Merrill LatAm Unlikely to Escape Merger Scythe

As Merrill Lynch and Bank of America (BofA) shareholders cast votes on the proposed merger today, questions surrounding the extent of the post-vote carnage swirl both internally and among the banks’ haggard competitors. The deal is expected to go through, forming a temporarily bloated entity employing some 370,000 people, according to one internal estimate. News reports citing market speculation in the days leading up to the vote suggest up to 30,000 could be eliminated globally. For Merrill’s LatAm business, insiders express cautious optimism that its relatively high profitability compared to other regions covered by the bank will shield it from the worst of the layoffs. “LatAm is profitable. There aren’t any areas within the region that have lost money on a net basis,” notes a senior official at the firm. LatAm barely overlaps with BofA’s existing businesses, which is an additional plus, and BofA has said it wants to keep the Merrill’s international businesses, especially those exposed to higher growth regions. However, BofA’s interest in LatAm beyond Mexico has long been in doubt, and some Merrill businesses are likely to be shut or significantly downsized by merger-related redundancies. There is added pressure from forecasts of a dramatically reduced LatAm fee pool in coming years versus estimates made 12 months ago when Merrill was beefing up. Among more vulnerable sectors are lines that generate less profit. ECM is one business that appears more exposed to bearish public markets that have for months shunned new transactions, say internal executives. The shop’s Brazil office, heard employing some 200 people, may also be “right sized,” to use the polite term. “There will be cuts, though I don’t think they’ll cut to the bone,” notes the Merrill official. Thursday, Credit Suisse announced an 11% reduction in global headcount following a 10% cut only a month earlier. Morgan Stanley, Citi, Goldman Sachs and JPMorgan have also trimmed a minimum of 10% in the past 2 m