Merrill Lynch was searching for a new chairman yesterday as Stan O'Neal stepped down after the biggest quarterly loss in the Wall Street brokerage's history.
Alberto Cribiore, a board member, will be temporary non-executive chairman and head a committee to find a replacement for Mr O'Neal, who left after his expansion into sub-prime loans and toxic structured credit products caused a $7.9bn (£3.82bn) write-down in the third quarter.
Mr O'Neal left yesterday with unvested shares and options worth about $160m. Merrill said his retention of the shares was in line with company policy and that he would get no payoff.
Names in the frame for the top job at the biggest US broker include Larry Fink, who heads the BlackRock money management firm Merrill bought half of last year, and John Thain, chief executive of the New York Stock Exchange. If Merrill stuck with tradition and appointed a true insider it could go for co-president, Gregory Fleming, a veteran Merrill investment banker.
Mr Fink and Mr Thain are perennial candidates for top Wall Street jobs. Mr Fink was in the running to take over from Philip Purcell when he quit as chairman of Morgan Stanley two years ago. Mr Thain is highly regarded for his leadership of the NYSE as exchanges have jockeyed for international position. He was also named as a possible successor to Chuck Prince if the Citigroup chairman were to step down.
Merrill last week announced a net loss of $2.3bn, caused by $7.9bn of credit-crunch write-downs at its fixed-income business. The write-downs – the biggest credit-crunch losses announced by any firm – were $3.4bn more than Mr O'Neal had predicted less than three weeks earlier. Support from the board would already have been shaky without his unauthorised approach to rival US bank Wachovia to try to secure a merger.
Merrill's board acted quickly to limit the damage from a disastrous few weeks. The company said it had agreed with Mr O'Neal that a change in leadership was needed for Merrill to refocus on its healthy businesses and draw a line under the debacle of its expansion into risky structured credit and sub-prime loans. Merrill will carry out a review to decide what to do with those businesses. The firm still faces critical challenges because it remains exposed to $20.9bn in sub-prime mortgages and collateralised debt obligations that could cause further write-downs if their value drops further. Mr O'Neal said: "I have been very fortunate to have spent the past 21 years at Merrill Lynch. The company has provided me with opportunities that I never could have imagined growing up."
His departure is a poignant final chapter to his rise from humble beginnings to head one of the top firms on Wall Street. The grandson of a former slave paid his way through college working at a General Motors factory in Georgia before gaining a scholarship to do an MBA at Harvard Business School. He got his first banking job with Merrill in 1986 at the late age of 35 but rose rapidly to head the firm and become one of the most successful black businessmen in the US.
He is the biggest casualty so far of the credit crunch that has left banks sitting on billions of dollars of potential losses as values of assets once thought safe slumped in the wake of the sub-prime credit crisis. He led Merrill into riskier businesses in search of high returns and turned it into a more hard-nosed company that showed him no mercy.