Bank of America is rumored to be considering selling its 34% stake in BlackRock, according to The Wall Street Journal. Now the question is whether the bank is looking to get out of asset management altogether.
Since the bank’s purchase of Merrill Lynch last year, it has been selling off what it considers its non-core assets, such as Columbia Management Group and First Republic Bank.
“At the time it looked like now that they had a stake in BlackRock through the purchase of Merrill Lynch they didn’t need Columbia,” said Alois Pirker, research director at Aite Group, in a phone interview on Monday. But now if they are considering selling BlackRock “it could mean they are really getting out of asset management.”
As the trend toward open architecture has caught on, more firms have decided to separate their asset management distribution side from their manufacturing side. The two landmark deals, says Pirker, were Merrill Lynch and BlackRock and Citigroup and Legg Mason.
“BlackRock has done well,” said Pirker. “But the question for Bank of America is: does it want to retain that as an investment or sell it off? It looks like if they sell it than the bank is really selling the ties to the asset management side.”
Bank of America hasn’t reached a final decision and no deal is on the table, according to The Wall Street Journal report.
"Over the last 12 to 18 months we have been methodically going through our businesses determining what businesses directly affect how we deliver products and services to our customers," said Jerry Dubrowski, Bank of America spokesman, in a phone call on Monday. "Blackrock was acquired when we acquired Merrill Lynch and it has never been integrated into our business."
BlackRock did respond to requests for comment.
Another question for Bank of America if it does decide to sell BlackRock is: what to do with the capital?
“They have financial concerns and issues that still need to be resolved and addressed and the economy still has its concerns. What they’re doing is raising cash by selling non-core assets,” said Rus Prince of Prince & Associates in a phone interview on Monday. “They’re not managing the BlackRock stake. It’s just an investment. If they can get a good price for it, it makes sense to sell it and apply the money where they need it more. Would they sell if things were going better? No. But people are selling things off they don’t absolutely need. And BlackRock would like to have their stake back as well.”
The rumored Bank of America/BlackRock deal won’t be the last of its kind. “You’re going to see more of this. And assuming that the world is not all rainbows and flowers than people are going to have to get much more focused on where they want to do business and how.”