Bank of America Corp. (NYSE: BAC), the lender divesting assets to raise capital, said Monday it has agreed to sell Merrill Lynch's International Wealth Management business outside the U.S. to Swiss private bank Julius Baer Group Ltd.
Shares of Bank of America Corp (NYSE: BAC), which have gained 39 percent this year, is trading relatively flat at $7.74 a share on Monday. Shares in Julius Baer, up 12 percent on the year, fell 2.3 percent to 34.61 Swiss francs.
The deal, the latest in a string of purchases for deal-hungry Julius Baer, could boost the Swiss bank's assets by almost half and bolster its exposure to the new markets of emerging economies.
"This acquisition brings us a major step forward in our growth strategy and will considerably strengthen Julius Baer's leading position in global private banking by adding a new dimension not only to growth markets but also to Europe," Julius Baer's chief executive, Boris Collardi, said in a statement.
The Zurich-based bank said it will pay up to 860 million Swiss francs ($884 million) in cash and shares to Bank of America, depending on the final amount of assets transferred.
The acquisition will likely add 72 billion francs in assets under management to Julius Baer, boosting its total by 40 percent, to 251 billion francs.
While Julius Baer is busy snapping up assets to cement its position as Switzerland's largest standalone private bank, Bank of America is working to slim down and rid itself of the heavy overhang of the U.S. financial crisis.
Even after relinquishing the crown as the nation's largest bank by total assets to JPMorgan Chase & Co. (NYSE:JPM) in the third quarter of 2011, Bank of American is still determined to become leaner and meaner.
The Charlotte, N.C.-based bank expects to ultimately realize $8 billion in yearly savings from its so-called "New BAC" cost-cutting initiative, including $3 billion a year by mid-2015 from the second phase of the project.
Bank of America has trailed rivals in recovering from the financial crisis, largely because of huge losses and lawsuits tied to its 2008 acquisition of subprime mortgage lender Countrywide Financial.
And its mortgage headache, which has already cost the bank more than $13 billion, is far from over.
In July, the banks said investor disputes over bad mortgages and mortgage-backed bonds in the second quarter have more than doubled from a year ago.
Investors who bought mortgages or mortgage-backed bonds from Bank of America before the 2008 crisis claim that Bank of America and other banks misled them about the quality of the mortgages and the banks have been forced to buy back some of those mortgages.
With Chief Executive Officer Brian Moynihan at the helm, Bank of America has been selling off non-core business units to improve its capital position under international Basel III regulations and improve top-line growth.
Following is a list of assets Bank of America has gotten rid of since the start of 2011:
February 3, 2011: Bank of America sold the former Countrywide Financial Corp. property and casualty insurer Balboa Insurance Co. to QBE Insurance Group Limited (ASX: QBE) for $700 million. Countrywide acquired Balboa in 1999 and held it as a mortgage insurer until Bank of America bought Countrywide in June 2008.
April 2011: Bank of America sold its $200 million United Kingdom portfolio of small business card loans to Barclays PLC (NYSE: BCS). Terms were not disclosed.
May 19, 2011: Bank of America agreed to sell its remaining 7 percent stake in BlackRock, Inc. (NYSE: BLK) for $2.55 billion. The alliance was formed in 2006, when Merrill Lynch reached sold its asset management division to BlackRock in exchange for a 49.8 percent stake.
June 6, 2011: Bank of America sold a $1 billion portfolio of credit-card loans to Regions Financial Corporation (NYSE: RF).
July 7, 2011: Bank of America sold Balboa Insurance's life insurance division to St. Paul, Minnesota-basedSecurian Financial Group Inc. Terms were not disclosed.
August 3, 2011: Bank of America sold its consumer-credit-card portfolio and operations in Spain to private-equity firm Apollo Global Management LLC (NYSE: APO). Terms were not disclosed.
August 5, 2011: Bank of America sold servicing rights on a pool of 400,000 mortgages to government-controlled housing giant Fannie Mae. The price tag on the loans that had unpaid principal balance of $73 billion was more than $500 million, the Wall Street Journal reported.
August 15, 2011: Bank of America took steps to exit the international credit card business by selling off its $8.6 billion Canadian card venture to the TD Bank Group for an undisclosed amount and announced a potential sale of card businesses in the U.K. and Ireland.
August 29, 2011: Bank of America sold about half of its stake in China Construction Bank Corporation(HKG: 0939) for $8.3 billion. This deal came just days after Warren E. Buffett agreed to invest $5 billion in the bank.
September 15, 2011: Bank of America sold 80.8 million shares of hospital operator HCA Holdings Inc (NYSE: HCA) back to the health-care company for $1.5 billion.
September 22, 2011: Bank of America sold almost $1 billion of performing and delinquent commercial real estate loans to a group of investors including Invesco Ltd. (NYSE: IVZ), Square Mile Capital Management LLC and a fund managed by Canyon Capital Realty Advisors LLC.
September 22, 2011: Bloomberg reported that Bank of America was in exclusive talks to sell its stake inNPC International Inc., which operates the biggest U.S. Pizza Hut franchise, for more than $80 million.
November 14, 2011: Bank of America sold most of its remaining holdings (10.4 billion common shares) in China Construction Bank to a group of unidentified investors for $1.8 billion. This has left Bank of America with about 1 percent of China Construction Bank's common stock.
December, 26, 2011: Reuters reported that Bank of America was considering selling its Indian back-office processing operation.
March 21, 2012: Bank of America sold its Irish consumer credit-card portfolio to the Apollo European Principal Finance Fund I, a fund affiliated with Apollo Global Management LLC. The deal includes more than 200,000 customer accounts with a balance of over €650 million ($825 million) of receivables. Terms of the deal were not disclosed.
Aug. 13, 2012: Bank of America sold its wealth management operations of Merrill Lynch outside the U.S. to Swiss private bank Julius Baer Group Ltd. The Zurich-based bank said it will pay up to 860 million Swiss francs in cash and shares to Bank of America, depending on the final amount of assets transferred.