HSBC, Merrill Lynch, Fold On-Line JV

by Carla Johnson, Investors Offshore, london

21 May 2002

HSBC and Merrill Lynch announced yesterday that they would discontinue their joint on-line wealth management partnership, with Merrill Lynch withdrawing from the venture altogether and the joint venture company, Merrill Lynch HSBC, being integrated into the HSBC Group.

The joint venture was launched amid much fanfare as a 50/50 venture between HSBC and Merrill Lynch in April 2000 to provide direct investment and banking services over the internet to mass affluent investors outside the US during the height of investor appetite for Internet businesses. At the time, the two firms said they would commit a total of US$1 billion over five years to the new venture.

In the past year, says HSBC, the venture has been ranked first in Europe for ‘Usability’ by BlueSky International, and ‘Most Consumer Friendly Online Broker’ by Investor’s Week magazine. In Australia, the company was named ‘Online Broker of the Year’ and ‘Best Online Broker for Experienced Investors’ by Personal Investor magazine and by yourbroker.com.au respectively. The Globe & Mail in Canada ranked MLHSBC a close second to the country’s market leading broker.

The brutal reality, however, is that at the end of 2001 the unit held about 100,000 accounts worldwide and had a net asset value of just US$109 million, far below predictions.

Although Merrill LOynch is withdrawing from the venture, HSBC said that the business will continue to use Merrill Lynch as part of its name and clients will still have access to Merrill Lynch research for 2½ years. Merrill Lynch will also continue to provide trading and settlement services for a transition period.

Keith Whitson, HSBC’s Group Chief Executive and Chairman of MLHSBC, said: “HSBC remains confident in the long-term prospects for MLHSBC’s business. We are pleased that the new structure allows for a continuing relationship with Merrill Lynch, including access to Merrill’s research for MLHSBC clients.”

Michael Marks, Executive Vice President of Merrill Lynch and Chairman of Merrill Lynch Investment Managers and International Private Client Group, commented: “We are very pleased to have reached this agreement with HSBC, which has resulted from a strategic review of all our business operations in the light of changed market conditions.”

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