John Thain… The Fixer

To be offered one of the toughest jobs on Wall Street is an opportunity afforded to few; to be offered at two i-banks at the same time is extraordinary.

Citi-group and Merrill Lynch at the end of last year had one man’s name at the top of their short lists: John Thain, Wall Street’s “Mr Fix-it”.

In the end, the former co-president of Goldman Sachs turned down Citi and accepted the role of chairman and chief executive at Merrill.

His rivals say he picked the right job. “Citi still has big problems; Merrill is a simpler story and it is fixable,” said one.

Mr. Thain, who developed a reputation as a fixer at the NYSE, has wasted no time trying to repair the damage at Merrill.

It’s been nearly 70 days since he took on the job and so far he has managed to patch up Merrill’s wounds with more than sticking plaster.

He has tapped into the cash-rich sovereign funds to raise $13 billion in new capital. Now he says “We will not have to go back to the market to raise capital."

Mr. Thain disclosed $15 billion of sub-prime mortgage-related write-downs - the largest quarterly loss since the broker was founded 94 years ago. He accepts there could be more write-offs, but says they are unlikely to be on the same scale.

He has also overhauled risk management, to ensure the same mistakes are never repeated.

He said he wants every part of the bank thinking about its actions, and the likely knock-on effects of other parts of the bank

Now he wants to focus on rebuilding the firm. He is trying to find ways to further exploit growth opportunities in its international wealth-management and banking businesses as well as explore the synergies between them.

“In terms of growth, we will focus our opportunities outside America because that’s where the world’s economy is growing. If you exclude our high-net-worth business, about 60% of our revenues are already generated overseas,” he said.

The plan is to expand wealth-management operations as well as the equities and fixed-income arms further into the Middle East, Russia, India, China and Brazil.

Mr. Fix it is likely to focus on China, but Merrill has to apply for a licence to operate there, a process that it is about to start.

Another area where Thain wants to concentrate is operating as a single firm across the group. The biggest implication of this is how staff would be remunerated?

“Over the last few years Merrill had moved to compensating people more on their individual businesses and I want to move towards paying them on the basis of how well the firm does first and also paying them using equity so they have a longer-term perspective,” he said.

He takes a dispassionate view of the financial meltdown on Wall Street. He said: “We won’t overreact to that, we’ll be prudent in managing our expenses but we want to maintain our strategic direction.”

As credit issues begin to surface on all forms of consumer lending, from auto loans to credit cards and in consumer lending. Thain is not predicting a quick cure; he foresees a wave of lawsuits as people seek compensation for their losses and problems in the capital markets.

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Further read >> John Thain on His New Job as CEO of Merrill Lynch

If he can manage to steer Merrill back on course in the first half, and if the economy comes right again in the second half, as Fed chairman Ben Bernanke predicts, then he and the bank should be in a good position to sail full steam ahead.