The Business Journal’s ranking of the county’s largest stockbrokerages is going to look a lot different in the aftermath of the credit crisis.
Consolidation in the industry, with strong companies buying out troubled ones, stands to create new dominant players in the county.
When we do our list next year, Charlotte, N.C.-based Bank of America Corp. stands to top it with its pending acquisition of Wall Street’s Merrill Lynch & Co.
Merrill Lynch tops this year’s list of top stockbrokerages on page 30, while Bank of America is No. 4.
How the combination plays out is yet to be determined.
It’s very early in the process, said Brad Dinsmore, West division consumer executive with Bank of America. It’s hard to see what changes, if any, will happen.
Merrill Lynch is being bought for about $45 billion to save it from going under from bad mortgage investments.
Bank of America stands to add an estimated 175 brokers to the 258 Merrill has in the county, as it becomes the new No. 1 employer of stock brokers and related staff locally.
It’s unclear if Bank of America will rename Merrill or let it operate independently as Citigroup Inc. did when it bought Smith Barney.
Smith Barney, which was sold to Citibank in 1998, lost the top local brokerage status to Merrill two years ago.
Merrill Lynch is keeping its chairman and chief executive, John Thain, as head of global banking, securities and wealth management for Bank of America.
Bank of America also owns U.S. Trust, a wealth adviser that employs about 50 people in the county.
Some have questioned how the two cultures of the companies would mesh, with Merrill being a traditional broker and Bank of America being a commercial bank.
Much of Bank of America’s brokerage business in the county has come from referrals through its premier banking unit, where account holders have a minimum of $500,000. That is the same crowd that Merrill tends to go after.
Bank of America also is the county’s largest retail banker with about 20% of local deposits.
Cross-selling investment services to its retail banking customers hasn’t until recently been a focus for Bank of America, and it only has a small percentage of its brokers in branches.
Meanwhile, Bank of America still is working on consolidating Calabasas-based home lender Countrywide Financial Corp.’s operations after it acquired the company in January for about $4 billion.
WaMu Fails, Wachovia Rescued
Wells Fargo Investments LLC, the second largest brokerage in the county, also stands to make a large leap in the broker count when it buys Charlotte, N.C.-based Wachovia Corp.
Wells stands to add about 125 of Wachovia’s brokers to the 210 it already has, giving it about 335 brokers. That still would put it behind the combined 435 of Merrill and Bank of America.
Wachovia’s 125 brokers include some from A.G. Edwards & Sons Inc., which were acquired in 2007 in a deal worth $7 billion.
Citigroup’s initial bid for Wachovia left out the company’s brokerages, which includes its asset management unit Evergreen Investments Management Co. in Massachusetts.
JPMorgan Chase & Co.’s buyout of failed Seattle-based savings and loan Washington Mutual Inc. could also impact the Business Journal’s annual list of stockbrokers.
Locally, Washington Mutual gives JPMorgan 64 branches and the third-largest market share of deposits with 11%.
JPMorgan never has been a force in the county, and neither it nor Washington Mutual made the list of biggest brokerages.
That could change.
JPMorgan, a longtime Wall Street player, became a commercial bank in 2000 when it bought Chase Manhattan Corp.
Some of Washington Mutual’s local branches have licensed brokers, but it’s never been a key part of its business.
Last year, JPMorgan opened a Costa Mesa office with 12 people to tap into the county’s wealthy population. It previously had an office in OC but closed it three years ago.
Another change on the list could come from the county’s third largest brokerage, Morgan Stanley, which received an investment from Japan’s largest bank, Mitsubishi UFJ Financial Group Inc., in return for a nearly 25% ownership stake.
Morgan Stanley, a major Wall Street investment bank, is the third-largest broker in the county with 175 licensed representatives.
It’s part of a group of major investment banks that have suffered heavy losses in the credit crisis and is in the process of changing its business model.
In September, it became a bank holding company to allow it to take on easier funding and to shore up losses.
Mitsubishi also owns San Francisco-based Union Bank of California NA, which it acquired the rest of the company it didn’t already own in August.
It plans to take Union Bank private by July, which would allow Mitsubishi to more easily make acquisitions.
Union Bank, which operates primarily in California, already offers discount brokerage services for online investors. Nothing has been said about changes for the company.
Smaller regional players, like Los Angeles-based Crowell, Weedon & Co., which has 31 brokers in the county, see Wall Street’s turmoil as an opportunity to become larger. The brokerage says it’s got a boost of customers and brokers from troubled companies.
