Can an old bull learn new tricks? That's been the question of late for Merrill Lynch & Co., the New York-based brokerage and investment bank. As Wall Street transformations go, Merrill's has been dramatic. Once relegated to the old guard as online rivals and new trading technologies chipped away at its core brokerage business (and profits), the company has since weathered severe swoops in the markets, made sweeping job reductions, paid steep penalties for its role in the Enron mess and repositioned itself in higher-margin business lines. Where once the focus was on volume, the new strategy favors profit-led growth produced by stronger channels through which high-margin services are sold, including M&A advisory, leveraged finance and structured products. Its latest full-year results show how far Merrill has come. Although 2004 net revenues of $22 billion were 16.5% below what they were in 2000, net income reached a record $4.4 billion, 29% higher than what the company reported for 2000.

Merrill's new course under Chairman and CEO E. Stanley (Stan) O'Neal has ignited a new period of innovation in finance as well, leading to three winning entries in this year's Alexander Hamilton Awards–two gold prizes in corporate finance and cash management, and a silver in insurance. At the heart of each project is a willingness to question old ways in a tireless effort to find greater efficiencies at lower costs. "There has been a real drive to expand our understanding, starting at a fundamental level of everything we do," says Russell Stein, Merrill's treasurer since 2003. "By [that year], the company's cost cutting had been so successful that we were able to start really taking a hard look at the business, in areas of liquidity modeling, risk and capital allocation."

As is true with all best-practices treasuries, Merrill's treasury team is considered a key source of strategic planning within Merrill's wider finance operations. "Treasury is an important intellectual factory for ideas, which brings the thinking about the balance sheet and income statement together," says Jeffrey Edwards, senior vice president and CFO, who formerly ran Merrill's investment banking division for the Americas. Edwards is leading an effort to improve return on equity (ROE) across the company, and as he puts it, "treasury is the engine at the heart of that." The new role includes a more traditional assignment for treasury on the "equity" side of the formula, with input on share buyback, dividend and preferred stock programs, as well as an analytical contribution on the "return" side, offering up ideas about asset growth, revenue profiles and acquisitions strategy.

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