Merrill Lynch & Co., the 99-year-old firm known for its “thundering herd” of brokers pitching stocks to Main Street, may cease to exist as a legal entity more than four years after being acquired by Bank of America Corp.
While Bank of America will keep the Merrill Lynch brand for its retail brokerage and investment bank, the Charlotte, North Carolina-based company plans to dissolve the subsidiary as early as the fourth quarter, according to an Aug. 2 filing. The firm will assume Merrill Lynch’s obligations and debt.
Bank of America, the second-biggest U.S. lender by assets, is simplifying its structure after Chief Executive Officer Brian T. Moynihan’s predecessor bought Merrill Lynch in 2009. Merging the legal entity could help Moynihan hit his $8 billion-a-year cost-cutting target and comply with regulators who want to make the biggest banks easier to resolve in a crisis.
“Less-complex structures would increase the success of resolution planning via living wills in the case of potential worst-case financial distress scenarios,” David Hendler, an analyst at CreditSights Inc., said today in an e-mail with the subject line: “Bye Bye Merrill Lynch & Co.?”
Dissolving the legal entity also ends Merrill Lynch’s need to file separate regulatory disclosures. The move will have “no impact” on how the firm serves clients or on the Merrill Lynch brand, said Jerry Dubrowski, a Bank of America spokesman.
Merrill Lynch had about $62 billion in long-term debt as of the second quarter, Hendler said. The move shouldn’t affect Merrill Lynch bonds because spreads have already converged with those of the parent company, Hendler said.
Troubled Takeover
Bank of America faced regulatory probes, investor lawsuits and criticism from lawmakers over claims it didn’t warn shareholders about Merrill Lynch’s mounting losses before they voted to buy the firm for $18.5 billion.
Last year, Bank of America agreed to pay $2.43 billion to investors who suffered losses during the takeover, engineered by former CEO Kenneth D. Lewis as the world’s biggest financial firms teetered near collapse during the 2008 credit crisis. Merrill’s operations were credited with fortifying Bank of America in the years that followed as costs piled up from bad home loans and credit cards.
According to a company history, founder Charles Merrill solidified his reputation on Wall Street by advising clients to sell stocks prior to the crash of 1929. The firm went public in 1971 and later in the decade introduced its corporate logo, the charging bull that Merrill executives have said is one of the most recognizable brands in the world.
Merrill Lynch had about 14,000 financial advisers as of June 30, excluding those working at bank branches. Bank of America’s entire staff was 257,158.
Merrill Lynch, Pierce, Fenner & Smith Inc., the firm’s broker-dealer unit, will continue to exist as a subsidiary, said Susan McCabe, a Bank of America spokeswoman. -Bloomberg
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