Exclusive: Bank of America puts non-U.S. wealth arm up for sale

ZURICH/LONDON Tue Apr 17, 2012 1:58pm EDT

A sign for the Bank of America is seen outside a branch in Vienna, Virginia October 16, 2009. REUTERS/Larry Downing

A sign for the Bank of America is seen outside a branch in Vienna, Virginia October 16, 2009.

Credit: Reuters/Larry Downing

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ZURICH/LONDON (Reuters) - Bank of America Merrill Lynch has put its wealth management units outside the United States up for sale, three sources familiar with the situation said, hoping to bring in up to $3 billion for the sub-scale business.

Bank of America is the world's largest wealth manager, but its non-U.S. arm -- which two of the sources said manages some $90 billion for rich clients -- is not large enough to generate enough money for the bank.

"There is a lot of soul-searching going on by a lot of players as to what to do with their non-U.S. private banking operations," said a fourth person, an investment banker who has knowledge of the financial sector.

Bank of America declined to comment.

The second-largest bank has lagged peers in recovering from the financial crisis, largely because of huge losses and lawsuits tied to its 2008 acquisition of subprime mortgage lender Countrywide Financial.

Bank of America's non-U.S. private banking business targets so-called "mass affluent" clients whose wealth is measured in hundreds of thousands of dollars, rather than super-rich private banking clients worth tens of millions.

But outside the U.S. it has never been able to build up the business to match the scale of its home market, meaning it is far less profitable.

Across the world, it manages close to $2 trillion of client assets, according to an annual benchmark study issued by consultancy firm Scorpio Partnership.

For a ranking of the world's largest wealth managers, click on r.reuters.com/ben62s

HANDFUL OF BIDDERS

The bank had asked potential suitors to put in first-round bids this week, according to one of the three sources, who spoke on condition of anonymity.

"The people I spoke to are not expecting this to be a particularly rapid process, just given the broad scope of the operations' geography and the relative skinny information that was made available," the source said.

Bank of America was looking to sell the unit as a whole and the deal could bring in up to $3 billion, the source said, or more than 3 percent of assets under management.

"Three percent of assets under management (is high) in Europe, but it is low in emerging markets. In Asia it is perfectly possible to raise 4 to 5 percent, and the same thing goes for Latin America," the source added.

There was only a handful of possible bidders who could spend money on the business, this person said, naming UBS, Credit Suisse, Deutsche Bank, JPMorgan Chase & Co and Wells Fargo.

Wealth management businesses do not generally contain equity capital, and there was no transfer of a legal entity, so the purchase price consisted entirely of goodwill. This reduces the buyer's regulatory capital, the source said.

"There are not that many buyers who could take a two-to-three billion dollar hit against their core tier I," capital ratio, the person said.

In more than two years under chief executive Brian Moynihan, Bank of America has shed non-core businesses and investments in other companies, in a bid to boost capital and streamline the financial behemoth.

BofA has sold its Canadian and Spanish credit card businesses in the past year, and in March reached an agreement to sell its Irish credit card portfolio. The bank has also said it intends to sell its card business in Britain.

(Additional reporting by Rick Rothacker in Charlotte, North-Carolina.; Editing by David Hulmes)

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Comments (4)
Harry079 wrote:
“but its non-U.S. arm – which two of the sources said manages some $90 billion of assets for rich clients – is not large enough to generate enough money for the bank.”

So now Bank of America will now only be Countrywide?

How much money is the Countrywide Arm generating for the bank?

Apr 17, 2012 12:59pm EDT  --  Report as abuse
Harry079 wrote:
By REUTERS
Published: February 27, 2012

“In a victory for Bank of America, a federal appeals court ruled that a proposed $8.5 billion settlement with investors in mortgage-backed securities should be reviewed in New York state court.”

Apr 17, 2012 1:14pm EDT  --  Report as abuse
Sounds like we’re getting into Madoff country here, eh?

Apr 17, 2012 2:00pm EDT  --  Report as abuse
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