Takeover could beef up Hub unit

Bank of America wealth management business to benefit from Merrill deal

Acquiring Merrill is the latest move by CEO Ken Lewis (right) to extend Bank of America's reach and fatten its portfolio. At left is Merrill's CEO, John Thain. (Mario Tama/Getty Images)

Bank of America Corp.'s planned purchase of Merrill Lynch & Co. could substantially strengthen the bank's major money management operations in Boston.

But those operations could wind up being run from New York.

Already running the nation's largest bank by deposits, executives of Bank of America had few details to offer on what the company would look like with the addition of nearly 17,000 Merrill investment advisers as part of the $50 billion stock deal.

With the chaos on Wall Street leveling some of the most storied names in finance, Bank of America has again emerged as one of the strongest institutions left standing. Now, it hopes the Merrill purchase will allow the bank to make its money management operations more competitive, appealing to what Bank of America's chief executive, Kenneth D. Lewis, calls the "mass affluent" - customers with more than $100,000 in investable assets who are looking for products like mortgages and college savings and retirement plans.

"We will finally have enough financial advisers to take advantage of that opportunity," Lewis said on a conference call with analysts yesterday. The bank, he added, will hang on to the Merrill Lynch name "and keep their organization intact."

Combined, the Bank of America-Merrill money management operation would have $2.5 trillion in total assets under management, and give Bank of America access to Merrill's investment channels in overseas emerging markets.

The bank has its wealth and money management operations headquartered in Boston. These include its Columbia Management mutual funds division and its U.S. Trust private banking division, which together had $634 billion in assets under management. Combining these with Merrill Lynch's big sales force and investment advisers could make units like Columbia more appealing to individual and institutional customers and make Bank of America more competitive with the likes of mutual fund firms such as Fidelity Investments and Putnam Investments, both based in Boston.

Merrill's presence in the funds world is through its 45 percent ownership in the investment firm BlackRock Inc., of New York. BlackRock has $104 billion in total mutual fund assets, according to the latest data from Financial Research Corp.

Bank of America currently has 8,000 jobs in Massachusetts. The bank put its Global Wealth and Investment Management unit in Boston following criticism from local politicians that its 2004 purchase of FleetBoston Financial Corp. would result in job losses in New England. The bank says it employs about 18,000 people in New England, roughly the number of workers Fleet had at the time of the merger.

Anne Finucane, Bank of America's chief marketing officer and the highest-ranking local executive, said the company's leaders are still discussing exactly how the bank and Merrill will combine operations. At the least, she said, the number of Bank of America jobs here following the deal "will remain substantially the same."

Finucane said the newly constituted money management's organization will have leaders in both New York and Boston, but said it is still under discussion whether it will be run by Keith Banks, the Columbia Funds veteran who runs it now, as well as how it might fit within Merrill Lynch divisions. Merrill Lynch has about 700 Massachusetts employees, scattered in retail offices around Boston and suburbs including Quincy, Newton, and Andover.

Gary Townsend, a Maryland hedge fund manager focused on financial stocks, said he expects Merrill's big workforce centered in New York will be a powerful pull for Bank of America as it decides where its investment and wealth management leadership winds up.

"The scale will be in New York rather than elsewhere," he said.

The Merrill acquisition is the latest of bold moves by Lewis to broaden Bank of America's geographic reach and portfolio. Investors, however, blanched at the offer for Merrill, nearly double its book value, and sent the bank's shares down $7.19, or 21 percent, to close at $26.55 yesterday.

Speaking on a conference call with analysts yesterday morning, Lewis acknowledged the bank could have gotten a better deal by waiting until Merrill Lynch's shares fell further. But he said the strategic fit justified the bid. Unlike rivals JPMorgan Chase & Co. and Citigroup, Bank of America until now has lacked a powerful brokerage arm to draw in upper-income customers.

Bank of America's chief financial officer, Joe Price, said there would be job cuts and mentioned back-office operations and office locations, but did not give details.

BlackRock has 272 employees at its offices at One Financial Center near South Station in Boston. The firm bought State Street Research & Management Co. in 2004.

Merrill Lynch also has a presence here in its First Republic private-banking group, which caters to wealthy professionals. It is headquartered in San Francisco but has been expanding here, including with a new center it is building at the soon-to-be-opened Mandarin Oriental hotel and condo complex in the Back Bay.

Ross Kerber can be reached at kerber@globe.com.