Is Merrill Lynch Better Off without Bank of America?

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An anvil around Merrill Lynch's neck?Our long-time staff writer Halah Touryalai, who now toils for our "frenemy" Forbes.com, has a good story today, echoing a sentiment that has been rattling around the brains of many Merrill's advisors I know: "I hate that bank."

Our friend Halah (yup, we still love her even though she was picked off by Forbes last year or so) writes: Among the units that provide BofA with a steady performance is its global wealth and investment management unit which includes Merrill Lynch’s 16,00+ advisors. The unit put up another quarter of healthy numbers with net income of $506 million up from $329 million a year ago. Total client balances were also up for the unit to $2.2 trillion from $2 trillion last year but down slightly from the first quarter of 2011.

Of those client assets Merrill brokers oversee about $1.5 trillion, and accounts for $3.5 billion of the unit’s $4.5 billion in revenue for the quarter. The brokerage unit added 500 advisors in the last three months bringing its total headcount to 16,241–the first time the firm has had over 16,000 brokers since being sold to BofA.

Bank of America’s problems are hurting Merrill Lynch while Merrill Lynch is helping to prop in Bank of America. There’s irony in that because less than three years ago BofA had to come in and rescue Merrill,” says Wall Street recruiter and Forbes contributor Danny Sarch."

We think she asks the right question. I know big FAs at Merrill who complain the bank simply doesn't work at warp speed as Merrill employees are used to doing. That said, I wonder if BAC isn't a buy down here in the single digits, since Merrill, well, they indeed are a pack of animals. They aim to win, and frequently do (well, with the odd mistake here and there; for example, many FAs are bothered by the do-it-yourself Merrill Edge, which has caused some clients to, well, do it themselves and save big on commissions.) Yet, I do agree with Sallie Krawcheck and her team that, well, you might offer the discount platform to eventually nab the Echo Boomers (those just out of college and a litttle older) once they make it big. I would not bet against Merrill --- in most any trade (well, most of the time; see my article from September 2008 in which I pointed out that Merrill had a near-death experience "that wasn't over." Days later --- the weekend of Sept. 14th, they indeed did "die." Merrill executives weren't happy with what I wrote, and, yet, I nailed it ---well, for once anyway.)

Here is an excerpt from my editor's letter back in 2008: "In trying to fathom the amount of capital that financial firms have destroyed since last summer, I called an acquaintance who used to work at Merrill Lynch. I was trying to get my brain around the big numbers, put the losses into context. Through the second quarter, Merrill wrote down about $50 billion in the credit crisis. That sum wiped out about 4.5 years of the company's earnings (not including the three-straight quarterly losses) — or 86 percent of its book value.

“'So, when you think about it,” I said to my friend, “'Merrill Lynch basically went bankrupt and recapitalized itself all at the same time — it's just that Merrill did so without having to file Chapter 11.'”

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REP. Editor-in-Chief David Aldo Geracioti on the business of Wall Street from a free-market perspective.

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David Aldo Geracioti

Is the editor-in-chief of REP. magazine.  He is also a devotee of the Austrian School of Economics leading lights Ludwig von Mises, Friedrich von Hayek, Murry Rothbard and to other thinkers in...
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