Two huge acquisitions in the banking sector have been completed following the biggest financial crisis to hit the US since the 1930s, capping a year in which Wall Street stocks were hammered, home foreclosure rates soared and job losses mounted.
Bank of America Corp said on Thursday it had completed its US$19.4 billion all-stock purchase of Merrill Lynch & Co, while Wells Fargo & Co said it had completed its US$12.7 billion all-stock purchase of Wachovia Corp.
Merrill Lynch’s sale to Bank of America, which is based in Charlotte, North Carolina, was announced in September. It creates the nation’s largest financial services company.
San Francisco-based Wells Fargo’s purchase of Wachovia, a deal that was announced in October, creates a coast-to-coast powerhouse with community banks in 39 states and the District of Columbia.
Besides acquisitions, the turmoil in the banking sector has brought announcements of big job cuts and loans to several banks from the government’s US$700 billion rescue fund.
The Bank of America-Merrill Lynch deal was struck as the solvency of investment banks was in grave doubt. By comparison, Lehman Brothers Holdings Inc was forced to file for bankruptcy.
New York-based Citigroup agreed to step in and buy Wachovia’s banking operations for US$2.1 billion with the help of the Federal Deposit Insurance Corp. But only four days later, Wells Fargo made a higher offer that did not hinge on any government support and ultimately won the right to purchase all of Wachovia.
Wells Fargo said that with Wachovia, it now has US$1.4 trillion in assets.
Bank of America has said it expects to cut 30,000 to 35,000 jobs over the next three years. The final number could be even higher, analysts said.
Including Merrill Lynch, Bank of America has about 308,000 employees.
Bank of America reiterated on Thursday that it expects to achieve US$7 billion in pretax expense savings by 2012. It said the cost reductions would come from a range of sources, including the previously announced job cuts and the reduction of overlapping technology, vendor and marketing expenses.