People used to talk about “first mover advantage” but sometimes going second can have a distinct advantage. CItigroup’s conference call left analysts and investors concerned that the bank could not confidently discuss its write-downs, and worried that more write-downs for asset backed securities may yet loom in the bank’s future. Merrill Lynch’s team has done a much better job at assuring those listening into its call that it has a firm grasp on its credit market exposure.
Perhaps the first correction from Citi’s approach is that where Pandit sat out most of the question and answer session, Merrill’s Thain stayed involved in the call the entire time. When UBS’s Glenn Schorr asked about whether write-downs on illiquid assets were deep enough that the firm could now transfer them at par value–basically, whether they had marked the assets to a market-clearing price–Thain jumped in and confidently announced that he was confident the assets were saleable as now valued.
The next correction was demonstrating a firm understanding of the risks faced by the firm. Where Citi CFO Gary “the Critter” Crittenden was forced to admit he had a weak understanding of many of the risks involved with asset backed securities, Merrill chief financial officer Nelson Chai and Thain both began discussing how Merrill’s $23 billion in short hedges reduced its risk in the CDO hedges.
It’s a marked contrast in how Citi handled its earnings call. Thain displayed a hands-on style, and obviously had drilled rather deeply into his firm’s numbers. The ghost of O’Neal has been exorcised.
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Merrill Lynch
Merrill Lynch Gives A Lesson In How To Talk To The Market
Discussion Of Write-Downs Much Better Than Citigroup
By Bess Levin
Comments (13)
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Hey, hey. its better to be approximately right than precisely wrong. Who will take bets on this one? Citi v. ML
is there some reason you are trying to give crittenden that especially obnoxious nickname?
That’s b/c Thain has actually run something with more than 100 employees, unlike Viki over at Citi.
On another note, congrats on 2 posts before 9am (I don’t count opening bell, but if you do then congrats on 3). Maybe we’ll get a couple more by noon?
On the contrary you are taken in by the dog and pony show that was Merrill Lynch call, it is absolutely b.s. that anyone is saying they know the book is marked right, Chai should have the integrity to admit there is ample possibility for further revaluations of over $30 billion ABS of CDOs if you don’t believe it I refer you to discussion of the basis risk on hedging
Ok first, does no one else find it strange (at the very least) that the CFO of the largest (“largest”) Financial company in the world doesn’t understand the business in which his company is engaged? Like, maybe “the Critter” could have had a pow-wow with the abs/structured finance people, maybe a few hrs worth of ppt on the stuff, no?
Also, how come no attention to Ken Lewis. That guy is single-handedly gutting the cap markets & banking side of BofA faster f&ck, destroying any inroads (or diversification benefit) the firm had made in traditional Wall Street businesses. How long before BofA is a pure-play consumer bank, or on the other hand, before KL gets das Boot?
Anal_yst did you listen to the call or are you going on the assumption that Jno. Carney has any about whether or not Gary knows ABS?
So apparently all one must do is be confident when lying your asses off. Gee I’ve been going about this ALL wrong.
MS
Bianco just bashed ML # on his call this morning
@ 9:10
someone’s been reading their black swan / fooled by randomness
Ken Lewis will remain in his job BECAUSE he’s turning the firm back into a “pure-play consumer bank”–the way his shareholders want it to be. (What that implies may be another issue.)
I’m with InIT4the$ – The experience of the ML team was more important than that Citi was “first mover.” Citi would still have been inept.
Did not listen to the call, going purely on rank speculation, heresay, and Carney “the Carnie”‘s word alone.
@ 10:07 am
afraid not, they must have borrowed it form some guy back in the early 1900′s who probably borrowed it from some guy back in the early 1800″s. What is that saying…? The only one who knows he said something new was the first man in existence?