Bove: Merill Lynch Will Drive BofA
Rochdale Securities’ Dick Bove on Bank of America’s uncertain future.
- Duration 7:14
- Date Sep 9, 2011
Rochdale Securities’ Dick Bove on Bank of America’s uncertain future.
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We you know we we have a guests that I -- get answers was a provide some insight what is -- I want to know if if his sources in his research you're doing this turning up the same thing that you have -- with bright morning and it's difficult they have -- -- securities -- top banking analyst hi Dick good to see thank you for being here.
Thank you is what what do you think you just heard what Charlie sources are saying that it's a it's a very very rough road ahead for Friday morning hand do you think He goes just a.
No I I think He solidified its position I think that basically it would be a big mistake and I think the bush realizes this.
To bring more instability -- to Bank of America by changing the CEO.
At this point in time I think what they did -- put -- in the two.
Cooperating heads is to bring in people who -- back stop -- and so that -- and won't be you know the key person for everything that happens it Bank of America.
And I think that they've made a huge strategic shift.
In the way they want to run the company.
This is the nation's biggest consumer bank.
And all of a sudden it's gonna downsize its consumer operations very dramatically it's going to increase its emphasis on capital markets and commercial banking.
So I I think that since the -- is bought into -- program.
Bought into his change in the executives.
Big big audience of more than at least for a while tickets.
It seems like if you selling now rather than the days of the TARP bailouts the government is.
It is less interested in keeping big banks together than it is may be an encouraging them.
To spin off that they don't like the fact that only four banks control about 50% of the industry.
Is is is Bank of America.
Okay with that are they in the process now of of of downsides -- that might they even spin off Merrill Lynch.
Well there's no likelihood whatsoever they're gonna spin off Merrill Lynch Merrill Lynch ultimately in my view is going to be Bank of America.
So that Merrill Lynch is gonna grow in importance.
Bank of Ireland -- it started aired it because that's a pretty provocative -- saying that Bank of America will just boiled down it to in in an enterprise.
Two and investment banks like Merrill Lynch that's what it will become.
It I think over time that Merrill Lynch will be the dominant factor in the Bank of America you do not gonna -- the largest consumer bank in the United States.
And completely throw away business that brings in over a trillion dollars and in in deposits but.
I believe that Merrill Lynch is going to drive Bank of America remember Merrill Lynch has the ability to operate everywhere in the world.
And that means it can go to the fastest growing economies -- do business where is the consumer portion of Bank of America is landlocked the United States.
Which is starting on the edge of recession if it -- in one.
And in in in a business which is being constantly sued and is constantly being -- -- -- by government regulation.
Dick it's Charlie -- -- you know there's a kind of internal contradiction that -- India which is say -- -- telling us that Merrill which is going to be taken over its going to be the dominant player within Bank of America.
Yet Bank of America is switching to less consumer -- The reason why Bank of America bought Merrill Lynch is because it's the largest brokerage firm.
In the country it's it's still it's about -- second largest -- Morgan Stanley bear reduce its reports a big deal with a lot of consumers through that that's why they bought them.
Why would they I mean it seems like if you're telling me I should like this new -- as it's going as it as it's at it's turning out.
We have tell me I should like.
A bank a consumer a commercial bank that has investment bank attached to it.
That it didn't need to spend all that money to -- -- they are back are already had an investment bank.
So you know a -- First stuff they didn't have an investment bank they had I think it was a very good but it it was a good -- we have gotten.
Will was a fixed income you know generator in other words you know although all of the banks do very well.
In investment banking for fixed income but they didn't buy Merrill Lynch reduce the sales force they -- that was a major part of that a lot of it.
That's ridiculous -- -- -- the cut -- cut the company out of the United States that got the company.
In some markets around the world which is right in that even Ken Lewis wanted to do Ken Lewis -- brokerage business that is crown -- You have but the humor -- is it got the company to equity offerings in other words.
-- of America couldn't break through into equity offerings.
Third it obviously got this distribution system to to depend on to its.
6000 bank branches in the -- in the latest second act that I just wanna say -- getting rid of it.
But I'm just tell you if you're -- -- Four main reason was was was it was the brokerage reasons why.
Was a good cross sell only consumer front and welcome everybody it tackles Ken Lewis said -- dime to quarter selling consumer products into -- felony for Maryland.
Well -- again -- -- early on the phone at fifteen billion dollars at the end of that quarter where that this -- if they started grace period because right.
We we -- is the profits of Bank of America coming from right now how much is Merrill Lynch return to Bank of America relative to what they paid for it.
They already stabilize about -- like -- paid injured.
Yeah well not.
About this will Warren Buffett when will his investment of five billion -- -- are or are you doubtful that this will be the same type of amazing payoff.
That it got with Goldman Sachs when He He put that billion entity -- But I think that Bank of America's stock ultimately it's gonna go back to that's when -- thirty so I think that his payoff is going to be.
Staggering in size not just not just that guy's gonna have six and a half percent of a company who is right now they're 400 billion dollars in liquidity.
Which is only got a 125 billion -- in capital with a market cap which is only about seventy billion.
You know this thing is upside down is supposed to have a market cap bigger -- book value book value.
Beginning -- -- Warren is okay guys the opposite Dick we gotta go but I have to ask you a quick question Bank of America is one of the largest lenders to small businesses in the country we know.
He despite the fact they're the backbone of the economy their -- and bad particularly when it comes to credit.
If it just becomes a Merrill Lynch what does that mean for all those small businesses that depend on Bank of America for loans.
-- -- -- -- killed right in other words the United States government has set up a program which penalizes banks for lending money to small businesses.
You know it's if you take a look at two banks -- America and Bank of New York.
Comerica has to have three times as much capital.
The dollar of assets as Bank of New York.
Because America lends to small businesses and Bank of New York does not -- United States government is killing.
The ability of the banking industry to lend money to small businesses through the capital regulations that they've established in Bank of America is going to dump.
Small business loans.
More bad news for small business -- Thanks sticks so much that bank currently pointing I think it I love -- I've got to disagree with the by the semi they've bought bank of murder from.
-- maravent -- is in the -- of commercial front if they're moving away from that.
If I own that stock I'm working chart yeah.
I -- you don't disagree with Dick to small businesses gonna get killed -- -- -- -- that I -- I I -- -- they were.
He's absolutely right.