A windfall for Merrill Lynch SA

Richard Stovin-Bradford

Richard Stovin-Bradford

Necessity may turn out to have been the mother of invention in the case of the local operations of US investment bank Merrill Lynch, which are likely to benefit significantly from Bank of America's $50billion bail-out of its parent company.

The hastily-arranged deal brokered over the weekend between Thain and Lewis could give the South African operation the financial muscle it needs to grow its sub-Saharan Africa footprint, say sources close to the company.

When Lehman Brothers' shares were pounded by speculators last week and Merrill Lynch's chief executive John Thain saw the contagion as his group's shares lost 40percent of their value in a week, he moved swiftly.

In doing so, he helped create an institution almost double the size of Citi, one of the largest banks in the US.

Seeing that Barclays was possibly talking to Lehman Brothers and then hearing that Bank of America (BoA) might be a bidder, he moved quickly to meet his BoA counterpart Ken Lewis and book a meeting with BoA on Saturday.

A deal was struck within 48 hours of negotiations.

"This transaction gives BoA an international footprint outside the US and, especially, an emerging markets footprint," one source said.

It would be "business as usual" at Merrill Lynch's SA operations, the sources said.

Two global conference calls on Monday from the New York head office - the first to the bank's investors, the second to all staff around the world - helped to calm nerves.

Job losses look most likely to strike in the corporate treasury and head office functions in the US and not in the banks' outposts - because of a general lack of overlap between the two businesses.

"The local operation is likely to be unscathed - in fact we are hopeful the bigger muscle will help us to increase our presence," one source said.