Merrill Lynch & Co., preparing for its biggest expansion since the 1990s, plans to buy a mortgage lender, triple its corporate investments and increase trading bets to boost shareholder returns that trail those of rivals, media reports said.

New York-based Merrill’s top managers spent the past six months determining how to spend “excess capital,” Chief Administrative Officer Ahmass Fakahany said in an interview with business publication Bloomberg last week.

“What’s new is an increased emphasis on building our institutional business,” Fakahany, 47, told Bloomberg. “When I say mortgage origination will take capital, that’s because it requires an acquisition.”

The biggest U.S. mortgage lenders not owned by major banks include Countrywide Financial Corp., Ameriquest Mortgage Co. and IndyMac Bancorp Inc. Fakahany declined to name potential targets, media reports said.

“Building a mortgage capability is a priority,” said Fakahany, who was promoted from chief financial officer in March 2005, Bloomberg reported.

“You can’t just build it out of thin air,” the executive said, according to Bloomberg.

Merrill is having “dialogues” with companies it may buy, Fakahany told Bloomberg. A mortgage lender would be what Merrill considers a “bolt-on” acquisition, not a “transformational deal,” Fakahany reportedly said.

Shares of Countrywide, the biggest U.S. mortgage originator, have gained 18 percent in the past year, giving the Calabasas, Calif.-based company a market value of $25 billion — more than one-third of Merrill’s, Bloomberg reported.

Other independent mortgage lenders include IndyMac, based in Pasadena, Calif., and closely held Ameriquest, which earlier this month reported that it is closing 229 branch offices and laying off 3,800 employees nationwide as part of a plan to consolidate its retail mortgage lending operations.

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