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| As one of the top performers in its field, Merrill Lynch (MER
) made the 48th slot on the BusinessWeek 50 list. The firm is Wall Street's strongest global-asset gatherer, with sizeable retail, investment-banking, and asset-management franchises. On Mar. 20, from Madrid, Spain, Merrill Lynch Chairman and CEO David H. Komansky discussed his strategy for sustaining the company's impressive growth with Investment Banking Editor Emily Thornton. Here are edited excerpts from their conversation:
Q: Are you satisfied with the growth that Merrill Lynch has achieved in the past 12 months?
A: I don't think I would say satisfied. That's a fairly dangerous word. I'm pleased by what we've done. But we have a long way to go and much to accomplish. If you look at it in the context of the last five to seven years, I think basically the real fuel for much of the growth that we have achieved has been our success in globalizing the firm, and being able to identify in the early 1990s a strategy that dictated that we expand globally to take advantage of many opportunities that exist outside of the U.S.
Then there was the reorganization from top to bottom to execute that strategy. I'm a firm believer that execution differentiates an organization. In our case, our ability to execute a global plan has focused us on becoming a truly global organization and taking advantage of the opportunities that exist in Europe, Asia, and Latin America.
Q: How is globalization driving Merrill Lynch's growth today?
A: I could probably take you on a travelogue around the world and paint a fairly rosy picture for you. Most segments of the world, while superficially they seem to be in lock step, really are at different stages of development and at different stages of their entrance into the free marketplace. We see, and have enjoyed, opportunities in Europe. Europe is pretty far advanced in its privatization program. We've been very successful to date. I'm speaking to you from Madrid. We have been very successful building up businesses in Spain, France, the U.K., many places. We see this as the very early days of generating earnings for our firm [from Europe]. Asia is probably somewhat behind that curve. It's still very early in its privatization programs. We have a very significant operation in Japan and the rest of Asia, mostly in Hong Kong and Singapore. We see great opportunity there.
But at the same time that all of this is going on, the opportunities in the U.S. continue to grow. Demographics, the creation of wealth, the phenomenon of a growing number of individuals taking more responsibility for managing their own investment assets through IRAs, 401(k)s -- all of these events have helped to create an atmosphere in the U.S. that enabled us to grow very significantly. We've really had a period of great opportunity. And I'd say that over the next five to eight years, the opportunities could well be greater than they have been in the past.
Q: Merrill Lynch is not only diversified across continents but also across business lines, with retail, investment-banking, and asset-management franchises. Do you see the mix of that portfolio changing in the future?
A: No. For many years, the retail, or private-client side, has generated a disproportionate share of revenues and profitability. For the last couple of years, the institutional side has done the same thing. One of the attractive elements of financial institutions like our firm is that we have these various segments. Part of our strategy is to build the capability to offer the best of class on a global basis.
Q: Do you plan to expand any particular business line in the next year or so?
A: Probably if we had this discussion a year ago, we might have had aggressive expansion plans. We'll still be growing, but our growth in the next year or so will be organic in nature.
Q: What do you see as your greatest challenge in 2001?
A: In this industry, if the economic climate and the investment climate worsen, it makes it very difficult.
Q: In the past, you have stated that you hope to boost your pretax profit margin to 24% by 2003. Are you on track for meeting that goal?
A: It will be difficult to achieve margin improvement. But we remain confident. |
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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