Dominion Bond Rating Service is confirming all ratings and trends on brokerage giant Merrill Lynch & Co. Inc., following the completion of its annual review.
The corporate rating for Merrill Lynch & Co., Inc. was confirmed at AA (low), with a stable trend.
The rating agency announced today that the confirmations reflect:
- Merrill’s strong complementary franchises in institutional investment banking, where it is a leader in its key markets, global retail brokerage and asset management;
- the growth of its U.S. banking strategy, which helps to better penetrate its existing franchises;
- the company’s reasonable financial risk profile; and
- its more expense-focused culture, given the repositioning and resizing over the past several years.
Notwithstanding these strengths, DBRS cautions that Merrill continues to be challenged by uncertainties related to the timing of a more meaningful market recovery, an intensely competitive environment, a somewhat higher credit risk profile relative to historical levels, regulatory scrutiny, and litigation risk.
“Similar to its competitors, litigation risk remains a concern, as the legal environment in the United States has become more challenging over the past year,” DRBS said in a release. “Despite recent settlements and improved business practices, it is too early to predict the outcome of class action suits, but DBRS continues to believe the magnitude of potential settlement costs will not impact ratings, although adverse decisions could negatively affect reputation as well as cause a structural shift in the way some base businesses are conducted.”