DBRS Confirms Merrill Lynch & Co., Inc. and Related Entities

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of Merrill Lynch & Co., Inc. (“Merrill Lynch” or the “Company”) and related entities at their current levels. The confirmation reflects the Company’s continuing financial success, which in turn is based on its prominent position in the U.S. retail wealth management business, a more diversified portfolio of global businesses than its peer group, and a management focus on long-term cost efficiency and positioning for growth and profitability.

The distinguishing feature of Merrill Lynch among its broker/dealer peer group is its formidable retail brokerage/banking franchise, which is among the most successful wealth management organizations in the U.S. Recent initiatives in this segment have improved profitability and increased the proportion of recurring revenues to over 65% of the segment’s total.

Merrill Lynch is investing actively to reposition itself for longer term growth in all segments. The Company is actively increasing its presence in fixed income and commodity markets in order to recover market share that had been lost through downsizing in 2001, as well as to enhance its already strong capabilities in equities. Merrill Lynch Investment Managers, which has over US$500 billion in assets under management, is seeing improved financial performance in the wake of stronger equity markets although it struggles to attract new funds in a competitive market. New distribution channels for asset management products are therefore being explored.

New management in place since 2001 has taken a more disciplined approach to investment spending and cost management, which has brought the Company’s pre-tax margins in line with its industry peers after a couple of years of underperformance. A strong capital position and effective risk management controls should help Merrill Lynch to cope with the inherent volatility in the broker/dealer business. Litigation and regulatory risks are common across the industry but DBRS believes that settlements and adverse decisions will not be sufficient to negatively impact ratings, though resulting structural changes to the business could have a negative impact on efficiency and profitability.

Note:
Issuer ratings apply to all general senior unsecured obligations of the issuer in question.