Stanley O’Neal the infamous CEO of Merrill Lynch, under whom the company faced huge losses has announced his retirement on Oct 30. The company’s board announced that O’Neal would give up his chief executive and chairman’s posts following Merrill’s announcement last week that it is going for an $8.4 billion write-down.
The company board has elected director Alberto Cribiore as interim chairman and he would search for the company’s next CEO. The front-runners for the post include Laurence Fink, chief executive of investment manager BlackRock and John Thain, chief executive of NYSE Euronext.
However, a new CEO could not set Merrill Lynch’s house in order easily. It will be a daunting task of managing the huge losses the company underwent under O’Neal, specially whether the firm is still willing and is able to engage in high risk, high reward proprietary trading.
O’Neal had shifted the focus of the firm from its traditional brokerage business to proprietary trading on the lines of rival firms Morgan Stanley and Goldman Sachs. The method worked for a while with net income rising to $7.5 billion in 2006 from $1.7 billion in 2002. However, credit crunch soon hit the firm with credit crunch hitting the bottom at $9.7 billion in the second quarter of 2007 up from $8.2 billion in the second quarter of 2006.
Analysts feel that Merrill will never be able to match the huge returns garnered by Goldman Sachs from propriety trading. It will now have to rely mainly on its retail brokerage business where it is the largest in the US.
Source:business week
Image:portfolio.com
