On Tuesday,
Reuters
reported that
Bank of America Corporation
(
BAC
) is again preparing to divest its international units in a bid to
further streamline its operations and focus on its core businesses.
This time, BofA intends to sell its international wealth management
units in anticipation of receiving about $3 billion.
The units on sale, which were mostly obtained by BofA from its
Merrill Lynch acquisition in 2009, comprise nearly $90 billion
worth of assets under management. However, this division of BofA
has been procuring mediocre results due to inadequate business
scale.
The Prospective Buyers
The potential bidders have been asked to present their tenders
this week for the first round of bidding. However, the sale offer
may not seem attractive to many buyers as the wealth management
businesses normally do not contribute in equity capital.
On the other hand, the eventual buyer will be rewarded with
BofA's goodwill attached with the business on sale. Companies such
as
UBS AG
(
UBS
),
Credit Suisse Group
(
CS
),
Deutsche Bank AG
(
DB
),
JPMorgan Chase & Co.
(
JPM
) and
Wells Fargo & Company
(
WFC
) are expected to be the possible bidders.
Past Divestitures
In March, BofA entered into an agreement to sell its consumer
credit card operations in Ireland to
Apollo Global Management LLC
's (
APO
) fund affiliate, Apollo European Principal Finance Fund I (Apollo
EPF). The deal is still subjected to regulatory approvals.
BofA's Spanish consumer credit card operations were also sold
to Apollo in August 2011.
Moreover, in 2011, BofA divested its Canadian credit card
portfolio as well as certain other assets and liabilities to
Toronto Dominion Bank
(
TD
). Furthermore, the company has plans to sell its card business in
the U.K.
Conclusion
BofA has been actively participating in divestiture of its
international units since last two years. The company has been
doing so in order to recover from its sour acquisition of
Countrywide Financial in 2008, which resulted in losses and
lawsuits, and to further enhance its capital level.
BofA is mainly concentrating on its core business by narrowing
down its global business at large to match with the much faster
resurgence pace of its peers.
Having cleared the stress test authenticated BofA's strong
capital position and its ability to successfully overcome another
severe economic downturn. Though BofA has been battling with a
swelling cost structure and a stressed run-off portfolio, the
company's repeated attempts to improve its balance sheet and
capital ratios, in spite of passing the stress test, is
commendable.
Currently, BofA retains its Zacks #3 Rank, which translates into
a short-term Hold rating. Also, considering the fundamentals, we
maintain our long-term Neutral recommendation on the stock.
APOLLO GLOBAL-A (
APO
): Free Stock Analysis Report
BANK OF AMER CP (
BAC
): Free Stock Analysis Report
CREDIT SUISSE (
CS
): Free Stock Analysis Report
DEUTSCHE BK AG (
DB
): Free Stock Analysis Report
JPMORGAN CHASE (
JPM
): Free Stock Analysis Report
TORONTO DOM BNK (TD): Free Stock Analysis
Report
UBS AG (UBS): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
Report
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