Merrill: How to do a Conference Call Right

I wasn't on the Merrill call this morning, but David Gaffen was, and it seems from his live-blog - and the Merrill share price - that John Thain just gave the market a masterclass in spinning negative announcements.

Rember that Merrill lost $12 per share in a single quarter - this is for a stock trading in the mid-$50s. The number was significantly larger than official analyst expectations of less than $5 a share, and the mood was grim going into the call. But just look at how Thain played it:

• As is S.O.P. for such things, he explained that Merrill Lynch is very profitable in terms of its business lines. That's hugely important to investors, who like to be forward-looking rather than backwards-looking.
• He emphasized that Merrill has no liquidity problems.
• He said that there would be no more dilution of shareholders beyond the capital infusion announced a couple of days ago.
• He talked about the "Goldmanization" of the management structure, although he didn't use that word - essentially saying that he would stop the bank from being at the mercy of individual silos.
• Interestingly, he's scaling back trading operations, too - not very Goldmanesque, perhaps, but it is reassuring, especially given that, well, Merrill's traders aren't Goldman's traders.
• He was upbeat, using words like "very optimistic as we look out to 2008," which sets him apart from most other banking CEOs.
• He made it clear that he was drawing a line under these write-downs and that there wouldn't be yet another shoe to drop. One way of doing that is by putting on $23 billion of short positions against the CDOs exposures that Merrill retains.
• At the same time, he was clear that the loss was no accounting gimmick, that it was real, and that he does not expect the write-downs to become write-ups in future. Which is understandable, if he has $23 billion of short positions.
• He gave the impression that he had hit the ground running, in stark contrast to the notorious Al Lord call where the new CEO hadn't got a real handle on his financial institution yet. He didn't ask Merrill's shareholders to be patient as he settled in and developed a strategic plan, or anything like that.
• He dared the markets not to take him at his word, not only in terms of future write-downs in the CDO portfolio, but more generally in terms of unexpected black swans. They simply won't happen, he said.
• He came right out and said the stock was cheap at present levels.

The result of all this? A decidedly modest drop in the share price. Yes, it's down about 2.5% from where it closed on Wednesday, but it's up from where it closed on Tuesday, when the capital infusions were announced. And at $53.70, it's already up more than 10% from its 2008 lows. Well done, that man!

Update: John Carney compares Thain's performance, favorably, to that of Vikram Pandit at Citigroup.