Should BofA Sell Merrill Lynch?

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Merrill BullWith Bank of America shares (Ticker: BAC) trading well below book value and its recent quarterly results so anemic, the rumor mill swirls with gossip over the fate of its unit, Merrill Lynch. And with the liabilities of the mortgage mess virtually unquantifiable, no wonder BAC shares can be bought for a shoe size price. (An aside: Which BofA executive thought it would be a good idea to buy Countrywide?! Amazingly stupid.)

Your guess is as good as mine what BofA is worth, but Merrill was the unit that truly shined in its most recent quarter. (That said, Morningstar's Fund Manager of the Decade, the Fairholme Fund, FAIRX, a famous contrarian stockpicker, is buying BAC shares, reports FundMojo.) Why would BofA sell it? To raise capital? (The New York Times reports that BofA is laying of 3,500 employees.) Bank of America Merrill Lynch was named the world’s leading wealth manager with nearly $2 trillion in assets by Scorpio Partnership.The bank seems to have integrated the retail brokerage very well --- ML clients can now deposit checks into their brokerage accounts via BofA ATMs, a dream for some ML advisors I have spoken to. And, Merrill rank-and-file seem content. (ML scored very well in our employee/FA-satisfaction survey last winter; in fact, more than 70% of the respondent FAs said their firm was the best to work for.) There have been some high-profile defections (HighTower, the RIA on a mission, nabbed a $1.2bn team recently), but overall FA headcount is up, client assets are not up but they are holding up well given the market's horrible volatility and ML executives say recruiting and training is going well.

The New York Times has even gotten in on the rumor-mongering, suggesting that BofA will sell the high-performing unit. I agree that BofA overpaid --- which is why Greg Fleming, who breifly ran the brokerage after Stan O'Neal's ouster, approached then-BofA honcho Ken Lewis: because he knew Ken would pay up. And pay up he did, spending $29 a share on Merrill at the absolute pinnacle (if that's the right word) of the financial crisis.

My question to all you FAs out there: Should BofA spin off ML? And for how much? Do you ML FAs like being owned by a gi-normous bank? Merrill executives say BofA lets Merrill be Merrill and doesn't interfere. And Merrill does have an outstanding management team and some of the most productive FAs on the planet. I don't know that it makes any sense to sell it off.

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