Bank of America seen as big winner from nation’s credit crisis
Pacific Business News (Honolulu)
Despite a 21 percent drop in Bank of America’s shares Monday, the bank is likely to come out a huge winner from the nation’s credit crisis.
“The bank is emerging as probably the biggest beneficiary of the disarray in the financial markets,” said Dick Bove, an analyst with Ladenburg Thalmann. “Bank of America will be stronger, larger, and command more business than ever before once this debacle is over.”
Clearly, the largest bank in California has its hands full. The bank sealed a deal to acquire Merrill Lynch on Monday after recently closing on the nation’s mortgage lender, Countrywide Financial Corp.
There will be significant challenges in integrating the cultures of Merrill Lynch (NYSE: MER) with Bank of America (NYSE: BAC). One can only imagine the reaction Merrill’s spendthrift New York workforce will have to receiving the first cost-cutting memo that routinely emanates from the bank’s Charlotte headquarters.
But combining Merrill Lynch’s wealth management and investment banking operations with Bank of America’s coast-to-coast branch network and deep customer base among the affluent and corporate America is expected to pay big dividends for the combined company.
The stature of the bank and its CEO Ken Lewis took a giant leap forward Monday. Long ignored by the New York media until the bank’s 2004 purchase of FleetBoston Financial raised the bank’s profile on the streets of Manhattan, CNBC today dubbed Lewis the “king of Wall Street.”
Some observers were already criticizing the Merrill deal, saying the bank overpaid. But BofA’s deal-making usually draws fire, often over price. Critics contend that shareholders of the bank’s acquisition targets fare better than the bank’s own shareholders.
But the defenders of Monday’s Merrill purchase included analysts such as Bove.
“If these were normal times, this deal would be viewed as a huge success for both companies,” Bove said. “This may not be the case in the next few days as the markets sort out the implication of the Lehman bankruptcy filing but longer term the deal will be recognized for the success that it is.”
The Merrill Lynch deal follows a string of deals crafted by Lewis that include the FleetBoston acquisition, which made BofA No. 1 in New England as well as the more recent LaSalle purchase, making BofA a major player in Chicago. He also orchestrated the purchase of MBNA, establishing the Charlotte bank as the nation’s largest issuer of credit cards.
At Monday’s press conference to announce the Merrill Lynch acquisition, Lewis said the merger was the “strategic deal of a lifetime.”
It brought to mind the words of a BofA insider who once observed, “Bank of America was built on a series of once-in-a-lifetime opportunities.”
Mark Calvey of the San Francisco Business Times, an affiliated publication, compiled this report.
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