Stunned Lehman and Merrill staff eye shifting landscape

By Saeed Azhar and Denny Thomas

SINGAPORE/SYDNEY (Reuters) - Employees of U.S. banks Lehman Brothers and Merrill Lynch in Asia struggled to come to terms on Monday with the speedy redrawing of Wall Street's financial landscape, as Lehman filed for bankruptcy and Merrill was sold to Bank of America.

"It's a little surreal," one long-time Merrill employee in Hong Kong told Reuters. "The end for Lehman was pretty ugly. They just ran out of options and time.

"It's hard to believe there will be no more Merrill Lynch. It's just shockingly fast how it happened."

Lehman employs about 3,000 staff, excluding the India back office, in Asia and the region has proved a sweet spot for the U.S. bank as it made inroads into new markets.

The Wall Street bank had expanded aggressively in Asia in the last two years, ramping up foreign exchange and investment banking operations in Singapore, Hong Kong and Mumbai.

It was also planning a bigger presence in China where it recently advised Aluminum Corp of China (Chinalco), which teamed up with Alcoa, on its $14 billion purchase of a stake in Rio Tinto.

The bank has been representing buyout firm Silver Lake in its bid for a stake in the mobile handset business of Chinese telecoms gear maker Huawei Technologies, but Lehman's downfall left the fate of its advisory mandates uncertain.

"That hasn't been thought through yet," said an Asia-based Lehman investment banker, who did not want to be identified.

"Nobody's been down this road before."

Another Lehman banker in Asia said: "On the investment banking side, we need to take care of existing business with clients. Obviously our clients are concerned. There is an existing mandate issue across the globe."

UNCERTAINTY REIGNS

For many employees, news was hard to come by as Monday was a holiday in Hong Kong and Japan -- home to Lehman's larger Asian offices.

At Lehman's Singapore office at the downtown Suntec Tower, only a trickle of staff arrived for work, dodging reporters' questions. At a nearby coffee bar, two Lehman staffers said they had been called at 6 a.m. (6 p.m. EDT Sunday) to be at work at 7 a.m.

Asked whether it was business as usual, a Lehman trader contacted by telephone told Reuters: "What business is there? There's nothing to do. All I've heard is what's being reported on the news."

A colleague in Hong Kong, talking by telephone and asking not to be named because of the sensitivity of the situation, said: "There are very few instructions at this point. I just need to look around and see what opportunities there are. Basically, I have to figure out something new to do.