This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Merrill Spin-off May Be Just What BofA Needs

Updated from 3:06 p.m. EDT

Bank of America (BAC - Get Report) can attribute much of the recent ill will from investors to its acquisition of Merrill Lynch. The credit default swaps market appears to indicate derivatives traders anticipate a simple, if radical solution: Spin it off.

It costs more to insure against a Merrill Lynch default than it does to insure against one by BofA, and that price gap has widened since early February, notes Dan Barrett, an analyst at Tradition Asiel Securities. Barrett speculates that the CDS market could be pricing in the possibility that Merrill would be spun out, leaving behind the safer, core banking business.

Though the controversial acquisition just closed four months ago, such a deal would make sense for several reasons.

First, it would allow Bank of America to raise money, which government regulators have determined it needs to do, according to several unconfirmed reports.

It would also allow BofA to get some value for its investment banking division before it sees further departures of talented executives. Though several Merrill executives, including former Merrill CEO John Thain and President Greg Fleming, have left since the deal closed, many still remain.

Embattled BofA CEO Ken Lewis and the rest of the BofA brain trust in Charlotte have always had an uneasy relationship with their New York-based investment bankers. Roughly a year before the Merrill acquisition, Lewis was widely quoted as saying, "I've had all the fun I can stand in investment banking at the moment." The reason he liked Merrill was for its "thundering herd" of retail brokers.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
BAC $16.36 0.00%
GHL $35.53 0.00%
GS $187.75 0.00%
LAZ $50.67 0.00%
MS $34.05 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs