Analysts Weigh in on BofA - Bull Deal
It would make Bank of America the country's biggest global brokerage. It also means Bank of America's staff of investment advisors and brokers would grow from about four thousand to more than 20-thousand. Thestreet.com investment analyst Philip van Doorn calls it "a great deal for both parties." He says it's particularly good for Charlotte-based Bank of America. "It broadens their business so that they have their fingers into just about every type of financial activity that's taking place in the U-S," he says. Like the struggling Bear Sterns and the recently bankrupt Lehman Brothers, New York-based Merrill Lynch suffered significant losses over investment products that were backed by mortgages at the heart of the mortgage meltdown. Last year, new management at Merrill disposed of these investments. Van Doorn says although Merrill was in better shape than Bear Sterns and Lehman it still needed outside help to survive. "My view is that Merrill had to sell and that they sold to the right company. Merrill's business will now be backed up by nearly 10-percent of U-S deposits," says van Doorn. Veteran investment banker Gary Townsend of Maryland-based Hill Townsend takes a more cautious view of the acquisition. He says the merger won't be easy. "The principle difficult in putting together Bank of America and Merrill will be to combine very diverse cultures," he says. Townsend says Bank of America has a reputation for cutting costs when it comes to customer service. He points to two years ago when customers of US Trust left after it was acquired by Bank of America. Townsend says Merrill customers likely wouldn't have the kind of access they now have to investment advisors and financial reports. "There will be some customers also that will undoubtedly too, choose to take their business elsewhere" says Townsend. Bank of America CEO Ken Lewis did not give specifics on staffing when he announced the deal yesterday. But he says the company expects to cut some staff as a result of the acquisition. UNC Charlotte Economist John Connaughton looks at the local impact such mergers would have. "There may be some reduction in back office operations and there may be some folding of agent operations where they've got brokerage operations close together but brokerage is such a small part of B-of-A and it's so scattered throughout the county that it's not going to be felt much in charlotte. It's not going to be a big deal here," says Connaughton. That may be the case now. But the shakeup caused by failed mortgage-backed investments is expected to last through the end of next year. And banks are trying to adjust with more cost cutting.