Bank Of America Capitalizes In Merrill Lynch Deal

The hottest major player on Wall Street is currently Bank of America. The North Carolina-based bank's recent purchase of Merrill Lynch will create one of the largest financial services firms in the world.

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Now we've been learning more about the sale of Merrill Lynch to Bank of America. Practically overnight, one of the nation's largest consumer banks was set to become a dominant company in wealth management and the world's largest brokerage firm. NPR's Wendy Kaufman reports.

WENDY KAUFMAN: Many analysts are calling the arrangement a shotgun wedding. Indeed Ken Lewis, the CEO of Bank of America, told a news conference that he didn't even talk to Merrill Lynch's top brass until Saturday. By Sunday night they had a deal. Bank of America has long aspired to become a first tier global bank. It's been eying one of the most recognized names on Wall Street for the past several years. And yesterday Lewis called the acquisition of Merrill Lynch the strategic deal of a lifetime.

Mr. KEN LEWIS (CEO, Bank of America): You can't do a strategic plan and look at opportunities or alternatives and not have this one as a top priority. We just never have been able to, you know, find the right time and the right moment. So, this was the one.

KAUFMAN: The acquisition would create what is arguably the largest financial services firm in the world, beginning with Merrill Lynch's giant retail brokerage. And it's more than 16,000 financial advisors. That would give the new B of A about 20,000 brokers with about 2.5 trillion dollars in assets under management. The acquisition would also give the giant consumer bank a major investment bank. Professor Jim Wilcox of the Haas School of business at the University of California, Berkeley, says on the retail side, the new B of A would be able to do more for its costumers than it can now.

Dr. JIM WILCOX (Professor of Financial Institutions, Haas School of Business, UC Berkeley): It also allows them to not only provide the kinds of retail financial services that you and I would use, but also now provide those same customers with access to the entire Merrill Lynch network.

KAUFMAN: The bank would also be able to sell them stocks and bonds and other investments. And that kind of cross selling, as it's known, would likely mean more profit for the bank. What's more, the vastly expanded global reach of the North Carolina based bank could provide a valuable revenue stream from abroad, especially important when the U.S. economy is faltering. Bank of America says if the acquisition is approved and finalized, it would be the number one underwriter of global high yield debt and the third largest underwriter of global equity. Richard Marston is a professor of finance at the University of Pennsylvania's Wharton School.

Dr. RICHARD MARSTON (Professor of Finance, Wharton School, University of Pennsylvania): Bank of America now has to be considered a truly global bank in the sense of some of the great banks of the past. I don't think there is any project that it cannot take on. All sorts of things it can do now that it wouldn't have been comfortable doing just a few days ago.

KAUFMAN: And that means more potential revenue. And, says Vipal Monga, a senior writer at The Deal magazine....

Mr. VIPAL MONGA (Senior Writer, The Deal): The more revenue you get, the more ability you have to sustain major shocks. In an environment like this, scale is everything. And this gives B of A immense scale.

KAUFMAN: But there are significant challenges for B of A. The firm is still digesting its takeover of Countrywide Financial. The nation's largest home lender held massive amounts of subprime and other troublesome loans. And Merrill Lynch itself may have bad loans still on its books. But yesterday, Bank of America CEO Lewis said emphatically that buying and integrating companies into B of A is something the bank knows how to do and do well. Wall Street and everyone else will be watching. Wendy Kaufman, NPR News.

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