BofA May Fully Vend Stake in MUFG JV – Analyst Blog

As part of its global strategy to move away from international
wealth management business, Bank of America
( BAC ) is in talks with Mitsubishi UFJ
Financial Group, Inc.
( MTU ) to
sell its remaining stake in the joint venture (JV) – Mitsubishi UFJ
Merrill Lynch PB Securities Co. The announcement related to the 49%
stake sale, worth approximately ¥40 billion ($487 million), could
come as early as next month.

The JV was formed in May 2006 by MUFJ and Merrill Lynch Co.
Subsequently, during the height of the financial crisis in 2008,
BofA acquired Merrill Lynch and hence, the JV was integrated into
BofA’s operations. Currently, the JV employs about 440 people
(about 80% coming from Merrill Lynch).

The JV provides wealth management services to clients with assets
worth more than ¥100 million. Moreover, it remains a profitable
venture, with profits of nearly ¥6.8 billion ($86.1 million) in the
fiscal year ended March 31, 2012.

Yet, BofA chose to divest its stake in the JV, as the company has
been trying to consolidate its global operations and doing away
with its non-core businesses. Over the last two years, the company
has completed the divestiture/closure of more than 20 non-core
assets to strengthen its capital position in order to improve its

In August 2012, BofA announced the divestiture of its
international wealth management operations to Julius Baer Group for
nearly CHF860 million ($882 million). The deal, which is still
subject to regulatory approvals, is expected to close by the end of
this year or early next year. Additionally, the divestiture did not
include the aforesaid JV.

Moreover, for MUFG, the purchase of the remaining JV stake will
further strengthen its dominance over the wealth management market
as well as stabilize the revenue base. This would also enable MUFG
to further improve its relationships with Morgan
( MS ), with whom it has three separate JVs.

Currently, BofA retains a Zacks #3 Rank, which translates into a
short-term Hold rating. The company has made considerable progress
in improving its capital base. We believe that the above mentioned
divestiture, if finalized, will further aid the company in
attaining its goal. This could serve as a slight positive for the
company, thereby leading to modest upward estimate revision. This,
in turn, could improve the company’s Zacks Rank.

BANK OF AMER CP (BAC): Free Stock Analysis

MORGAN STANLEY (MS): Free Stock Analysis Report

MITSUBISHI-UFJ (MTU): Free Stock Analysis

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Friday, November 30th, 2012 EN

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