Merrill Lynch has pulled out of the retail securities business in Puerto Rico. The firm sold its branch operations and client lists to Santander Securities Corp. in late February for 15 million dollars. It said that its investment was not paying off.
"We sold our private client operations in order to maintain acceptable levels of return on equity," a Merrill spokesperson says. "A substantial capital investment would be needed" there, and the firm didn't foresee an acceptable return.
Apparently, the securities market in Puerto Rico is a tough one, even for mighty Merrill.
"Investors in Puerto Rico generally do not buy stocks--they are fixed-income investors," explains Sydney Prevor, president of a small broker/ dealer in Santurce, Puerto Rico. Online trading firms are actively courting those who do buy stocks, and the government is phasing out a tax credit that now generates investment money known as 963 funds, Prevor says.
Before the sale, Merrill Lynch had 19 registered reps and 23 support staffers located in two retail branches. All but two of the Merrill brokers transferred over to Santander, says Jesus Mendez, Santander managing director. Merrill's branch office in Mayaguez became a Santander branch, but the Merrill office in San Juan was closed. Brokers there were transferred to Santander's office across the street, he says.
As part of the deal, Santander also agreed to sell Merrill Lynch's mutual funds in Puerto Rico.
"The securities market here is definitely a viable one," Mendez says. "That's why we made this investment."
Merrill says it will remain active in the institutional business in Puerto Rico, with five employees in institutional sales and seven in government securities sales located in San Juan.
As a result of the sale, Santander says it becomes Puerto Rico's second largest broker/dealer with 57 brokers in 10 branch offices. Santander is a subsidiary of Banco Santander Central Hispano, S.A., a leading financial group in Spain and Latin America.