SINGAPORE, May 6 (Reuters) - Merrill Lynch & Co Inc MER.N sees no need for more capital as the subprime crisis nears an end, but expects U.S. banks with large exposure to consumers to be the next problem area, its chief executive told a Singapore newspaper.
John Thain told the Business Times he does not foresee the need to raise more capital, after the biggest U.S. brokerage raised billions of dollars, including from Singapore investment firm Temasek, after suffering massive subprime-related losses.
“Right now, our equity capital is $44 billion, which is just a little under its record high,” the paper quoted Thain as saying in a report published on Tuesday.
The Straits Times, which said Thain was in Singapore to meet the local banking regulator and clients, quoted him as saying Temasek no longer has any paper losses on its Merrill investment.
Temasek [TEM.UL] has invested $5 billion in the U.S. investment bank, paying $48 a share late last year. Merrill stock dropped to a 5-year low of $37.25 in March but closed on Monday at $51.75.
Thain told the two newspapers that while he believed the worst of the subprime mortgage crisis was over, the U.S. economy will go through a difficult period due to falling home prices, rising food and energy prices, and rising unemployment.
“The next problem area will be those financial institutions who have large exposures to consumer-related debt: home equity loans, auto-loan receivables, credit-card receivables. And they would be primarily regional US banks,” he told the Business Times.
Thain also said he is revamping both the risk management and compensation systems at Merrill.
“We will change the risk management culture. Risk now reports directly to me,” he told the Business Times. (Reporting by Daryl Loo, Ian Geoghegan)