Will Ken Lewis’ successor at BofA keep Merrill Lynch?

When a new chief executive takes over at Bank of America Corp. after Ken Lewis departs in January, one decision he or she is likely to face is whether BofA should sell — or spin off — the brokerage business of Merrill Lynch & Co. Inc., industry observers noted.
A potential sale or IPO of the retail securities giant and its 15,000 reps and advisers would be complicated, as various operations between Merrill and BofA are still being integrated, observers said.
Still, if BofA’s recently minted board of directors looks to hire a banker with a “Mr. Clean” reputation and little love for the securities business, BofA could ultimately elect to cut its ties to Merrill, which it agreed to buy last September in the darkest days of the credit crisis.
That deal was completed in January.
“Ultimately, what’s going to happen is that Bank of America will get rid of Merrill Lynch,” said one veteran Merrill adviser, who asked not to be identified. The board of directors will most likely name a banker who focuses on risk management as CEO, and that new leader will focus on banking, not selling securities, the adviser said.
Any sale or spinoff of Merrill Lynch is unlikely to occur in the next year or two, observers noted.
Mr. Lewis, 62, said Wednesday evening he was stepping down as CEO at the end of the year. The company has not announced a successor.
Alois Pirker, research director for the Aite Group LLC’s wealth management practice, downplayed any potential spin-off of Merrill, citing the fact that no firm has the deep pockets to buy it. Merrill’s future depends on whether the new CEO wants to manage a company with a “universal banking model” that has a variety of business operations, or prefers to focus on banking.
“My bet is, they’re going to try to integrate Merrill. But, if they get a core banker, that person may not be interested in retail brokerage,” Mr. Pirker said.
Merrill has been a headache for Mr. Lewis’ since the $29 billion sale was completed Jan. 1. In December, Merrill reported fourth-quarter losses of more than $15 billion, and then paid out billions in bonuses to executives — a move that has led to questions about whether BofA’s management misled investors about Merrill’s health before the deal closed.
A federal judge in September rejected a $33 million settlement between the bank and the Securities and Exchange Commission, questioning what the bank had told its shareholders about the losses and why the company’s executives hadn’t been sued.

Related Topics: Bank Of America Corp., Merrill Lynch