By Jonathan Stempel NEW YORK (Reuters) - Bank of America Corp completed its purchase of Merrill Lynch & Co and Wells Fargo & Co finished buying Wachovia Corp, the latest sea changes in a transformed banking industry facing dire economic times ahead. The Merrill takeover was completed on Thursday, ending more than 94 years of independence for the Wall Street investment bank and brokerage. The Wachovia merger closed on Wednesday, marking the denouement for a lender that started in 1879 with what it deemed a "very adequate" $100,000 of capital. Bank of America has said it would issue about 1.71 billion common shares to buy Merrill, equal to about $24.1 billion, plus 359,100 preferred shares. The Wachovia merger valued that bank at roughly $12.7 billion. By adding Merrill, Bank of America vaulted over JPMorgan Chase & Co and Citigroup Inc to become the largest U.S. bank by assets, with about $2.7 trillion. Wells Fargo ranks fourth, with about $1.4 trillion. Bank of America and Wells Fargo are also the largest U.S. mortgage providers. The mergers follow a year that saw several major U.S. financial providers find buyers, fail, or adopt new business structures amid the biggest financial crisis in decades, prompting the U.S. Treasury Department to craft the $700 billion Troubled Asset Relief Program to bail out the industry. A year-long U.S. recession has caused banks' credit problems to soar. Economists believe the U.S. economy shrank as much as 6 percent in the fourth quarter and could decline at least through June, and expect the unemployment rate to soar well above 8 percent in 2009, up from November's 6.7 percent. Merrill and Wachovia together suffered more than $48 billion of losses from January to September, largely because of writedowns tied to mortgages and other troubled debt. Another big lender hurt by mortgage losses, Cleveland's National City Corp, was acquired Wednesday by Pittsburgh-based PNC Financial Services Group Inc for about $3.9 billion, based on reported common shares. NEW CHALLENGE FOR LEWIS Kenneth Lewis, chief executive of Charlotte, North Carolina-based Bank of America, had already spent some $110 billion on major acquisitions before buying Merrill, but his latest purchase may pose his greatest challenge yet. He must stem defections from Merrill's "thundering herd" of 17,000 brokers and its investment bank, as he prepares to shed at least 30,000 jobs overall to help save $7 billion a year. This follows a year when Bank of America shares fell 65.9 percent amid declining profitability, big exposure to the housing market and rising credit card delinquencies. Adding Merrill makes the bank's brokerage, credit card, investment banking, mortgage and wealth management operations, plus its deposit base, the nation's largest or close to it. "We are now uniquely positioned to win market share and expand our leadership position in markets around the world," Lewis said in a statement on Thursday. While Bank of America and Merrill raised $25 billion of capital from the Treasury program, many analysts have said they may need more. Bank of America in October halved its dividend, and some analysts have said another cut may be needed. Continued...Bank of America, Wells close mergers as banking transforms
Friday, 2 January 2009
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