Don't expect Merrill Lynch & Co. to reinvent itself as a commercial bank, even though it now has nearly $70 billion of deposits.
"Getting the deposits has been easy, using them has been much more challenging," said David H. Komansky, Merrill's chairman and chief executive officer, speaking Monday at a conference in New York sponsored by his company and with many top executives from the nation's commercial banks in attendance.
"This may sound sacrilegious to some of you, but getting to $70 billion was a no-brainer," he said. The New York company got there by flowing money from money markets funds into deposit accounts.
But don't expect Merrill to become the next Citigroup Inc. or Bank of America Corp.
"Clearly we don't want to be too bank-like," he said. "We don't want investors to look at us like a bank; we don't want the multiples of the banks."
Merrill, however, will do a certain amount of corporate lending, sticking to investment-grade loans, Mr. Komansky said. "We will be able to use the bank to complement our existing business. What we're not going to do is to go out and lend money to get business," he said.
And though Merrill will continue to strengthen its balance sheet, Mr. Komansky shot down the notion that financial companies need to rent out their balance sheets to credit-starved corporations to win investment banking business.
"Future success will hinge on more than the much-talked-about ability to extend out your balance sheet," he said. Year-to-date, Merrill holds the top spot in equity origination, with 17% of the market, and commands 26% of market for the advisory business on announced merger and acquisition business, he said.
Separately, in response to a question about Merrill's joint venture with HSBC Holdings PLC, Mr. Komansky said that to some extent the venture has cooled its expansion a bit because of less demand for virtual investing in the wake of the dot-com implosion.
Launched in 2000, Merrill HSBC was intended to attract high-net-worth investors outside the United States. On Monday, Mr. Komansky said: "We still see that opportunity as a terrific opportunity over a period of time, but there have been fundamental changes in both the market and our original philosophy." Now Merrill HSBC is using more of a physical approach, putting investing kiosks in the banks, he said.
"We are slowing down our expansion; we're up and running in the U.K. and Canada, and building slowly in France." Merrill will look to "extract costs" from the venture over the next couple of months, he said.