackRock are very positive for us.

Prashant Bhatia (Citigroup): You indicated that you don''t need to raise capital; what would drive you to change that and can we infer that because you don''t need to raise capital, you are expecting to be profitable in the quarters ahead?

John A. Thain: At the end of last year, we raised $12.8 billion in new capital and for 2007, we lost $8.6 billion. We therefore basically raised $4.2 billion of excess capital. That excess capital was intended to reassure the market that we didn''t have to come back into the equity markets and it''d give us the capital base to go forward into 2008. That continues to be the case. Concerning profitability going forward, we obviously don''t give guidance so we''re not going to project anything. But your comment is a very reasonable expectation.

Prashant Bhatia (Citigroup): On the auction rate securities, can you update us on how much of these securities are owned by Merrill Lynch clients and how you think this issue gets resolved over time?

John A. Thain: Our clients own about $18.5 billion of them. Of that $18.5 billion, about $12 billion are closed-end funds, which are the most problematic. We have been working with those closed-end funds to refinance the securities, which is the ultimate answer here. Nuveen and BlackRock have announced the intention to do that. That is the answer to this problem. Ultimately these things are very well protected from a credit point of view, and so I don''t think there''s any question that the investors will ultimately get their money back at par. They however have to be refinanced and that''s what we''re working to do.

Susan Katzke (Credit Suisse): Can you comment on the Private Equity business and review again what the negative mark was this quarter and what your intentions are for your larger, single-name holdings?