Merrill Lynch announced the formation of a new executive management committee in Asia yesterday (Monday), promoting two of the firm's most senior originators and retaining the services of one of two existing investment banking co-heads.

In an internal memo penned by global investment banking head Sam Chapin, Merrill's said the three new co-heads of Asian investment banking would be: KL Wong, currently vice Chairman of Asia and head of Hong Kong investment banking; Erh Fei Lu chairman of Merrill Lynch China and Samuel Poon, who has run Asian IB alongside Rahman since November 2001.

At the same time, Chapin said Australia is being split away from non-Japan Asia and its current head of Australian investment banking, Kevin Skelton, will report directly to New York instead.

The latest management shuffle follows the appointment last December of Stanley O'Neal as global CEO and Kevan Watts as Chairman of Asia and Europe. Like all of his counterparts across the global investment banking industry, O'Neal has a mandate to increase profitability and senior Merrill bankers say this was underscored at a global conference call yesterday emphasizing "revenue generation and cost cutting."

The firm is said to employ 64 investment bankers in non-Japan Asia, although the number will creep up to 70 again in June after a number of analysts are confirmed. However, some local staff are convinced another round of cuts is likely taking the number down to 60. New York management are said to believe the cost base in Asia is still too high because the region is generating few deals and it is expensive to maintain the lifestyles of senior expatriate bankers based here.

Yet thanks to one deal, Merrill's investment banking group has had the best start to 2003 of any of its rivals. An extremely astute market call and aggressive move to underwrite a $1.5 billion bond issue for Hutchison Whampoa in February has netted the bank one of the most profitable Asian bond issues in recent history. According to the 10-year deal's offering prospectus, Merrill's garnered $6.75 million from fees of 45bp and a further $21.6 million for "certain financial hedges, financial advisory services, structuring services and other expenses."

To put what translates as a bought deal into perspective, Merrill's is believed to have made from one deal, more than any other investment bank made from the whole G3 primary bond market in Asia last year, excluding related swaps activity.

Winning the deal was viewed as a huge coup for relationship manager KL Wong and it has been reflected in his elevated job title. Internally the new management committee is viewed as a means of giving two of the firm's most successful and seasoned orginators a wider platform to demonstrate their leadership abilities. It also marks a renewed emphasis on Greater China, where Merrill's has been historically very strong at winning and executing mandates.

Where Poon is concerned, the former head of Asian DCM has long been considered a protégée of Watts and is renowned for his focus on profitability rather than empire building. Under the new structure he becomes COO of investment banking.

As for Rahman, the bank says the former head of Asian ECM head is "evaluating several internal options," but it seems almost certain he will transfer out of Asia. Fellow ECM heads have expressed sadness and surprise at the news, since Rahman has always been regarded as highly effective and under his leadership Merrill's was consistently at or near the to the top of the equity league tables.

Prior to becoming co-head of Asian IB in November 1999, he had been head of Asian ECM since the mid 1990's and before that worked on the Asian ECM desk in London. Indeed, he has been at Merrill Lynch since leaving Cambridge University in 1987 and in Asia created a tight knit ECM group, embracing fellow Cambridge contemporaries Angus MacPherson, the current head, who went to Peterhouse College and Singapore-based Ben Iversen, who went to Jesus.

Rahman's departure will also be a loss for the Hong Kong based charity Operation Santa Claus, for which he has raised hundreds of thousands of dollars during his time in Asia.

Given that Merrill's now has three co-heads of Asian investment banking, it is hardly surprising to find that it also has two regional chairmen. Raymundo Yu shares the role with Watts, having returned to Asia earlier this year to replace Chek Low who resigned in the wake of Watts return.

Yu has already done one stint as chairman, replacing Watts in July 2000 after the latter became co-head of global investment banking. He continues to run private banking across Asia and Europe and has been with Merrill Lynch since 1981. Current and former colleagues say that while he has never been prominent in investment banking circles, he has been an extremely successful and popular leader on the private banking side.