A Bank of America sale of Merrill Lynch is now highly unlikely, experts say.
"They're not likely to sell what's increasingly become a part of their business," says Richard Lipstein of Boyden Global Executive search, observing that while there were certainly losses to deal with due to the Merrill acquisition, "from a revenue standpoint, it's been a terrific acquisition."
The two are now so closely intertwined in their investment banking and wealth management operations that they're essentially "connected at the heart," Liptein says. One has to wonder, "How much damage do you do by separating them now?"
Lipstein is not alone in his assessment at this stage of the game.
"Analysts once proposed that Bank of America should consider spinning off its valuable Merrill unit - but in the current climate, that may not be a wise action," the International Business Times reports today.
"... Bank of America has at least one sterling asset-Merrill Lynch-which the bank bought (and rescued) during the darkest days of the global financial crisis in 2008," the report states.
It goes on to quote Robert Lutts, president and chief investment officer of Cabot Money Management in Salem, Mass., characterizing Merrill as a "cash cow" that Bank of America can ill afford to lose.
"Merrill is their 'golden goose,'" he said. "It generates major cash flow and is a proven franchise.
The article states that Merrill has proved it could not survive as an independent entity, and, like Lipstein, concludes that separating out Merrill could significantly weaken the entire company.
Earlier reports suggested that embattled Bank of America might indeed be forced to spin-off Merrill Lynch, the company's most profitable unit.
"U.S. regulators have pushed Bank of America Corp. to show what measures it could take if conditions worsen for the Charlotte, N.C., lender, according to people familiar with the situation," the Wall Street Journal reported early this month.
"Executives of the bank recently responded to the unusual request from the Federal Reserve with a list of options that includes the issuance of a separate class of shares tied to the performance of its Merrill Lynch securities unit," these people said.
However, the piece went on to point out that "Chief Executive Brian Moynihan isn't expected to pull the trigger soon, if ever, on the creation of a so-called Merrill Lynch tracking stock," since such a move could be viewed as counter to Mr. Moynihan's strategy of knitting together the disparate parts of the franchise into something truly cohesive.
The departure of Sallie Krawcheck, the former head of Merrill's wealth management unit only a few days after that report, further suggests that a Merrill Lynch sale is unlikely.
"One could say that Bank of America 'spun off' Krawcheck, instead of Merrill Lynch," the International Business Times muses, going on to suggest that Bank of America should perhaps unload as many Countrywide-related assets as possible instead.
"They'd be better off selling off Countrywide assets," Lutts observed.