One of the most famous names on Wall Street for almost a century, Merill Lynch, may soon go the way of the dodo – at least legally.
Bank of America Corp (BAC) acquired Merrill Lynch in 2009, as the famous Wall Street firm struggled following the financial crisis. Merill Lynch had been operating as a subsidiary of Bank of America. But now BOA is looking to formally absorb Merrill Lynch, and permanently dissolve its status as a separate legal entity.
The Merrill Lynch name – which Bank of America will continue using for promotional purposes – still carries brand recognition, and is quite valuable to the company. However, having Merrill Lynch operate as a subsidiary was proving too complex and costly. Banks like BOA are trying to cut costs by simplifying, especially as allegations persist that the giant lenders have become too big to manage themselves.
BOA has made cutting costs one of their top priorities. In earnings reports for the second quarter of 2013, the company experienced a 70 percent jump in profits, laregly due to massive overhead cuts.
But the bank is still dogged by bad assets carried over from the financial crisis, and is looking to shed even more costs, with a goal of $8 billion by year's end.
One of the persistent costs the bank is experiencing is litigation. The bank has been accused of knowingly hiding toxic assets from the financial crisis from investors, and has to fight costly shareholder and regulatory body lawsuits on two fronts: as Bank of America, and as Merrill Lynch.
By dissolving the entity known as Merrill Lynch, Bank of America can focus their legal battles on just one front, while retaining the famous Merrill Lynch name. The bank would keep the Merrill Lynch logo, the charging bull that is perhaps the closest thing Wall Street has to a mascot. And they would retain the over 14,000 financial advisors in Merrill Lynch’s global wealth and investment management business that former CEO Ken Lewis referred to as the Wall Street firm's “crown jewel.”
The Big Four banks have been experiencing record profits while still trying to appease regulators and investors that are still concerned the banks have become too unwieldy to adequately deal with financial meltdowns. As recently as Aug. 2 the bank was hit with more civil claims against both entities relating to the last financial crisis.
Bank of America is up .56 to hit $14.40 a share. They're up 19.04 percent on the year.