Saturday 22 July 2017

Merrill Lynch warns of 'hard' Brexit danger

Merill Lynch International Bank Ltd has its HQ in Dublin
Merill Lynch International Bank Ltd has its HQ in Dublin

Gordon Deegan

The directors of what was once Ireland's largest bank in asset size have fired a warning shot over the impact a 'hard' Brexit could have on its business.

Merill Lynch International Bank Ltd operates its HQ out of Dublin and a branch office in London.

Its 70 staff are well-rewarded for their work - new accounts show that last year the staff shared a pay-pot of $26m (€24.5m) - or on average $370,000 (€348,690) each.

In 2010, the bank was Ireland's largest in terms of asset size, having $483bn in assets. At the end of last year, this had reduced to $4.9bn.

Now, the directors have warned of the consequences of a hard Brexit for the bank.

The bank is owned by the Bank of America and the directors for Merrill Lynch International Bank Ltd address the Brexit issue in their new 2016 accounts.

They state: "If the terms of the exit limit the ability of Bank of America's entities to conduct business in the EU or otherwise result in a significant increase in economic barriers between the UK and the EU, those changes could impact the company's business, financial condition and operational model."

However, even before the Brexit referendum, the bank was scaling back its operations here.

During 2016, the bank continued to downscale operations, with the number of staff employed reducing from 173 to 70.

Numbers employed in 2010 by the firm totalled 2,049.

The new accounts show that Merrill Lynch International Bank last year returned to pre-tax profit to record pre-tax profits of $130.34m. This followed a pre-tax loss of $25m in 2015.

The bank's shareholder funds reduced by just under $1bn during the year decreasing from $5.94bn to $4.99m.

As part of its scaling back, the directors state that the company has largely de-risked itself from global markets and global banking activity and no longer originates new business.

The directors state that the bank retains a residual rates and currencies business where the market risk is hedged.

The directors also point out that the bank also retains a small global markets and global banking portfolio which is being run off.

The directors also state that the bank continues to rationalise its branch structure and closed its Frankfurt, Milan and Rome branches in 2016.

The firm's net interest income reduced from $61m to $20m driven by lower interest receivable on loans while the bank fees and commissions decreased from $44m to $17m as the bank is longer earning investment banking fees.

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