There are few firms left on Wall Street with a culture as clearly defined as Merrill Lynch's. It still has 15,000 brokers spread across the US who sell stocks to retail investors. Its leaders - boisterous back-slappers from Irish-American families - have tended to be drawn from this "thundering herd".

Then there is Stanley O'Neal. Last week Merrill named Mr O'Neal president and chief operating officer, making him the heir apparent to David Komansky, the current chairman and chief executive, who says he plans to retire in April 2004.

It was a historic choice. Should he succeed Mr Komansky, Mr O'Neal would be the first African-American leader of a big investment bank. He would be the first Merrill chief who had not worked as a broker. Already he is the only top-tier global financier on Wall Street who has attended a one room schoolhouse, picked cotton and worked on a car assembly line.

Merrill may need a change. Business is bad and getting worse. Competition from bigger, better-capitalised companies, such as Citigroup, means Merrill is no longer the biggest kid on the block. Changes in society and technology are threatening its tradition of employing brokers to work the telephones, offering stock tips.

Merrill is a firm with a lot of thinking to do and Mr O'Neal has impressed people who know him as a thoughtful man. He is described as clear-minded and open to possibility. The implication is that Mr O'Neal may be intellectually better equipped than other Merrill executives to make a leap into the unknown - a merger with a commercial bank such as HSBC, a large acquisition or a round of big sackings. "Stan is intellectually honest about these things," says one former associate. "He is a dispassionate observer."

Mr O'Neal (49) was born in the American south - a second class citizen in the segregated state of Alabama. As a teenager, he and his family moved to Atlanta, Georgia, and he was among the first group of black students to attend his high school. It is not the kind of thing Mr O'Neal talks about easily - he displays little interest in being seen as a symbol of racial progress - but associates say the experience was bruising.

In Atlanta, though, Mr O'Neal also found opportunity. His father was a General Motors worker and Mr O'Neal enrolled in a programme that enabled him to alternate semesters on the GM assembly line and at the GM Institute, now known as Kettering University.

Mr O'Neal's pluck caught the eye of GM executives and he wound up at Harvard Business School and then at GM's treasury department. He worked his way through a series of financial jobs at GM, but that left him wondering how he would do at the highest levels of finance - on Wall Street.

Well into his 30s, Mr O'Neal switched gears and joined Merrill as an investment banker in 1986. It was a good fit - Merrill is a team-oriented firm and Mr O'Neal rose quietly but quickly. He helped make Merrill a leader in the junk bond business - an indication that beneath his calm exterior, a risktaker lurks - and was made cohead of investment banking in 1997.

The following year, Mr O'Neal was made Merrill's chief financial officer, a job that kept him out of harm's way when the global debt rout of late 1998 hammered the firm's fixed-income operations. Herbert Allison, then Merrill's president, resigned amid the turmoil that followed, leaving that job open until last week.

Last year, Merrill started to prepare Mr O'Neal for the top by putting him in charge of the US private client group - its retail brokerage. Mr O'Neal and his deputy, James Gorman, an Australian-born former McKinsey consultant, soon made an impact by cutting jobs. But Mr O'Neal wants to be seen as more than a cost-cutter. He is also trying to restructure Merrill's brokerage effort, seeking to provide different levels of service for customers with different levels of wealth.

Merrill's progress in such areas is clearly a concern for its board. Mr Komansky had said he would fill the president's post by early 2002 and it is understood the board pressed him to get the succession issue out of the way quickly. Some Merrill insiders say that Mr Komansky would have preferred Jeffrey Peek, head of asset managment at Merrill, as his deputy but was overruled.

Mr O'Neal says that he and Mr Komansky agree on policy and emphasises the need to manage the company better. "Both David and I believe we are on the right track strategically," Mr O'Neal said. "We can improve on execution. There is little doubt about that. But that is always true about any organisation - it has to be in the process of continual improvement."

The heat is on Mr O'Neal and Mr Komansky. Merrill shocked investors last month with a profit warning and this month it reported a 41 per cent drop in second-quarter earnings.

"The company was the first to pre-announce weak numbers last quarter and expenses still look high," said Richard Strauss, analyst at Goldman Sachs. "Stan's challenge will be helping Dave navigate through the downturn, keep a lid on expenses and maintain and strengthen the firm's position."

As cool as ever, Mr O'Neal acknowledges the challenges. Referring to the dismal environment on Wall Street, he says: "I was reminded of the old curse: `May you live in interesting times'." The only certainty is that they are about to get more interesting still for Mr O'Neal and Merrill Lynch.