Selling its U.S. Trust private banking division could raise billions and alleviate Bank of America's capital concerns, but C-I doesn't believe it's going to happen - at least anytime soon.  BofA paid $3.3 billion for U.S. Trust in 2007 - from Charles Schwab & Co. 

Speculation about a sale is rampant.  Bank of America needs to shrink its balance sheet and raise its capital ratios as it struggles to find bottom on its mortgage-related problems.  A sale also would ease simmering tensions within Bank of America’s global wealth and investment management division.  U.S. Trust bankers sometimes find themselves at odds with a much larger and more aggressive Merrill Lynch operation, which generated more than five times as much revenue in the first quarter.  And, some rival firms have reported receiving  waves of resumes and inquiries from U.S. Trust portfolio managers and advisers looking for a stable place to bring their clients - that according to Boston Business Journal on 5/20/11.  

Solid reasons why a sale just won't happen.   U.S. Trust remains a core asset, and Bank of America has repeatedly turned aside private-equity firms that have shown keen interest in buying U.S. Trust.  USTrust has a unique standing in the financial community -  strong heritage and powerful brand recognition among wealthy Americans. 

Richard Bove, bank analyst at Rochdale Securities, believes U.S. Trust fits nicely within Bank of America’s wealth management operations.  And while he "wouldn’t discount the fact that they might sell it," he nonetheless says "it would be a mistake to sell U.S. Trust unless (Bank of America) needed to raise capital. ... Other asset management firms would like to have it.”

Bove noted that Bank of America has sold large money management operations before to strengthen capital ratios - e.g., last year, it sold Columbia Management’s long-term asset management business to Ameriprise Financial for about $1 billion in cash.  And, USTrust likely would fetch more than 3 times that amount.

In a March presentation to investors, BofA’s global wealth management chief Sallie Krawcheck said the integration of U.S. Trust and Merrill Lynch platforms had not been completed, but called it a strategic priority.

Pales in contrast to Merrill Lynch Global Wealth.   Merrill's unit produced $13.1bn in revenue during 2010 and reported nearly $1.6 trillion in client balances - vs. $368bn at U.S. Trust.  There are some BofA executives who see the Merrill Lynch acquisition as making U.S. Trust redundant. 

Another weakness is how the businesses translate into referrd business.  U.S. Trust is a steady, fee-based business, while Merrill Lynch is transaction oriented and a powerful force in referring clients to BofA’s commercial banking and global markets businesses.

Overriding Factor in Holding Onto U.S.Trust.   Bank of America has been clobbered and continues to be clobbered by its acquisition of Countrywide Financial under then-CEO Ken Lewis.  Some see "CFC" as the bank's "Waterloo."  So, why sell off a business that:  (i) turns a profit, (ii) broadens the bank's image - beyond that of a huge commercial bank offering ATMs at every corner,  and  (iii) hasn't given the bank a bad moment and doesn't cause BofA executives to lose sleep at night. 

It's that last point that should seal the deal.   But remember:  our opinion won't make it any cheaper for you to get on a NYC subway - it'll still cost you $2.25.