BofA Buys US Trust

The big bank is paying Schwab $3.3 billion.
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Bank of America (BAC) - Get Report is bolstering its wealth management business with the $3.3 billion acquisition of US Trust from Charles Schwab (SCHW) - Get Report.

The nation's second-largest bank is paying cash for Schwab's private banking division. The deal will enable Charlotte, N.C.-based BofA to bulk up its offerings to rich individuals and enable it to better compete with

Citigroup

(C) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

.

"The acquisition of US Trust, a prestigious 153-year-old firm, enhances our credibility in this market, significantly advances our capabilities to serve especially ultra high net worth clients and adds scale to our private banking business," says BofA Chairman and CEO Kenneth Lewis.

San Francisco-based Schwab is selling US Trust some six years after it acquired the asset manager in a deal valued at $2.7 billion.

US Trust, which was founded in 1853, manages money for wealthy individuals. The group has $94 billion in assets under management and accounts for 17% of Schwab's revenue over the first nine months of the year.

The sale is a further attempt by Schwab to streamline its operations and focus on its core brokerage business. Schwab says it will record a pretax gain of $1.9 billion for the sale and will use the proceeds for general corporate purposes.

''This transaction will improve our overall profit margin and return on equity, and further sharpen our strategic focus on serving individual investors and independent investment advisors,'' says Charles Schwab, the broker's chairman and CEO.