Numerous sources are reporting this morning that embattled Merrill Lynch CEO Stan O'Neal has decided to leave the Wall Street investment bank amid a firestorm of criticism for the firm's third quarter results. From Bloomberg:
For Merrill, a firm that over nine decades built a corporate culture that promoted from within and gently nudged its chiefs into distinguished retirement, O'Neal's ouster is an abrupt departure. To his predecessors, many of whom resented his penchant for getting rid of dozens of Merrill loyalists, the losses are a painful reminder of how much has changed at the brokerage they used to call "Mother Merrill." "I've been in touch with many, many of our fellow employees and ex-employees and they're sick, everyone is sick about it, as I am too," Daniel Tully, Merrill's CEO from 1992 to 1996, said in an interview this weekend. "It's awful," he said, becoming the first former head of the brokerage to castigate O'Neal ... Merrill risked becoming "a snake pit with political infighting," Punk Ziegel & Co. analyst Richard Bove said in an interview yesterday. "With Mr. O'Neal stepping aside, he avoids that." The shares have lost one third of their value in five months as rising U.S. subprime mortgage defaults led to a credit-market freeze in August.
Merrill Lynch reported a $2.31 billion loss for the third quarter as the investment bank absorbed $7.9 billion in write-downs on subprime mortgages and related asset-backed bonds. The loss far outstripped what investors were expecting and what Merrill itself had said it would report, and in the days subsequent to the earnings miss O'Neal reportedly approached Wachovia about a merger without the consent of Merrill's board of directors. Update: Moody's Investors Service last week downgraded Merrill to A1 on what it characterized as a "risk control failure."