Merrill’s brokerage unit head may not survive
Robert McCann, who directs Merrill Lynch's global wealth management division, may be on his way out as a result of the Bank of America merger--and could take some of the firm's top talent with him.
Bank of America Corp. announced Wednesday that Robert McCann, who as head of Merrill Lynch’s global wealth management division oversees its Thundering Herd of about 17,000 retail brokers, may not be in charge of that unit for long.
BofA said the new leader of global wealth and investment management “will be determined in the future as the company works to define the target environment through the transition process.” It said Mr. McCann will remain in charge of the brokers in the meantime.
The news comes at a delicate time for Merrill. At least 10,000 employees, or one-sixth of the workforce, are expected to lose their jobs, according to a report Tuesday by Ladenburg Thalmann analyst Dick Bove. The biggest cuts are expected in operations and other support-staff positions. BofA plans to cut $7 billion from Merrill’s costs base by 2012, which would equal 9% of the firm’s operating expenses last year.
“Bank of America’s ‘slash and burn’ style following acquisitions is likely to be pronounced at Merrill,” Mr. Bove wrote in a report to clients.
Analysts were quick to interpret BofA’s announcement about the leadership of its flagship wealth management to mean that Mr. McCann has lost a power struggle. They reckon that he may soon leave and take top brokers with him.
“Chuck Schwab is probably very happy with this announcement,” said Sanford C. Bernstein & Co. analyst Brad Hintz, referring to the founder of Merrill competitor Charles Schwab & Co. “Brokers have great loyalty to McCann, who is a solid manager. Managing retail brokers is hard and certainly isn’t a business in which BofA has shown great expertise.”
Mr. McCann has worked at Merrill virtually his entire career, joining the firm in 1982 and leaving only for a five-month spell at Axa in 2003. Upon his return, he was appointed vice chairman and put in charge of the firm’s wealth management group. He added the title of president in 2005.
The division he runs forms the historic heart of Merrill and is by far its best performer. Through the first nine months of the year, it generated $2.2 billion of pretax earnings on $10.2 billion of net revenues while Merrill’s investment bankers and traders generated billions in mortgage-related losses. The continuing profitability of Merrill’s core business is widely seen as why Chief Executive John Thain was able to persuade BofA to pay a hefty premium for the ailing firm last month.
Though Mr. McCann may be headed elsewhere, other top Merrill executives will keep their responsibilities and titles as they join BofA. Mr. Thain is to be president of BofA’s investment banking operations, while Merrill’s current president and chief operating officer, Greg Fleming, will head global corporate and investment banking, which will include overseeing BofA’s vast commercial banking business. Tom Montag, currently Merrill’s global head of sales and trading, will head global markets at BofA.
A BofA spokesman said Mr. McCann “can fish in a much bigger pond” at BofA. A Merrill spokeswoman couldn’t be reached immediately.
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