By Sean Cronin
UPDATE 1: US bank to open Kuwait, Qatar offices, expand wealth management business, CEO says.
Merrill Lynch & Co. plans to expand its operations in the Gulf in the face of the escalating US financial crisis, its chief executive told reporters in Dubai on Monday.John Thain said the US bank plans to open up new offices in Kuwait and Qatar before the end of the year and increase its wealth management business.
"In spite of all the financial difficulties and concern about the global economy we continue to be optimistic about our presence here [in the Gulf] and we are certainly committed to continue to grow our presence here," Thane said.
However, Thane said the Gulf is not immune to the global economic downturn and predicted economies in the region will slow.
"Clearly we are in a contracting economic environment. The US economy is contracting very rapidly and we are going to have a global economic slowdown," he said.
"To me the only question is how deep the recession will be and how long the recession will be. All parts of the world will be affected. There is no such thing as decoupling. The economies here will slow down it’s just a question of degree."
Merrill Lynch said in report earlier this month it had lowered growth forecasts for the UAE, Saudi Arabia, Qatar and Kuwait and that GDP growth for the region as a whole is expected to slow to 4.5 percent in 2009 from 6.2 percent this year.
Thane said oil prices will provide a "degree of protection" to Gulf states.
The price of oil is currently hovering around the $70 a barrel mark, significantly down from its all- time high above $147 in July. However, Merrill said in its report the price would need to fall below $50 before Gulf states would have to reassess their spending plans.
Merrill Lynch, which is being taken over by Bank of America Corp., reported a fifth straight quarterly loss as the credit crisis left the firm with at least $13.5 billion of writedowns.
Thain turned to Bank of America CEO Kenneth Lewis last month after the deepening crisis on Wall Street sent Lehman Brothers into bankruptcy.
The US government said earlier this month that it will pay about $125 billion for stakes in nine banks.
The investments, including $25 billion in Bank of America and Merrill, are part of the US Treasury's plan to spend $700 billion to prop free up credit markets amid the worst financial crisis since the Great Depression.
The Bank of America deal represents the end of Merrill's almost century-long history as an independent company.