Greg Fleming cracks the whip again

“Greg Fleming is in for a busy year, the 45 year-old Merrill Lynch president and chief operating officer is breathing fire on all cylinders, addressing bank's staff at a “town hall” meetings and “circle of champions” events”

Merrill Lynch stunned the markets last October when it revealed $5 billion in writedowns from risky bets on sub-prime mortgage assets. Ballooning to $29 billion (£14.8 billion) and resulting in 4,000 job cuts

The revelation cost Mr O 'Neal, then the chief executive, his job and the bank's executives, led by Mr Fleming, were forced to go cap in hand to a collection of sovereign wealth funds to raise emergency capital.

Fleming remains in buoyant spirits. Arriving in London last month to rally the troops and get them re-focused and back on track after the extreme turbulence of the past nine months.
In his “town hall” meeting ...

I said that we have come a long way and put a lot behind us.

He emphasised on getting back to the day-to-day blocking and tackling that everybody was thinking about last June or July before it all went in a different direction.

It's important for people to know that we feel like we are in a position to be on the offensive and build the business

The 16-year Merrill Lynch veteran argues that the violent adjustment of huge writedowns, followed so quickly by intensive capital-raising, have made him confident that recovery would be quicker this time than in previous crises.

The fact that you could write that much down and put the capital back in such a short period of time leads me to be more optimistic than some about the future.

At least he can be confident of his own role. The arrival of Mr Thain raised questions about the future of all senior executives at Merrill Lynch, including Mr Fleming.

The new chief executive has brought in a number of staff from outside the company but reaffirmed Mr Fleming's status when he unveiled his new line up recently. Now, to judge by the number of references to Mr Thain, it is clear that they work together well.

On several occasions Mr Fleming ensures that he uses Mr Thain's words when answering questions on sensitive issues, such as the speculation that Merrill will need to go back to Singapore, Kuwait and South Korea's sovereign wealth funds.

Mr Fleming is in no doubt about the value of the sovereign wealth funds' intervention - the funds injected cash more quietly than could have been achieved by a mainstream institution, for a longer investment term than hedge funds and with fewer demands than private equity.

Many of them [the sovereign funds] do detailed analysis before moving, but when they are ready to go, they are ready to go in the amounts required given the scale of the problems. So they have been a significant positive, which is why I believe there has been less political noise in the US than you would have expected.

Fleming is also upbeat about a recovery in the financial markets ... with a revival in mergers and acquisitions, albeit in at least six months.

What you need is well-capitalised institutions that are able to do the deals. As we work our way through this, we will have more and more of those and then it will pick up considerably, no later than the middle of next year. Regional US banks and small financial companies will go under the hammer, and the strong euro will fuel cross-border deals ...

On the likelihood of consolidation among Wall Street's big four banks.

There's only Goldman Sachs, Morgan Stanley, Lehman Brothers and Merrill Lynch left, so it becomes a conversation about culture, fit etc.

Mr Fleming is even unruffled about the accounting rules that forced global investment banks to cut heavily the value of their credit-related securities, even if the
underlying assets were unimpaired ...

Fleming claims Merrill Lynch is well-positioned to participate in the markets' recovery ...

Bank owns 49 per cent of Blackrock, the blue-chip asset manager, and client businesses such as M&A advisory and equity underwriting are high return-on-equity operations.

The mortgage origination business is gone, but Merrill Lynch continues to offer mortgage servicing to other loan providers.

The 94-year-old American bank further increases its reliance on markets outside the United States ...

Sixty per cent of its institutional revenues now come from outside the US and that's going to be 75 per cent within the next five to seven years. Mr Fleming goes on to say. In wealth management we want to triple our revenues outside the US over the next five years.

Merrill Lynch had a reputation for cutting and burning staff more viciously than most rivals in the bad times. In the aftermath of September 11, the bank shed more than 20,000 workers, then struggled to find the manpower to capitalise on the subsequent upturn.

Mr Fleming admits ...

There is a concern in our employee base, a feeling of 'here we are again', and John Thain and I are very focused on not having that happen this time.

He figures that the worst writedowns are over and that the price of leveraged finance paper is picking up. It is not going at close to face-value prices, but he says that buyers have come out that were not there in the first quarter of this year.

Source: Times Online

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Rich clients deserting wealth management businesses

“UBS cuts 5,500 jobs after £5.5bn quarterly loss”

UBS cut 5,500 jobs and sold $15 billion (£7.6 billion) worth of damaged assets yesterday, shares in Switzerland’s biggest bank fell by more than 4 per cent amid fears that restructuring would wreak further havoc

The bank added to investors’ woes by revealing that rich clients were deserting its wealth management business and business banking clients in its home market had pulled almost SwFr2 billion (£960 million) from their accounts in the first quarter

Job cuts include 2,600 staff from UBS’s investment bank, which ran up most of the group’s $37.4 billion in credit crunch writedowns. Fewer than 900 jobs are expected to be lost from the investment bank in London, where UBS employs about 9,000 people. Marcel Rohner, the chief executive indicated that the worst of the staff cull was over.

UBS said that it had agreed to sell a $15 billion book of sub-prime mortgages to BlackRock, the asset management group. The mortgages had already slumped in value from $22 billion, the bank said.

Source: Times Online

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Bear Stearns carved up

“Michael Spencer in talks over slice of Bear Stearns equity team
”

Michael Spencer, the City’s richest man, is in advanced talks to carve out the UK equities business of Bear Stearns, the stricken American investment bank according to Times. Spencer is looking to hire a team of about 25 staff from Bear, headed by Nicolo Brandolini d’Adda, the co-head of European equities
Although Bear has agreed to be bought by JPMorgan Chase, European equity sales and trading is an area in which there is a high degree of overlap between the two US banks, meaning that the new owner is expected to retain very few of Bear’s stockbrokers. UK equities are thought to account for about one third of Bear’s European stockbroking revenues.

Numis Securities, in which Mr Spencer holds an 11 per cent stake has 180 employees, said recently that it was “determined to grow the business organically in a contracyclical fashion” and would “exploit the volatility in the market to attract staff”.

Bear Stearns employs about 140 staff trading European equities in London. JPMorgan has not yet said how many of Bear’s employees it plans to keep. The acquisition will not formally complete until June 1

Source: Times 28/04

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“Michael Spencer in talks over slice of Bear Stearns equity team
”

Michael Spencer, the City’s richest man, is in advanced talks to carve out the UK equities business of Bear Stearns, the stricken American investment bank according to Times. Spencer is looking to hire a team of about 25 staff from Bear, headed by Nicolo Brandolini d’Adda, the co-head of European equities
Although Bear has agreed to be bought by JPMorgan Chase, European equity sales and trading is an area in which there is a high degree of overlap between the two US banks, meaning that the new owner is expected to retain very few of Bear’s stockbrokers. UK equities are thought to account for about one third of Bear’s European stockbroking revenues.

Numis Securities, in which Mr Spencer holds an 11 per cent stake has 180 employees, said recently that it was “determined to grow the business organically in a contracyclical fashion” and would “exploit the volatility in the market to attract staff”.

Bear Stearns employs about 140 staff trading European equities in London. JPMorgan has not yet said how many of Bear’s employees it plans to keep. The acquisition will not formally complete until June 1

Source: Times 28/04

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Women still face Glass Ceiling

“Barclays Bank appoints 5 women among 80 managing directors”

Barclays Capital, the investment banking division of Barclays, has been forced to defend its record as an equal opportunities employer after it emerged that it had promoted 80 managing directors, of which only five are women. BarCap, employs about 15,700 staff across offices in 26 countries, took out a full-page advertisement in the Financial Times 10 Jan, to announce the promotions, covering public relations executives as well as bankers in locations from London and New York to Madrid and Singapore.

The investment banking unit, led by Bob Diamond, specialises in the corporate credit markets and has been one of the fastest-growing City employers. It accounts for more than a third of Barclays’ annual profits, which last year topped £7 billion, and employs a little under half the group’s 33,000 staff.

Two of the new female BarCap MDs are in London. The other three are based in New York, Jakarta and Singapore.

Employment commentators said that the promotions underscored the perception of the City remaining a male-dominated environment. Nevertheless, they were loath to judge BarCap, pointing out that the decision about whether to pursue a banking career is also a lifestyle choice, tending to involve long hours and a gruelling travel schedule, albeit for considerable financial rewards. It emerged yesterday that, after meeting performance targets, Mr Diamond was on course to collect a £14.8 million payout covering the past three years. The payout means that Mr Diamond is likely to have received about £75 million in pay, cash bonuses and share awards since he joined the board in 2005.

Heather McGregor, a director of Taylor Bennett, the recruitment consultant, said: “Investment banks do struggle to find women for senior positions because very often women have other agendas and choose not to make their careers a priority.”

Of the 358 executive directors at FTSE 100 firms, only 14 — less than 4 per cent — are female, according to Manifest, the proxy shareholder voting specialist.

A spokeswoman for The Equalities and Human Rights Commission said that it was disappointed but not surprised by the lack of female appointees at BarCap: “It’s not a simple question of discrimination — it’s also about working practices.”

Siobhan Loftus, a media relations executive at Barclays Capital and one of the new managing directors, defended the promotions, which she said were based entirely on merit. “We are a meritocracy. In our diversity policy we would hope to promote irrespective of any gender bias,” she said.

“We would always look for the best person for the job. We want to provide an environment where people feel comfortable irrespective of their background, gender, sexuality or race.”

Food for Thought:

Economist "Women in Business" 2005 ...

It's 20 years since the term “glass ceiling” was coined by the Wall Street Journal to describe the apparent barriers that prevent women from reaching the top of the corporate hierarchy; and it is ten years since the American government's specially appointed Glass Ceiling Commission published its recommendations. In 1995 the commission said that the barrier was continuing “to deny untold numbers of qualified people the opportunity to compete for and hold executive level positions in the private sector.” It found that women had 45.7% of America's jobs and more than half of master's degrees being awarded. Yet 95% of senior managers were men, and female managers' earnings were on average a mere 68% of their male counterparts'.

Ten years on, women account for 46.5% of America's workforce and for less than 8% of its top managers, although at big Fortune 500 companies the figure is a bit higher. Female managers' earnings now average 72% of their male colleagues'. Booz Allen Hamilton, a consulting firm that monitors departing chief executives in America, found that 0.7% of them were women in 1998, and 0.7% of them were women in 2004. In between, the figure fluctuated. But the firm says that one thing is clear: the number is “very low and not getting higher”.

Source: Times Online

In August 2006 Forbes reported that 70% of women and 57% of men believe an invisible barrier -- a glass ceiling -- prevents women from getting ahead in business, according to a study of 1,200 executives in eight countries, including the U.S., Australia, Austria and the Philippines were the findings of a study conducted by
Accenture.

Women aren't as worried about the pay gap as they were five years ago, says Carol Gallagher, president of the Executive Women's Alliance and author of Going To The Top: A Road Map for Success from America's Leading Women Executives. Gallagher, who is also an executive coach, says Gen Xers and Yers don't think any barriers prevent them from getting to the top.

And baby boomers are now looking toward retirement, not obsessing about pay. When Gallagher published her book in 2000, there was a huge demand for information about the gender gap. At the time, almost all her executive coaching clients were women seeking the secrets of corporate success. Now 70% of her clients are men. "There [isn't] a need for as much of the women's group stuff," Gallagher says.

To some extent, there's a disconnect between American women and their counterparts abroad. In a study of American executives by Catalyst, a research and advocacy firm, women were just as likely as men to say they aspired to senior management positions. "Women want the responsibilities and rewards that come with top positions," says Sheila Wellington, a professor at New York University's Stern School of Business, who was president of Catalyst when the survey was conducted.

But a global study, also conducted by Catalyst, found that men worldwide desire the top jobs more often than women.

Even in the U.S., some experts say the glass ceiling doesn't affect job satisfaction. Women make sacrifices at work in exchange for greater happiness in their lives as a whole, says Warren Farrell, author of Why Men Earn More.

His book offers 25 reasons for the pay gap: Women work fewer hours, for example, and they don't stay at jobs as long as men do. Whether it's nature or socialization driving their decisions, women tend to choose lives that allow them to spend more time with their families, Farrell contends.

Even ambitious women don't measure success in high salaries and fancy job titles. Relationships with colleagues and giving back to the community are more important to women than salary, according to "The Hidden Brain Drain: Off-Ramps and On-Ramps in Women's Careers," a study by the Center for Work-Life Policy, which was published in the Harvard Business Review last year.

"They want to feel satisfied and good about their work, but also want to feel satisfied about other things in their life," says Melinda Wolfe, head of global leadership and diversity at Goldman Sachs Group (nyse: GS - news - people ).

Even if most women don't want to break the glass ceiling, Wolfe says, the few that do shouldn't be ignored. Sometimes their ambitions have been tempered by a corporate culture that stifles their success. Sometimes they choose circuitous career paths, taking some time to care for children, prepare for a career change or work in the nonprofit sector.

There's another reason why the pay gap has barely budged in the last five years: Women don't ask for more money. "They don't think they deserve it," says Lois Frankel, president of Corporate Coaching International and author of Nice Girls Don't Get the Corner Office. She adds, "We don't have the [negotiating] skills. We see it as something smarmy."

But Susan Solovic, CEO of SBTV, a Web site that creates video programming aimed at small-business owners, offers another reason why women aren't complaining about the pay gap: They've decided to work for themselves. The number of women-owned firms grew 17% between 1997 and 2004, according to the Center for Women's Business Research, while the total number of firms rose only 9%. Says Solovic: "There is really no glass ceiling when it comes to owning your own business."

Source: Forbes

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