I cannot recall the last time a major public company has opened up the "firing" line of what could turn out to be a quite contentious conference call. Bank Of America (BAC) is doing just that by subjecting the very funds that its wealth management division invests in to questions from more than just hedge fund managers.
As noted in this recent "Market Current" by Seeking Alpha:
"Monday, August 27, 6:19 PM BofA's Wealth Management division is holding a conference call tomorrow with Paulson & Co.'s John Paulson, giving the firms retail advisors and clients a chance to take a shot at his disappointing year-to-date performance. So far in 2012, Paulson's Advantage Plus fund is off 18%, while his Advantage fund was down 13%. Remember, this is on the back of declines in 2011 of over 50% and 36%, respectively, and comes just days following Citigroup's (C) announcement that its Private Bank was pulling $410M out of Paulson's funds."
What makes this even more interesting to me is that this conference call comes on the heels of BAC's sale of its non-US wealth management division to Julius Baer, the Swiss bank giant, just about 10 days ago.
As noted in this previous article, I suggested that this just might be the tipping point for BAC to rid itself of the entire division.
"As far as I am concerned, Bank of America has now just about "announced" that the Merrill division in the USA could be dumped. That's obviously just a guess, but I think I could be right since the current deal with Julius Baer has opened the door. Why shouldn't they dump it all, and become a "real" bank again? Is it so terrible to make money by lending, and by charging for services, and by leading the technological advances in the world of banking?"
Could this "conference call", which virtually feeds John Paulson and the entire wealth management division to the lions, be the beginning of the end for this underperforming division?
If we look at an article written back in January, we can get some very clear signals;
"BofA showed signs of progress in its bid to become smaller. Now the nation's second-largest bank by assets, BofA continued to shrink its balance sheet, trimming total assets by 4 percent to $2.1 trillion.
Moynihan said the bank is on track to meet its goals of slashing expenses by $5 billion by the end of 2014, part of Project New BAC. Expenses in the fourth quarter totaled $19.5 billion, down from $20.8 billion in the same quarter last year.
Job cuts will help bring costs down. BofA reduced its head count by 7,000 workers in the fourth quarter and now has about 281,000 employees, executives said, down from 288,000 at the beginning of the quarter. The bank will slash 30,000 positions in phase one of Project New BAC. A second phase will begin this year."
By ridding itself of the entire wealth management division here in the US, Bank of America could close in on becoming the worlds largest "small" bank.
Julius Baer paid about $2.5 billion for the non US division. How much could the whole ball of wax here in the USA fetch? Another $2.5 billion, if not more? Why not?
If Citigroup is pulling out $410 million from the Paulson Funds, how much will others pull out of the funds? If BAC is about to dump the rest of this mess, it might just be the tipping point for the bank to reach its ultimate goal of making money the way banks are supposed to; from deposits, from fees, from lending to businesses, and mortgage lending.
Not too shabby an idea, in my book!
Disclosure: I am long BAC.