Ups and downs in Japan
All the international businesses of Merrill Lynch's GPC group made losses in 2000-02 but the Japanese business suffered most. Now, after a restructuring, and a shift in focus towards high-net-worth individuals, the business is back on track and in profit.
At the end of the fiscal year (end of first quarter 2004), the number of accounts held by high-net-worth individuals had grown 28% and assets had jumped 77%. Total assets under management for all accounts is now ¥1.3 trillion ($11.8 billion).
Merrill's first foray into the Japanese retail business was in the 1980s but it struggled to compete with domestic stockbrokers and regulatory restrictions, and was forced to pull out in 1993. The following years, however, changed the competitive environment in Japan. Relaxation of foreign exchange controls meant Japanese investors could purchase foreign stocks, bonds and mutual funds, while the crash of Japan's stock market had left domestic brokers with serious financial problems.
The first hit at GPC
One such broker, Yamaichi Securities, declared bankruptcy and in 1997 Merrill took on 2,000 of its 7,000 employees and 33 of its branch offices, to launch a Japanese GPC business in 1998. The business model was aimed at offering comprehensive asset management services from small-lot investors up to high-net-worth individuals.