Bank of America chief executive officer Brian Moynihan wants a little less America in his securities business, and that could mean a little more Canada.
Mr. Moynihan, in a recent visit to Toronto where Bank of America Merrill Lynch has its main Canadian office, pointed out that while the firm is the No. 2 investment bank in the world in terms of the amount of fees it collects, 70 per cent of that fee income comes from the United States. For competitors, just half their revenue comes from the U.S.
For Bank of America Merrill Lynch, increasing international earnings from places like Canada is “one of our biggest opportunities as a company,” Mr. Moynihan said.
There’s no target for growth in Canada, but it’s clear that expansion is expected. Talk to one of the Toronto-based executives of the firm, and the words “increase market share” come up over and over.
“It depends how much the market will give us,” Mr. Moynihan said. “It depends on how good our team is at winning business. I don’t look at countries or companies and say ‘You’ve got to be this big.’ I just say ‘Go out and win in the market, [and]make sure you make money doing it for the shareholders.’ ”
That growth is not going to come from acquisitions, or even a big hiring spree, executives at the firm say. That means it’s going to have to come from squeezing more out of the firm’s existing setup of about 500 staff across Canada.
The plan in Canada is not all that different from Mr. Moynihan’s vision of how to deliver more earnings from Bank of America’s home market. It goes something like this: “Bank of America customer, meet Merrill Lynch. Merrill Lynch customer, meet Bank of America. Now, can we do some business?”
Prior to the merger of the two companies at the beginning of 2009, many Canadian companies that used Bank of America for services such as lending and cash management didn’t use Merrill Lynch for transactions such as bond deals or mergers. The opposite was also true, so cross-pollinating customers should generate sales.
However, perhaps the biggest change from having Bank of America behind Merrill is the ability to lend to corporate clients. Offering loans can open the door to getting the mandate to advise on a merger or to underwrite and initial public offering or a bond sale. Companies tend to spread those fee-generating businesses out among the banks that give them loans.
“It gives clients a chance to hire us when they want to,” said Brad Cameron, Bank of America Merrill Lynch’s head of Canadian mergers and acquisitions. “Before, when they wanted to hire us they couldn’t always justify it internally or to their board. Now it’s easier.”
Bank of America executives are cagey about how much lending they’ll do in Canada, with Lynn Patterson, the bank’s country head, saying only that “the capacity is there.” However, it’s clear from the size of the bank’s balance sheet that it could play a leading role in any lending syndicate likely to come up in Canada.
“Our goal is to be the largest global player here,” said Chris Impey, who was hired from Citigroup Inc. last year to build up the corporate lending group in Canada. Before, Bank of America had largely covered Canadian clients from New York.
After the lessons of the credit crisis, when banks ended up losing money on loans made too cheaply, the key for the firm is managing to get that lending business while hewing to the last line of Mr. Moynhihan’s instructions: Make sure it’s profitable.
Focus on Growth
Corporate bankers are getting quite desperate to lend to quality borrowers, as loans commitments made during the credit crisis to nervous borrowers stockpiling cash start to roll off the books, depleting loan volumes and profits. And in that environment, there’s pressure on banks to fight for business with lower rates and easier terms.
Still, the focus on growth has got to feel like a relief to the bankers and traders who work at Bank of America Merrill Lynch in Canada.
As Merrill teetered before falling into the rescuing embrace of Bank of America in a merger that closed on the first day of 2009, the future for Merrill Lynch in Canada seemed troubled. There was a trickle of departures. Merrill struggled in the merger league tables in 2009, dropping to No. 9 in the Bloomberg rankings for advisers on announced deals with a Canadian angle from third in 2008.
It wasn’t until Ms. Patterson was named to one of the committees overseeing the merger integration that it seemed clear that Merrill Lynch’s Canadian operations would have a solid place in the plans of the new owner. Now, Merrill is back in third place in the Canadian M&A league tables, and advising on marquee transactions such as the defence of Potash Corp. of Saskatchewan from BHP Billiton’s hostile bid.
“We’re in pretty good shape,” Ms. Patterson said. “It’s just about winning market share.”