AFF5050 ASSIGNMENT MERRILL LYNCH MONASH UNIVERSITY.docx

AFF5050 ASSIGNMENT MERRILL LYNCH MONASH UNIVERSITY.docx

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AFF5050ASSIGNMENTMERRILLLYNCHMONASHUNIVERSITY

ExecutiveSummary

Thepurposeofthisreportistoanalyzethechoseninternationalbank,whichisMerrillLynch,basedoncurrentfinancialposition,pastperformanceandfutureexpectationsandtheimpactofglobalfinancialcrisisin2008.Informationiscollectedfromvariousnewspapers,annualreports,journalarticles,itsofficialwebsitesandotheronlinesources.

Thisreportbeginswithanoutlineofthehistoryregardingthisinternationalbankandthenexploresbothcurrentinternationaldevelopmentsandfurtherdevelopment.Afterareviewofitsbackground,wefoundthatMerrillLynchisoneoftheleadingplayersininvestmentbankingindustry,anditsproductsandservicesofferedarealsorepresented.

Next,thefinancialstrengthandproblemswillbeexaminedthroughanalyzingthecomparisonbetweenthehistoricalandnewestfinancialinformationfromMerrillLynchdisclosures,andwewilldiscussthepossiblereasons.Moreover,anin-depthfinancialperformanceofMerrillLynchwillbemeasuredbysomekeydata.ThenweanalyzethecompetitivepositionofinvestmentbankingindustryandthefutureexpectationofstrategiesofMerrillLynch.

Finally,wediscusstheimpactoftheglobalfinancialcrisis.Intermsoffinancialstrength,whenwecomparedMerrillLynch’sperformancewithhistoricalfinancialdata,itgainedsustaineddamagefromthecreditcrunchsince2007butitsfinancialsituationturnedbetterinthefirsthalf2009becauseofitssuccessfulrestructuringplanandfuturestrategy.Ontheotherhand,asthelastannualdataprovidedin2011,thefinancialpositionofMerrillLynchisnotoptimisticasshownbytheirpoorkeyratios.Inaddition,theimpactofthesub-primecrisisonMerrillLynchwillbeevaluatedanddiscussed.

TableofContent

1.Introduction4

1.1.Purpose4

1.2.Scope4

1.3.Methodology4

1.4.Limitation4

2.HistoryoftheBank5

2.1.DomesticDevelopment5

2.2.InternationalDevelopment6

2.3.FurtherDevelopment6

3.Products/ServicesofMerrillLynch7

3.1.WealthProtection7

3.1.1.HedgingandLiquidityStrategies7

3.1.2.TrustandEstatePlanning7

3.2.Cross-BorderSolutions7

3.2.1.ForeignExchangeServices8

3.2.2.MulticurrencyInvestments8

3.2.3.GlobalAccountStructuring8

3.3.BankingandCashManagement8

3.4.TrackingProgress8

3.5.ProfessionalMoneyManagement8

3.6.Investments9

3.7.Advice&MarketIntelligence9

4.FinancialStatementAnalysisofMerrillLynch9

4.1.CurrentSituationofMerrillLynch10

4.1.1.DecreasedCreditRating10

4.1.2.ChangeinFinancingStructureandMerger10

4.1.3.ChangeinLeverageRatio11

4.2.PastPerformance2006-201111

4.2.1.EarningsStatements2006-201111

4.2.2.BalanceSheetandInterest-bearingCapitalOperation12

4.3.RatioAnalysis13

4.3.1.ProfitabilityRatios13

4.3.2.DebtRatios15

4.3.3.SharePriceandMarketValueRatios15

4.4.MarketCompetition17

4.4.1.MarketValueAnalysis17

4.4.2.MarketShareAnalysis18

4.4.3.DataAnalysingofCompetition19

4.5.FutureexpectationofMerrillLynch21

4.5.1.RebuildReputation21

4.5.2.SmallAcquisitionsandInvestments22

5.ImpactoftheGlobalFinancialCrisis（GFC）22

5.1.MerrillLynchGotLotsofCDOsandIlliquidityofCDOs23

5.2.TheDefaultandBadInvestments23

5.3.LosingConfidentfortheTradingPartner24

5.4.HowdoesMerrillLynchResponding?

24

6.ListofReferences26

1.Introduction

1.1.Purpose

Thepurposeofthisreportistoprovideanin-depthanalysisforMerrillLynchinvestmentBank,whichisoneoftheleadingplayersininvestmentbankingindustryinglobe.

1.2.Scope

MerrillLynch’sevaluationextendstoitsoperationsaswellasitsinternationalexpansionandwillincludeanalysisofMerrillLynch’spastperformanceandfutureexpectation.MeanwhileweevaluatedMerrillLynch’scurrentfinancialsituationandtheproblemscausedbyglobalfinancialcrisis.

1.3.Methodology

Theresearchconductedforthisreportwasprimarilysourcedfromtheirrespectivecorporatewebsites,onlinejournalarticles,newspapereditorialsandvariousliteraturesoninternationalbanking.

1.4.Limitation

Sincemostofourinformationwascollectedfromtheinternet,ourinformationshouldbereliablebutcouldstillberestrictedbysomemisleadingnews.Moreover,themaximumwordlimitof4000wordshasrestricteddeeperdiscussion.

2.HistoryoftheBank

2.1.DomesticDevelopment

MerrillLynchisnowasubsidiaryofBankofAmericawhichfocusesontheinvestmentbankingandwealth（MLOfficial,2011）.Beforetheacquisitionin2009,itwasapubliclyownedcompanyandtradedontheNewYorkStockExchange.ThecompanyisfoundedbyCharlesE.Merrillin1914onWallStreet,NewYork.（NewYorkTimes,1915）Mr.MerrillwasoneofthefirstNewYorkstockbrokerstobringuptheideaofsellingstocksandbondsnotonlytorich,alsotosmallinvestors.（Nocera,1998）In1915,EdmundC.Lynch,joinedLynch,andthenamewereofficiallychangedtoMerrill,Lynch&Co.Andin1916,WinthropH.Smithjoinedthefirmaswell.

There’samajorrestructuringin1930,MerrillLynchspinning-offthebrokeragebusinesstoE.A.Pierce&Co.（TimeMagzine,1935）thenthecompanybegantomainlyfocusoninvestmentbanking,andmadelotsofcleverinvestmentstobuildthereputationasinvestmentbankers.OneofthesignificantfinancialinvestmentsisacquiringtheSafewayfoodchainin1926,basedontheinvestmentserviceprovided;Safewaybecamethethirdlargestgrocerystorechainwhichhasmorethan3500storesacrosstheUSbythemid-1930s.（LosAngelesTimes,1925）

In1940,MerrillLynchmergedwithE.A.Pierce’s&Co.andCassatt&Co.wasrenamedMerrillLynch,E.A.Pierce,andCassatt.（Wiley,1999）In1941,aftertheemergingwithFenner&Beane,thecombinedfirmbecametheleaderintheU.S.andchangednametoMerrillLynch,Pierce,Fenner&Beane.（GreenwoodPublishingGroup,1985）In1964MerrillLynchenteredthegovernment-securitiesbusinesswhenitacquiredC.J.Devine&Co;aftertheacquisitionthefirmdeterminedentryintothefieldsofrealestateandassetmanagement.Thisacquisitiongiveslotsofbenefittothefirmgrowthin1970sand1980s.（TimeMagazine,1964）.

2.2.InternationalDevelopment

Duringthe1970sthecompanybegantodiversifyandexpandinternationally.ThefirstinternationalofficeofthebankwasopenedinLondon1960,and4yearslateritopensthefirstTokyoofficewhichisthefirstU.S.securitiesfirminJapan.（Markham,2002）

In1980s,thecompanycontinuedtoprosperinAsiaPacificmarket.（SreeKumar,2008）In1995,itbecamethefirstforeignsecuritiescompanytoenterChinaaswell.

SinceMerrillLynchhasbeenpurchasedbyBankofAmericain2009,itprovidescomprehensivemarket,industry,productandadvisorexpertisetomorethan140000businessesaroundtheglobe.

（GlobalWealth&InvestmentManagement,2010）

2.3.FurtherDevelopment

Afterthefirmwentpublicin1971,thefirmwaswellknownforitsGlobalPrivateClientservices.Inmid-1995,sincetheacquisitionofSmithNewCourtPLC,MerrillLynchbecamethelargestinvestmentbankintheworld.InSeptember2008,becauseofthehugelossfromdropinvalueofCDOsandbadinvestments,MerrillannouncedthatithadagreedtobepurchasedbyBankofAmerica.（NewYorkTimes,2012）

3.Products/ServicesofMerrillLynch

Productsorservicesthebankisofferingaretheillustrationofthescopeinbankingactivitytheparticularbankiscovering.MerrillLynchoperatesawidevarietyofbankingbrandsthroughoutitsoperationinEurope,NorthAmericaandAsia.Withitlargefinancialassets,it’sprovidesawiderrangeofproductsofmainlyfinancialservice.

3.1.WealthProtection

WealthprotectionisviaHedgingandLiquidityStrategiesandTrustandEstatePlanningtoprotectyourwealthandlegacyduringyourlifetimeandforgenerationstocome.

3.1.1.HedgingandLiquidityStrategies

Investorscanuseallkindsofproductsandstrategiestoensurepersonalassets,fromavoidimpactofmarketvolatilityandsatisfytheneedsoftheindividualliquidityneeds.

3.1.2.TrustandEstatePlanning

BackedbyMerrillLynch’snetworkofseasonedtrustandestateplanningspecialists,Merrillwillassisttheircustomerstoestablishtrustsandpersonalholdingcompaniestohelptheircustomertoachievewealthprotectionandtransfergoals.

3.2.Cross-BorderSolutions

CrossbordersolutionsisviaForeignExchangeServices,MulticurrencyInvestmentsandGlobalAccountStructuringtohelptheircustomertoefficientlymanagecurrencyexposureandinvestmentrisk,whileseektheopportunitytogainprofit.

3.2.1.ForeignExchangeServices

MerrillLynchoffersforeignexchangeproductsdesignedtosatisfiedcustomer’sinvestmentandtradingneeds,includingspotandforwardtransactions,hedgesforcurrencyrisk,structuredproducts.

3.2.2.MulticurrencyInvestments

CustomerscanusemultiplecurrenciesininvestmentoptionsbasedontheMerrillLynchGlobalSelects,includingeuro,U.S.dollar,BritishpoundandJapaneseyendenominatedshares.

3.2.3.GlobalAccountStructuring

Merrilllynchthoughhelpcustomertostructureglobalaccountsintheirpreferredcurrency,tomanageorreducethevarietyofrisksassociatedwithglobalinvestments.

3.3.BankingandCashManagement

ThoughMerrillLynchInternationalCashManagementAccount,MerrillLynchInternationalAssetPower,MerrillLynchInternationalBankLimitedandSecurities-BasedLendingtohelptheircustomertoachieveflexibilitytopursuetheirpersonalinvestmentobjectives.

3.4.TrackingProgress

MerrillLynchprovidestheircustomertoviewadetailoftheiraccountinbothwithinMerrillLynchand