U.S. retail brokerages modestly boosted fourth-quarter profits as higher merger and recruiting expenses largely offset growing management fees and a market-fueled increase in client assets.

On the busiest day of bank earnings, several of the biggest wealth managers reported gains in fees, commissions and client assets. But the high cost of mergers and the impact of thousands of brokers moving to new jobs hurt results.

Morgan Stanley , which merged its wealth management arm with Citigroup's Smith Barney to form Morgan Stanley Smith Barney on May 31, said the nation's largest retail brokerage generated pretax income of $231 million, bouncing back from a year-ago loss of $51 million.

Net revenue rose 4 percent to $3.14 billion from the third quarter, a more useful comparison, but operating expenses rose 6 percent to $2.91 billion.

Net income at the unit fell 14 percent to $162 million. After stripping out Citigroup's 49 percent stake, Morgan Stanley realized a $29 million profit and a paltry 1 percent return on equity.

Total client assets rose 2 percent to $1.56 trillion, even as Morgan Stanley Smith Barney's brokerage force fell by 25 to 18,135 during the quarter. The firm said U.S. retail clients withdrew $4.7 billion in assets, the third straight quarter of net declines.

Bank of America's Merrill Lynch Global Wealth Management fared better. Profit rose 9.5 percent to $446 million from a year earlier. Earnings rose 43 percent from the third quarter, which had higher credit losses.

Net revenue from Merrill's Thundering Herd rose 1.6 percent to $3.08 billion from the previous quarter, as last year's market rally boosted assets under management by 5 percent and fueled a 5 percent jump in asset management fees.

Total client brokerage assets rose 2.4 percent to $1.27 trillion from the third quarter.

But operating expenses rose to 2.4 billion from $2.27 billion, reflecting merger integration costs.

Merrill Lynch boosted its financial adviser force to 15,006 from 14,979 in the third quarter -- though headcount is still down from 15,822 in the first quarter last year.

The year-end increase of advisers reflected high retention rates, increased hiring and training new advisors. Bank of America also said its Merrill Lynch integration is on track, with cost savings surpassing original first-year estimates.

Bank of America bought Merrill Lynch on Jan 1. last year.

WELLS FARGO

Wells Fargo & Co , which acquired Wachovia's sprawling brokerage business at the beginning of last year, said increased client assets and higher revenue from retail brokerage boosted the company's trust and investment fees.

Wells also purchased insurer Prudential Financial Inc's

minority stake in a securities brokerage venture on December 31, giving the bank 100 percent ownership.

Wells Fargo's profit from wealth management, brokerage and retirement businesses fell 46 percent to $131 million from the third quarter, reflecting the costs of settling a case related to its previous sales of auction-rate securities.

Securities regulators pursued national and regional brokers over these securities that were touted as cash-equivalents, but have been impossible to trade since the credit crunch.

Total revenue from these businesses fell 3 percent to $2.88 billion from the previous quarter, as higher asset-based fees were offset by lower securities gains. Meanwhile, expenses rose 10 percent to $2.54 billion.

Wells Fargo said recruiting efforts last year landed brokers that generated twice the revenue of those who left.

Bank of New York Mellon said wealth management pretax income rose 22 percent from a year-earlier but was little changed from the third quarter.

Total fee revenue rose 13 percent from a year ago, fueled by its sixteenth straight quarter of net inflows. Client assets rose 11 percent to $154 billion from a year-earlier and 2 percent from the previous quarter.

Results were weighed down by lower net interest revenue, due to lower deposit margins, while noninterest expenses fell 3 percent from the year-ago period.

Northern Trust said fees generated by its trust and private banking services for the very rich totaled $219.9 million in the current quarter, up 3 percent year over year.

Last year's stock market rally, as well as new business, boosted assets under management 12 percent to $627.2 billion from a year earlier.

(Reporting by Joseph A. Giannone. Editing by Robert MacMillan and Tim Dobbyn)

Investment Merrill Lynch Wachovia Wells fargo