Huge Bloomberg article on BofA’s Merrill acquisition. My view is that the vast majority of all mega-mergers are unmitigated disasters. The one true exception seem seems to be Commodity mergers (especially Energy/Oil), where you increase reserves but cut admin overhead.
As disastrous and expensive as the acquisition has been, the Bloomberg column argues it also has helped the bank compete with JPMorgan (JPM).
Merrill’s businesses contributed $1.8 billion to Bank of America’s first-half net profit of $7.5 billion, or 28 percent, even after the bank posted $27 billion in loan charge-offs and higher loan-loss reserves, according to company filings. Those businesses are likely to account for 25 percent to 30 percent of the bank’s profits over the next three years, said John McDonald, an analyst at Sanford C. Bernstein & Co. in New York.
The share of the bank’s revenue that came from investment banking and wealth management rose to 47 percent in the first half, after the Merrill acquisition, from 29 percent last year, according to the bank.
I don’t agree with much of the analysis, but it is nonetheless worth a read.
Merrill Bringing Down Lewis Gives Bank 30% Profits
Bloomberg, October 5 2009