Bank chief quits after biggest-ever losses

The credit crunch claimed its biggest corporate victim yet today after the embattled chief executive of investment banking giant Merrill Lynch stepped down.

The widely-expected departure of Stan O’Neal came after Merrill posted third-quarter losses of $2.3bn US (€1.6bn) last week – the biggest loss in the bank’s 93-year history.

Merrill Lynch was hit by huge write-downs of $7.9bn US (€5.47bn) on its exposure to bad mortgage related debt following the collapse of the US sub-prime mortgage market and losses from loans used for corporate takeovers.

While Mr O’Neal, who has been with the bank for 21 years, has paid the price for the unwinding of Merrill’s high-risk strategy, he is reported to be leaving the group with a pay-off worth more than $150m US (€104m).

The company said: “Mr O’Neal and the board of directors both agreed that a change in leadership would best enable Merrill Lynch to move forward.”

Merrill said it hoped the move would help it focus on strengths elsewhere in the business, which performed well apart from the mortgages blow.

Mr O’Neal has also come under pressure after reports that he began informal talks about a possible merger with US bank Wachovia without the knowledge of Merrill’s board.

The 56-year-old, who has led Merrill since December 2002, said today he wished his former colleagues a “successful future” following his retirement.

Merrill is one of a host of major investment banks which has suffered due to the turmoil in global financial markets.