Second-quarter profits at Merrill Lynch, the Wall Street bank, surged by 30 per cent, boosted by stronger investment banking and better performances from fixed income, currencies and commodities trading.

Profit after paying preferred dividends rose to $2.07 billion (£1 billion), or $2.24 a share, up from $1.59 billion, or $1.63 a share, a year earlier. Revenue rose 19 per cent to $9.73 billion, Merrill said today.

The results easily beat Wall Street expectations for profits of about $2.02 a share on revenue of $9.25 billion.

Shares in Merrill rose more than 1 per cent in New York but later trimmed gains after the brokerage said the market for sub-prime loans is yet to stabilise.

The record pace of takeovers during the quarter helped push revenue from investment banking up 41 per cent to $1.4 billion.

At the company’s global markets business revenue was up 36 per cent, to $6.19 billion. Revenue from fixed income, currencies and commodities surged 55 per cent to $2.6 billion.

Stan O’Neal, the chairman and chief executive, said: “We delivered another strong quarter in a volatile and, at times, hostile market environment.”

He added: “These results reflect our revenue diversification, which makes possible strong performance despite uneven market conditions.”

There was a decline in net revenue from structured finance and investments business, which includes mortgage-related activities.

Merrill, like others on Wall Street, has been hurt in the fallout from delinquencies and defaults in the sub-prime loan market. Investment banks package mortgage loans and sell them as investments.

During the quarter, Bear Stearns disclosed massive losses stemming from mortgage-backed securities in two hedge funds it managed. Merrill Lynch, which had about $850 million tied into one of the hedge funds, seized collateral and sold about $100 million of the assets in an auction.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax