Big rise in Merrill Lynch profits

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Merrill Lynch has managed a big rise in second quarter profits despite exposure to the sub-prime mortgage market.

Net earnings rose to $2.1bn (Â£1.0bn) between April and June, up 31% from the same period of 2006.

Sub-prime loans are for borrowers with inferior credit ratings, and rising US interest rates have increased defaults.

But those problems have been offset by the continuing mergers and acquisitions boom, which has meant Merrill Lynch has been able to earn big fees.

Revenue from investment banking rose 41% while the fixed-income, currencies and commodities business grew 55%.

Revenue fell from the structured finance and investment department, which includes mortgage-related activities.