Tokyo, Feb 12: US securities giant Merrill Lynch and Co said Thursday it will take over staff and branches of the failed Yamaichi Securities Co. Ltd. to become the largest foreign brokerage in Japan. Merrill Lynch will take on 30 offices and 2,000 staff from Yamaichi and set up retail banking operations, dealing with individual investors in a highly competitive market.It is the first time a foreign firm has dared move in on the Japanese retail brokerage market, which has been well guarded until now by local brokers. Analysts warned Japanese houses will feel the pinch, particularly as the move could signal a fall in income from commissions, on which the Japanese firms are heavily reliant. Yet Prime Minister Ryutaro Hashimoto endorsed the move with open arms when early discussions became public in December, saying it would bring market confidence.
"The initial investment is likely to be $ 200-300 million," Merrill Lynch International chairman Winthrop Smith said, although the full price of the transactionwas not disclosed.
The wholly owned subsidiary, Merrill Lynch Japan Securities, will begin operations within six months, he said, dependent on approval from the finance ministry. Although he expected losses in the first year of operation, Smith said he aimed to break even within three years. Asked whether the recent financial turmoil in Asia will undermine Merrill Lynch's securities business in Asia, Smith said "the current problems will create better opportunities in the longer term."
The firm already has 1,000 staff in Japan, operating corporate and institutional accounts. Former Yamaichi officials will be appointed as managers of the firm, although the specific number was not given. Yamaichi, Japan's fourth largest brokerage, collapsed in November with debts estimated at $ 29 billion in the country's biggest business failure since World War II. Yamaichi President Shohei Nozawa thanked Merrill Lynch in a statement for hiring its employees."I would like to express my heartfelt appreciation. I wish thesuccess of the new company," said Nozawa.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
