BofA snaps up Schwab asset
By ASSOCIATED PRESS
Published November 21, 2006
SAN FRANCISCO - Charles Schwab Corp. is selling wealth-management specialist U.S. Trust to Bank of America Corp. for $3.3-billion in cash, ending an ill-fated attempt to marry the discount stock brokerage's do-it-yourself style with a service devoted to pampering multimillionaires.
With the sale announced Monday, Schwab will walk away from the uneasy relationship with a profit. The San Francisco brokerage bought U.S. Trust six years ago for $2.7-billion in stock.
The deal, expected to be completed in the spring, continues a high-priced expansion that has solidified Bank of America's position as the nation's second-largest financial services firm behind Citigroup Inc.
Since 2003, Bank of America of Charlotte, N.C., has spent about $82-billion to buy FleetBoston Financial Corp. and credit card issuer MNBA Corp.
In recent weeks, some analysts had been wondering if Bank of America might try to snap up all of Schwab. The speculation intensified this month after Schwab abruptly canceled a Nov. 16 meeting with investors.
Although it wasn't the blockbuster some anticipated, Wall Street seemed pleased with Monday's deal. Schwab shares rose 38 cents, or more than 2 percent, to close at $18.94 during on the Nasdaq Stock Market, while Bank of America shares rose 11 cents to $54.96 on the New York Stock Exchange.
After it adds U.S. Trust, Bank of America expects to be managing about $261-billion in assets for the rich - more than any other U.S. bank. JP Morgan Chase & Co. currently holds the top spot among U.S. banks in the high-end market, with assets of $204-billion under management.
The asset size of Bank of America's wealth-management arm would still rank well behind four full-service stock brokerages: Merrill Lynch, Citigroup, UBS and Morgan Stanley.
When Schwab bought U.S. Trust during the dot-com boom, the brokerage thought the niche service would be a good fit for its brokerage customers as they accumulated more wealth.
"It was a big move away from their core business of servicing the mass market and the mass affluent markets," said Lauren Bender, manager of the wealth management practice at Celent, a financial consultant.
But Schwab's emphasis on offering low prices to independent-minded investors clashed with the philosophy of U.S. Trust, a 153-year-old company that prides itself on rolling out the red-carpet treatment for the financial elite.