Will Bank of America sell Merrill Lynch?

A rumor has begun circulating that Bank of America might need to sell Merrill Lynch.

It's source appears to be John Carney, senior editor at CNBC, who pointed out that a sale of Merrill Lynch could be one way of raising the $50 billion it's said to need to cover mortgage losses.

Carney points out that Bank of America paid around $50 billion to acquire Merrill, making it an obvious candidate for divestiture. Meanwhile, the New York Post says B of A is thinking of selling its stake in China Construction Bank. But this would only raise $21 billion.

Needless to say, a sale of Merrill Lynch would be massively disruptive and probably result in many thousands of job losses. In reality, however, it's unlikely.

B of A/Merrill Lynch has just announced its second quarter results. They show total net revenues in the global banking and markets division falling 6% in the first half, versus the same period of 2010, while profits fell 11%.

This looks good compared to Citi - where revenues in securities and banking fell 18% and profits fell 40% over the same period.

More importantly, however, B of A/Merrill Lynch is looking increasingly dependent on its global banking and markets division for its profitability. In the first six months of 2011, the bank as a whole made a loss of $6.7 billion, while its global banking and markets business contributed a profit of $3.7 billion. Merrill Lynch might be better off without Bank of America, but Bank of America would not necessarily be better off without Merrill Lynch.