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NEW YORK (Kyodo) One of the major lessons Merrill Lynch Japan Securities Co. learned after the drastic restructuring of its retail brokerage business was that “people were key” in returning the firm to profitability, said President Izumi Kobayashi.

“Thinking back on five years’ history, we found out that people are the key, that good leadership and teamwork changes directions in times of difficulty,” Kobayashi, 47, said in a recent speech at New York’s Japan Society.

“And even if the company CEO is just a normal person and pretty young,” she said jokingly, “still, having good people, we can recover.”

Kobayashi became both the first female president and first Japanese president of Merrill Lynch Japan five years ago. She has led a remarkable turnaround at the local unit of U.S. brokerage Merrill Lynch & Co.

After weathering major losses and job cuts in recent years, the unit’s retail brokerage division has seen pretax earnings rise again, making it one of the most profitable retail securities brokers in Japan.

“I think we’ll have good results in 2006,” she said.

Outlining the challenges Merrill Lynch faced when she took over, Kobayashi also spoke about the strategy used to overhaul the struggling retail business, which centered on the “high-net-worth segment business.”

“In 1997, we were a hero,” she said, referring to the brokerage’s takeover of 33 branches and hiring of over 2,000 former employees of the defunct Yamaichi Securities Co. that year.

“But at the end of 2001 and 2002,” after heavy losses of over 100 billion yen and cutting the 3,000-strong workforce nearly in half, “we were treated as an enemy of Japan.”

While external market conditions in the late 1990s contributed to the company’s stumbles, Kobayashi said an analysis of its failures also found internal communication lacking and cultural differences and misunderstandings much to blame, starting with the difficulties the natives have in pronouncing the brokerage’s name.

“Too many Rs and Ls,” she explained. “I’m working at this company for over 20 years, and my mother still cannot pronounce it.”

Other major issues included deep public suspicion of securities firms and foreign capital and services.

“The timing was too early for the Japanese market” in the 1990s, she said, adding people were not yet comfortable with disclosing their financial details to a third party, such as a consultant.

Kobayashi attributed the brokerage’s return to profitability partly to a revamp of its business plan to focus on its strengths with a “pure Japan-oriented vision,” and developing partnerships, including a private banking venture with Mitsubishi UFJ Financial Group Inc.

“We completely changed (our) business model and focused on working together as one organization,” she said.

Asked about her experience as a company president in a country where CEOs are usually males with an average age of about 60, Kobayashi said she has learned to use her position to her advantage after initially struggling.

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