Bank of America Would Be Foolish to Spin-Off Merrill Lynch

Moreover, as revenues and earnings shrink, the bank’s much-maligned chief executive Brian Moynihan has engineered a massive program of job cuts and the selling of non-core assets.

Follow us

And, oh, yes, the stock price has been languishing for more than two years -- shares have lost almost half their value year-to-date.

“Banks are now in an extremely challenging environment,” said Robert Lutts, president and chief investment officer of Cabot Money Management in Salem, Mass. “Even banks like Wells Fargo and JP Morgan, which are better off than Bank of America on a relative basis, are still delivering pretty dismal numbers.”

However, Bank of America has at least one sterling asset -- Merrill Lynch, which the bank bought (and rescued) during the darkest days of the global financial crisis in 2008.

Analysts once proposed that Bank of America should consider spinning off its valuable Merrill unit – but in the current climate, that may not be a wise action.

Moynihan himself has asserted that Merrill is a stellar segment of the company and that it would make no sense to unload it.

Indeed, among Moynihan’s restructuring moves, core businesses are being consolidated and aligned. For example, the bank’s investment banking unit is being combined with corporate banking operations and other segments.

Moreover, Moynihan fired Sallie Krawcheck, the former head of the wealth management unit, suggesting that the notion of separating Merrill simply will not happen,

One could say that Bank of America ‘spun off’ Krawcheck, instead of Merrill Lynch.

Todd Hagerman, an analyst at Sterne Agee, said Moynihan “is desperately trying to get his arms around the many challenges confronting the organization by proving to shareholders and bank regulators alike that he is willing to make tough decisions in short order to stabilize the company."