Is Bank of America Considering Selling Merrill Lynch?

Posted by adaniels in Blog on November 21, 2011

Does Bank of America need to sell the thundering herd? CNBC’s John Carney reports that the big bank is facing both inside and outside pressure to make a “dramatic change,” and that change could include selling Merrill Lynch, the brokerage house the bank bought during the financial crisis.

Some of the issues Bank of America is facing relate to another acquisition it made in recent years – Countrywide Financial. BofA announced that it could have over $20 billion in mortgage expenses in the second quarter, much due to mortgages from Countrywide. In addition, regulations such as the Dodd-Frank Act and the Basel Rule are asking banks to have higher capital. To top it all off, the bank’s stock is down 27 percent in 2011, and dividends can only be paid at just a penny a share until the capital issue has been improved.

That is where possibly selling Merrill Lynch comes in. Carney says that “something must be done to repair the ongoing damage to Bank of America’s shares,” and wonders if “selling or spinning off Merrill” could “do the trick.” The CNBC writer suggests that Merrill Lynch “may be valued more highly outside of Bank of America than inside.” Carney claims that at least three insiders he talked to are “weighing” selling at least part of the bank.

Written By Lisa Swan

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