Wirehouse representatives have been on tenterhooks since last week, awaiting the fate of their parent companies — while at the same time trying to deal with the market meltdown.
At New York-based Merrill Lynch & Co. Inc., some brokers wondered whether their supposed savior, Bank of America Corp. of Charlotte, N.C., would buy the brokerage firm.
They watched as shares of both Bank of America and Merrill Lynch got hammered on news that the bank was cutting its dividend and selling $10 billion in stock at a bargain basement price in order to shore up its balance sheet and finance its purchase of Merrill.
The market continued selling off the companies last week, along with Charlotte, N.C.-based Wachovia Corp. and Morgan Stanley & Co. Inc. of New York.
The talks between Citigroup Inc. of New York and Wells Fargo & Co. of San Francisco over the fate of Wachovia were reportedly stalled as of press time. And rumors surfaced last week that Mitsubishi UFJ Financial Group Inc. of Tokyo might pull back from plans to inject $9 billion into Morgan Stanley in exchange for an equity stake, but Mitsubishi quickly reaffirmed its intention to follow through.
ANXIOUSLY WAITING
"Merrill and Morgan [Stanley] are in dire straights," said a Wachovia broker in California, who based his opinion on the stocks' sell-off last week.
"I think they're going under," said this rep, who asked not to be identified.
Bank of America has its own bad loans, plus bad mortgages acquired from Countrywide Financial Corp. of Calabasas, Calif., and now Merrill's problems, the Wachovia rep said.
Without a rescue by Wells Fargo & Co. of San Francisco, Wachovia will be in the same dire condition, he said.
"If we get [taken over by Wells Fargo], it changes the whole ball game for Wachovia Securities," said the California rep.
"If we don't, it's a very bad situation," this broker said.
The angst over Wachovia's fate has caused some Wachovia clients to leave, brokers said.
"It's costing us money right now," said a Wachovia rep on the West Coast who asked not to be identified. This broker said he lost several million-dollar accounts.
Whatever happens, some Wa-chovia reps say they've lost faith.
"There's a growing lack of confidence in the management of Wa-chovia [Securities]," said an East Coast Wachovia rep who is a legacy broker of A.G. Edwards & Sons Inc. of St. Louis.
Critics of Wachovia management say the firm has given them conflicting information and doesn't seem to know what's going on. But no one knows what's going to happen in the current environment, countered the Wachovia rep in California.
"I think people look for a scapegoat" in tough times, this broker said. Wachovia Securities chief executive Danny Ludeman "has been a solid leader with good vision."
At Merrill, reps were also waiting anxiously for news of their retention package, with some worried that Bank of America might see little need — or have limited ability — to offer an attractive deal.
"I'm hearing [from Merrill brokers] that unless they get 100% [of annual production], they'll walk," said recruiter Rick Peterson of Rick Peterson & Associates in Houston.
"And they want cash," he said. "That would be an expensive package for [Bank of America]."
Merrill brokers say the retention deal might be rolled out along with details of a new compensation plan that is expected to reward better producers and offer more investment options for deferred compensation dollars.
Meanwhile, at Citigroup subsidiary Smith Barney, brokers were awaiting more details about branch closures. The parent company is also trying to strengthen its balance sheet, and as part of that cost-cutting effort, Smith Barney plans to consolidate some branch offices around the country, and is firing branch managers. It's also consolidating four retail divisions into two, and cutting the number of regions from 20 to about a dozen, sources said.
The exact number of branches that will be closed or managers who will be let go is unclear.
Smith Barney brokers and recruiters heard that anywhere from 40 to 100 offices could be shuttered. They expected that smaller satellite offices would be the most likely targets. The firm has 544 branches nationwide.
Smith Barney spokesman Alexander Samuelson declined to comment.
"It's a smart move" financially, said a Smith Barney rep in the Northeast. But management can get stretched thin when overseeing multiple offices, he said.
The restructuring at Smith Barney comes in the wake of the recently announced resignation of Sallie Krawcheck, the well-liked former head of wealth management, who will be leaving at yearend.
Ms. Krawcheck "seemed to be the real connection to the brokerage force" for Citigroup, said recruiter Mindy Diamond, president of Diamond Consultants LLC in Chester, N.J.
Meanwhile, brokers everywhere had to deal with the market meltdown, with some seeing clients throw in the towel.
"I had three [client] capitulations yesterday, and nearly another one today," the Smith Barney rep in the Northeast said in an interview last week, referring to clients who wanted to sell everything they have for cash.
"Most are just realizing there's nothing they can do" at this point, he said. "A majority of [clients] are just stunned into submission," said a Smith Barney rep on the West Coast who asked not to be identified.
E-mail Dan Jamieson at [email protected].
