Bank of America CEO Kenneth Lewis Monday touted his bank’s deal to acquire storied Merrill Lynch, despite a financial system he described as “under almost unprecedented stress.”
Lewis’ announcement of the deal came amid an epically grim day on Wall Street, as the U.S. financial system strained to absorb the economic shockwaves unleashed Sunday when Lehman Brothers filed for bankruptcy, Bank of America began moves to purchase Merrill Lynch and American International Group searched for an economic lifeline.
The Dow reacted to the turmoil by dropping 4.4 percent, or 504 points.
Lewis said he plans to buy Merrill in a $50 billion, all-stock transaction. Bank of America, already the nation’s largest retail bank, would become the largest U.S. brokerage with the addition of Merrill, which employs 20,000 financial advisors and has $2.5 trillion of client assets, according to Reuters.
Bank of America is the nation’s largest bank by market value, with roughly $154 billion.
In addition to it’s sizeable brokerage division, Merrill would give Bank of America a large investment bank. The bank would also acquire one half stake of the asset manager BlackRock Inc. with the transaction, Reuters reported.
“This creates the company it would have taken a decade to build,” said Lewis during a conference call with investors, according to Reuters.
Lewis expects the Merrill deal to be completed in 2009, he told investors, adding that it would reduce earnings per share by 3 percent next year, Dow Jones reported. Lewis expects Bank of America to break even by 2010.
The deal comes just a few months after Bank of America purchased Countrywide Financial for $2.5 billion.