Merrill Lynch chief exec to step down

There has been speculation over the weekend that Merrill Lynch’s Chief Executive, Stan O’Neal, who took up the top job 5 years ago, is to leave the US investment bank. If he does step down, the 56-year-old will be entitled to a multi-million dollar severance package. The Chief Executive earned $48 million last year.

The bank’s directors have been in discussions over the weekend reviewing Mr O’Neal’s future and the search for possible successors, inside and outside the company. Sources close to the company believe the board will choose an external candidate. Speculation is surrounding Larry Fink, head of asset management company, BlackRock.

Observers believe the internal candidates are Greg Fleming, a banker who is now co-president and Bob McCann, who is in charge of Merrill Lynch’s brokerage business.

According to reports, a number of the bank’s directors had lost confidence in Mr O’Neal’s leadership, rendering his position untenable. Furthermore, his position was damaged when several board members expressed anger at his decision to approach Wachovia, the US bank, about a potential merger without approval from directors.

Last week, the bank announced losses of nearly $8 billion in its mortgage-backed securities business, nearly twice the figure it anticipated just 3 weeks ago. This makes Merrill Lynch the biggest casualty of the recent turmoil in the credit markets.

Brad Hintz, an analyst at Sanford Bernstein, said Mr O’Neal’s strategy seemed to be successful until the growth of its business packaging US home loans into securities left it overexposed to the problems in subprime mortgages.

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