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  1. Wealth
April 18, 2012

Why Bank of America may flog wealth units

By Spear's

If the world’s largest wealth manager, with close to $2trn AUM, isn’t making enough money then what hope is there for the rest?

Reuters are rumouring that Bank of America’s non-US wealth management operations are up for sale at $3bn.

That’s big news: if the world’s largest wealth manager, with close to $2trn AUM, isn’t making enough money then what hope is there for the rest?

Some speculate that it signals renewed worries about Europe. Others that non-US trading hubs like London have hit saturation point.

But the decision, if true, is consistent with internal politics at Charlotte, North Carolina. Since taking over in December 2009, Brian Moynihan has been selling non-core assets with near the same ferocity as his predecessor bought them.

His strategy has been to refocus the banking behemoth around its core customers. That’s reasonable given that Bank of America’s recent balance sheet woes derived from the polar opposite – with Ken Lewis acquiring, for example, Countrywide Financial and its ill-fated mortgage book.

But the scale of the turnaround needed, after two bailouts totalling $45bn, means that the market is yet to be fully convinced – best proven by Buffet’s $5bn swoop last August barely shifting the stock price above $8.

So will the rumoured wealth management sale make a difference? Potentially, if it’s true that Bank of America’s non-US wealth management operations are mass-affluent focussed and can’t build the scale needed. But it’s not that simple. The UK business, for example, concentrates on UHNWs and so potential buyers will be acquiring a wardrobe of all shapes and sizes.

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Another issue is who’s capable of paying $3bn for the business’s $90bn AUM. According to Reuters, it’s most likely UBS, Credit Suisse, Deutsche, JP Morgan or Wells Fargo; we’ll be chasing that up over the coming days…

Read more by Freddy Barker

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