Bank of America Embarks on Asset sale to stay afloat
In the current financial situations, banks are merely struggling to remain afloat and restore investor confidence. While most banks resort to layoffs of employees as a major cost cutting measure, some go a little bit further. The Bank of America, for instance, shed some of its assets China Construction Bank, despite its current good performance in the market.
This decision comes as a surprise to many economists, given the good performance of the China Construction Bank. The fact that BoA could sell- and was willing to sell more provided the price was right- shows just shows how bad it wants to make profits so as to restore investor confidence.
It is not just the assets held by the Chinese bank that are at risk of being offloaded. Merry Lynch, an investment and brokerage venture that the Bank of America purchased way back in 2008, is next on line. This is in spite the fact that Merry Lynch is actually performing well currently.
Other sources indicate that there could efforts to reverse integration between Merry Lynch and Bank of America, which has been ongoing for the last 2-3 years. The bank aims to achieve a new category of stocks which it hopes will open up revenue options for it. While this will provide a short term solution to its current problems, it is likely to shut down its major source of cash that has literally been keeping it afloat.
However, this approach of selling assets is not new to BoA. During the last recession, the bank embarked on a mission to sell its shares in First Republic Bank. Additionally, it also sold off its holdings in Columbia Management. Recently, BoA disposed its credit card business to Toronto-Dominion Bank. It appears the bank is keen to divest its small assets as well as holding so as to keep its investors happy.