Michael Marks, the senior British board member at Merrill Lynch, lashed out yesterday at a City whispering campaign against Smith New Court, the former top UK trading house bought last year by the US investment banking giant.
He described as "absolute garbage" claims that Smith's dominant market- making share had slipped beneath that of rivals, and that the loss reflected a culture clash with the more cautious US parent.
"It is very easy, when a company gets taken over, for competitors to whisper into the ear of institutions, `Say, have you noticed a change at Merrill Lynch?'," Mr Marks said. "We are getting a little ill-tempered at all this talk."
But several big institutions said they had noticed a change of style at Smiths, which was the archetypal City trader. "Our relationship with them is not as good of late, they are not as good with ideas, they are not quite as competitive as before," said the head of UK equities at a large fund manager.
Another investment manager said he was surprised to find Smiths no longer among the top five brokers it uses. "Merrills appears to have placed a corporate leash on them, and the competition from BZW, UBS and County NatWest has become really intense," the manager said. A third said: "We are very aware of the low morale there. It's a cultural struggle, and the style has been affected. Smiths are not punting like they used to."
Several institutions said they had heard claims that Smiths' market-making share, which traditionally stood at around 20 per cent, had slipped below that of arch-rival BZW. "This is absolute garbage," said Mr Marks, former chairman of Smith New Court and now merger co-head of global equities on Merrill's board. "Our market share is unaltered, we have been over 20 per cent and had to tell the boys to take it easy."
He rejected talk of a more cautious style being imposed on Smiths traders by Merrill Lynch, whose American retail broking tradition is very different from the traders' risk appetite. "We are still doing the business, huge deals, it is untouched," Mr Marks said.
In an attempt to ease growing tensions in the merged operation, which had prompted several key desertions to rival investment banks, Merrill has moved Paul Roy back to take control of the London research operation. The former chief executive of Smith New Court, he is well respected and understands the frustrations of the UK researchers.
Merrill was hit late last month by the defection of its two top-ranked media analysts, Richard Dale and David Forster, to Salomon Brothers.Reuse content