As banks have made inroads into Wall Street, brokerage firms like Merrill Lynch have responded by offering loans to small and midsize companies. But lately at Merrill, the push into lending has hit a rough patch.
For a second consecutive quarter, Merrill Lynch executives found themselves discussing an obscure part of the firm’s operation yesterday, as analysts expressed concern that a bigger problem might be brewing. Merrill said it set aside more money in the third quarter, though executives would not say how much, to cover potential losses from loans to brokerage clients.
The firm added $60 million to its reserves against loan losses in the second quarter, an amount equal to about 1 percent of the $6 billion it has in outstanding loans though its Business Financial Services unit.
Merrill’s chief financial officer, Ahmass Fakahany, responded to several questions from analysts on a conference call by saying that the firm was confident that it now had adequate reserves against potential loan losses. He did not mention that the problems in the lending unit had led to a management change.
For this complete story, please visit Problems at Lending Unit Put Merrill Lynch on the Spot.
