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Asia is key to Merrill's global strategy, says CEO

Upbeat mood seen in stock rebound, wiping out paper losses of Temasek's purchase. -ST
Grace Ng

Tue, May 06, 2008
The Straits Times

THE man in one of the hottest seats in international banking was in Singapore yesterday and reading the last rites over the United States sub-prime mortgage crisis.

Merrill Lynch chief executive John Thain believes the global financial sector has put the worst of the credit market debacle behind it, although dangers still lurk for the real economy.

Mr Thain, whose bank took a huge hit from the US sub-prime crisis, warned that a combination of falling house prices, rising energy costs and flagging consumer demand are likely to lead to a US slowdown for six to 12 months.

While Asian markets are likely to be affected by the US woes to varying degrees, he pointed out that the region is still the 'perfect match' for Merrill's strategy to become a top global wealth management and investment banking player.

Singapore, China, India and Russia are among the key fast-growing markets where he sees 'great opportunities'.

The upbeat sentiment is reflected in Merrill's own share price of late.

Mr Thain, who has been in the job since December last year, has presided over a moderate recovery after Merrill was almost brought to its knees by huge US sub-prime-related body blows.

It recorded three consecutive quarters of red ink due to US$31.7 billion (S$43.5 billion) in write-downs and credit losses on investments.

The shares were at a five-year low of US$39.93 in mid-March but have since recovered to about US$53. This is lower than the US$59 level when Mr Thain took over, but above the US$48 per share that Temasek Holdings paid for its US$5 billion stake in Merrill.

Temasek does not have any paper losses now, he pointed out, adding that the Singapore company is a 'great long-term investor'.

Mr Thain, who is in Singapore to meet the local banking regulator as well as clients and Merrill bank executives, added that the bank is focused intently on Asia.

It is preparing to get a licence to run a wealth management business in China and was recently given the green light to start a similar operation in South Korea.

The importance of Asia to Merrill is underscored by the time Mr Thain has spent in the Republic. His Singapore visit is the second trip to Asia in a month and follows trips to India and China three weeks ago.

Mr Thain yesterday met the Monetary Authority of Singapore's financial advisory council, of which he is a member. The council consists of the heads of all major financial institutions in Singapore. It meets from time to time to bring everyone up to speed on new developments and regulations.

Merrill employs about 1,500 people in Singapore, which Mr Thain said was 'one of the group's major hubs in Asia'.

The bank is also on track to move its global services centre for its private banking and global markets to a new building in the Republic, which has a capacity for 2,000 employees, by next year.

Mr Thain said the 4,000 job cuts taking place across the group will occur mainly in the US, and offices in Asia are unlikely to be affected.

He has unveiled a new senior management team in the US and is breaking down divisions, which he called 'silos', in Merrill's trading units, as he attempts to turn the bank around.

While emphasising that there will be little change in the bank's fundamental strategy, Mr Thain said Merrill needs to work on one area - building 'more teamwork...and operating as a single company'.

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