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Bank of America Corporation (BAC) Ready to Divorce Merrill Lynch?

“Break up the big banks!” That is starting to be the plaintive cry around the financial industry, with now several executives across the industry expressing some openness to breaking up  these financial institutions – like Bank of America Corporation (NYSE;BAC), Citigroup Inc. (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) among them – into separate banking and investment arms. And it seems with recent headlines that Bank of America Corp. (NYSE:BAC) might be ready to bring back shareholder value that hasn’t existed since it merged with Merrill Lynch in 2008.

Bank of America Corp (NYSE:BAC)

A recent piece suggested just that at Charlotte, N.C., headquarters of Bank of America Corporation (NYSE:BAC) in the wake of the announcement of intent to sell its Merrill Lynch foreign wealth-management business to Swiss firm Julius Baer. Is this the first step toward Bank of America Corporation (NYSE:BAC) ridding itself of the Merrill Lynch albatross that has sent the bank’s shares down nearly 70 percent from the time of the merger?

Maybe, maybe not. At the time of the merger, Bank of America Corporation (NYSE:BAC) CEO Ken Lewis publicly regretted the merger, claiming that the federal government pressured the merger to happen during the height of the financial crash, despite Merrill Lynch having unattractive financial numbers. At the time, Bank of America stock was selling for $27 a share, and went up as much as $40 just a month after the merger was announced. Now, the shares are hovering around $8.

Does having Merrill Lynch on board weigh down Bank of America Corporation (NYSE:BAC) stock? While there is a seeming coincidence with the price of the stock falling after the merger was consummated, current Bank of America CEO Brian Moynihan has not made any statements expressing a desire to be rid of Merrill Lynch. It’s possible the bank might have studied the possibility and may not think it’s a good idea. But as Bloomberg Businessweek put it, “If (Moynihan)’s now amenable to selling off such a chunk of Merrill Lynch (the non-U.S. operations), how much of a stretch would it be to suggest he could be persuaded sell off or spin off the rest?”

It should be an interesting scenario to watch for investors in Bank of America Corporation (NYSE:BAC), including hedge funds like David Tepper’s Appaloosa Management LP.

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