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On a slushy January morning in New York City, Sallie Krawcheck sits at a marble-top table in her corner office on the 50th floor of the Bank of America tower, the second-tallest skyscraper in town. Although pedestrians far below are dodging icy splashes from passing cabs and buses, the head of Bank of America's (BAC) Global Wealth and Investment Management division isn't dressed for stormy weather. Her cream cardigan is thrown over a light print dress, and her chin-length hair is tucked behind one ear, exposing a large diamond earring. In a few hours, she'll be hosting a charity fundraiser on Park Avenue; for now, she's arguing that there's no better place for the clients and advisers of Merrill Lynch—the world's most profitable brokerage—than Bank of America, the embattled retail giant that swallowed Merrill during the crisis of September 2008.
"In the days and weeks after I got here, it hit me like a blast furnace: The client comes first," says Krawcheck, who's been running the wealth unit for nearly two years. "We operate in the client's interest. We measure client satisfaction down to the adviser level." She's so on-message that you have to remind yourself that this is the same person who, as an analyst covering Wall Street a decade ago, told a Fortune reporter she could tell when management was lying because "their lips move."
As the boss of 15,500 financial advisers at Merrill Lynch and 2,200 more at U.S. Trust, Krawcheck, 46, may be the most powerful woman on Wall Street. In the past two years her division—one of the best performers inside Charlotte (N.C.)-based Bank of America—produced $3.1 billion in profits and pushed client balances to $2.2 trillion while riding a bull market that has seen stocks double from their 2009 lows. Shares of BofA have gone nowhere since the Merrill deal closed in early 2009.
Krawcheck's performance is a rebuttal to those who argue that Bank of America got suckered when it paid $50 billion for Merrill. It was a "crazy price," Warren Buffett told the Financial Crisis Inquiry Commission last May, because Ken Lewis, BofA's chief executive officer at the time, "could have bought them the next day for nothing because Merrill was going to go when Lehman went." Lewis tried to cancel the deal weeks before it closed, saying that Merrill—which posted a $15.3 billion loss in its final quarter of independence—was in worse shape than his team had known. Regulators instructed him to proceed because Merrill's failure would threaten economic stability, he told analysts in 2009. The acquisition forced him to seek $20 billion in federal bailout money on top of the combined $25 billion Bank of America and Merrill had already borrowed. Since then BofA, which also bought subprime home loan giant Countrywide during the bust, has racked up $25 billion in mortgage and credit-card losses. In 2009, it repaid the $45 billion in rescue loans.
Krawcheck betrays no doubts about the wisdom of the acquisition. "The deal has made tremendous sense strategically," she says. "Will the business over time do better? We certainly hope and expect so." The key to making the marriage work lies in what the industry calls "cross-selling"—driving business between the wealth management, consumer banking, and commercial banking divisions. A Merrill client, for example, may shift his company's 401(k) plan to BofA's retirement unit, or open a personal line of credit at the retail bank. Bank of America management tracks the number of leads and referrals—for products such as mortgages, credit cards, and debt financing—that come from each of the firm's brokers.
Creating those synergies would be easier if Merrill's brokers—its so-called Thundering Herd—weren't independent operators, with their own clients and profit-and-loss statements. Krawcheck must draw profitable cross-sell opportunities from them without driving them away. "A good part of our growth potential," she says, "is directly linked to our connectivity to the bank." Many of the seven current and former Merrill brokers interviewed for this article, most of whom did not want to be named for fear of undermining their relationship with Bank of America, say they resent the loss of control the new centralized sales culture has created. In the two years since BofA acquired Merrill, the combined firms' broker count has dropped from 18,000 to 15,500. Most of the losses came during and right after the crash.
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