Banktown's bragging rights swelled Monday with word of Bank of America's $50 billion deal to buy Merrill Lynch, one of the world's largest brokerage firms.
The behemoth bank has long been a selling point for wooing newcomers and economic development to the Charlotte region. Buying Merrill rockets it to the nation's No. 1 banking spot by assets.
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“I was thunderstruck,” said Russell Robinson, of Charlotte law firm Robinson, Bradshaw & Hinson and a longtime civic leader. “To have Merrill Lynch in effect as a subsidiary of Bank of America, headquartered in Charlotte, raises Charlotte's standing in the financial world tremendously.”
Bank of America, by far Charlotte's largest Fortune 500 company, provides some of the city's best-paying jobs, is a major player in charitable and civic causes and supports many other jobs, from restaurants to law firms. As with any merger, there are concerns about potential layoffs, but overall the feeling locally was positive.
The Merrill deal, brokered in haste amid an epic financial crisis, gives Bank of America a powerful slice of Wall Street and significantly expands its global footprint.
The deal comes as Charlotte has seen Wachovia, its other major bank, oust its top executive and call for massive layoffs as it deals with fallout from the mortgage meltdown. Bank of America also has taken hits in a crisis that has cost the industry hundreds of billions of dollars in falling asset values, adding to a gloomy mood in the nation's second largest financial center.
The Merrill deal won't fix the nation's financial woes, but it helps prevent further erosion, buying needed time for healing. It follows Bank of America's July purchase of troubled Countrywide Financial, which averted the potential collapse of the nation's largest mortgage lender.
And the big dollars in the Merrill acquisition, although a hefty discount from the brokerage firm's value a year ago, underscore Bank of America's relative health in a struggling industry. For Charlotte natives, such as Robinson, and other longtimers, the deal is powerful affirmation of a growth story that has shaped the city.
“I believe they're the only financial institution in America that had the power to pull this off,” said Steve Luquire, of Luquire George Andrews, a Charlotte marketing communications firm. “It's the Bank of America style. They're smart, they're bold, and they're aggressive.”
Luquire, long active in economic development issues, is a board member and former chairman of the Charlotte Regional Partnership.
“As a region, we're fortunate to have an institution…that's on the acquiring end,” he said. However, he added, “despite this deal, we're in such an unprecedented time that it's unsettling for everyone.”
At lunchtime Monday, bank employees interviewed along Tryon Street said they were still digesting the news. In general, they said it was a good sign the company has the money and strength to do big deals even as others struggle.
“Bank of America is taking over the world,” one employee joked.
The bank has said its headquarters will remain in Charlotte. Job losses typically follow mergers, but it's too early for specifics on the Merrill deal. Overall, the area's finance and insurance employment has risen this year, despite layoffs among banks and mortgage-related companies.
Nearly 66,000 people worked in the sector as of July, up more than 2 percent from a year earlier. That increase could be driven in part by brokerage business and hiring to help work out troubled mortgages, said Wachovia economist Mark Vitner.
Tony Crumbley, who joined the Charlotte Chamber staff 31 years ago, said we might also be gaining jobs as a result of other deals, such as the Countrywide acquisition. Generally, he said, banking employment here has risen over the years, despite layoffs, because of bank growth. The impact of this deal, like most, could take several years to play out.
“In the end, it could be a phenomenal coup for Charlotte and the banking industry here,” said Crumbley, the Chamber's vice president of research. He added, “I think it brings a measure of confidence, that Bank of America is willing to stick their neck out on a $50 billion deal.”
Charlotte has been a repeated winner through mergers among its top companies, said Pat McCrory, Charlotte's longtime mayor and now the state's Republican candidate for governor.
“It shows the strength of Charlotte,” McCrory said. “It shows we're big enough to be a major player but we've retained our quality of life…to make people want to raise their families here.”
Staff writer Jen Aronoff contributed.