Merrill Lynch & Co. (MER), the biggest U.S. brokerage, on Tuesday said quarterly net income climbed a better-than-expected 49 percent to record levels as underwriting and trading revenue jumped.

Stocks rose and corporate bonds improved relative to Treasuries in the third quarter, helping trading revenues rise across Wall Street.

But Merrill's long-dormant asset management and individual investor businesses also turned in higher revenue and profit margins, which analysts said offers hope for future profit growth and helped lift Merrill shares in early trading.

"We are probably at the point where the trading cycle is slowing, at least in North America, and it's tough to say investment banking will get better. But the retail and asset management businesses look really good. That's what's exciting to investors," said Brad Hintz, an analyst at Sanford C. Bernstein (search) in New York.

Merrill said third-quarter net income rose to $1.38 billion, or $1.40 a share, from $922 million, or 93 cents a share, a year earlier. The per-share earnings beat analysts' average forecast by 21 cents, according to Reuters Estimates.

Merrill's investment banking net revenue rose 33 percent from a year earlier, to $773 million. Investment banking revenue is growing industrywide as merger and acquisition activity increases and debt and equity issuance broadly rise.

Citigroup on Monday said stronger investment banking revenue helped lift its net income 35 percent last quarter.

Merrill's trading revenue rose 73 percent to $2.9 billion as debt trading produced record quarterly net revenue.

Global private client revenue, which includes retail and wealthy individual investors, rose 16 percent to $2.7 billion, and Merrill Lynch Investment Managers' revenue rose 22 percent to $456 million, signaling that individual investors are growing more active.

Merrill shares have been among the weaker performers in the brokerage sector this year due to relatively slow trading among the individual investors that by some estimates account for about half of the company's revenue.

But analysts in recent months have said retail trading seems to be picking up industrywide, which could help Merrill's shares.

As of Monday's close, the shares had risen 2.2 percent this year, while the Amex Securities Broker Dealer index (XBD) had risen 12.3 percent.

In early trading on the New York Stock Exchange, Merrill shares were up 25 cents, or 0.41 percent, to $61.35, even as the broader market edged lower. In pre-market trading, Merrill shares were up by as much as 4 percent.