BofA Won't Sweat Merrill Departures

The unexpected departures this week of two of Merrill Lynch's top executives may raise doubts about Bank of America's (BAC Quote) latest acquisition, but there are lots of reasons to remain optimistic about the deal.

This week saw the exit of Greg Fleming, Merrill's president and CEO, and Robert McCann, head of the wealth management division that was widely viewed as the major prize for BofA in buying Merrill. While Merrill has seen other high level departures since the deal was announced in September, both Fleming and McCann had been assigned important-sounding new roles at the combined company.

BofA has projected it will eliminate $7 billion in costs as part of the takeover, and losing highly paid executives is an important part of accomplishing that, notes Moody's Investors Service analyst David Fanger. "If you think about the nature of mergers, there are going to be excess senior managers when you start out," he says.

Whether the departures presage a broader culture clash between New York investment bankers and Charlotte-based commercial bankers is unknowable at this point, according to Sterne Agee & Leach analyst Sean Ryan.

"To distill it down, commercial bankers tend to view investment bankers as overpaid, and investment bankers tend to view commercial bankers as dim and lazy," Ryan says.

Both analysts believe BofA generally has been successful in integrating other small and midsized commercial banks, and in the past decade there have been a number of tie-ups.

"Basically you just cull management and integrate the other company's operations into your own. That's sort of a learned skill, and few organizations have done more of it than NationsBank/Bank of America," Ryan says, alluding to the former name of the Charlotte institution that took over San Francisco-based BankAmerica in 1998.

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