With stock markets rising and investor sentiment improving, brokerage firms have proven to be more popular than big banks in satiating the "interest sensitive" or "financial" sector of individual and institutional portfolios.

Analysts perceive that brokerage securities/equities are less susceptible to price fluctuations if interest rates rise in the later half of 2004, which many investors and economists are predicting.

And with the renewed vigour in the markets and investor sentiment, brokerages have seen increases in both mutual fund sales and asset management/portfolio service, thus increasing their revenues ? and their bottom lines.

No one has done it better than Merrill Lynch, the US's largest brokerage firm, which has proven that bigger can be better.

Merrill Lynch's fourth quarter profits doubled the previous year's income and surprised and impressed analysts and investors.

The company achieved 17 percent revenue growth and turned in its best ever full year earnings.

On Wednesday Merrill reported that fourth quarter net income had risen to $1.24 billion or $1.23 per share. This figure is up from $539 million or 56 cents per share one year earlier.

These earnings caused analysts to give "A+" reports on a stellar finish to 2003 for Merrill Lynch. Over the past year Merrill recorded profits of $4 billion on net revenue of $20.2 billion.

Merrill was able to net an increase in revenues of $1.16 billion in 2004 (an increase of eight percent year over year) primarily due to mutual fund commission revenues surging.

That's just not due to improved financial markets.

In the past year, CEO Stanley O'Neil embarked on a regimental cost cutting and strict budgeting diet.

The company spent the better part of the last three years restructuring globally ? (closing satellite offices in Canada and other profit losing regions) and implementing accountability on all management levels.

All this good news is summed up in simple terms, or one "stock line"; The 2004 fourth quarter annualised returns on average common equity rose to 18.7 percent from the 9.5 percent of 2003.

This company shows the type of management discipline that investors appreciate and the 2004 appears to be another profitable year for the big bull.

@EDITRULE:

Paul Jenkins in an investment advisor at LOM Holdings Ltd,