Bank of America reaches £28bn deal with Merrill Lynch

A new financial giant has been created as Bank of America confirmed it is to buy Merrill Lynch in a deal worth $50 billion (£28 billion), subject to the approval of shareholders and regulators.

The deal will result in the new financial services giant involved in everything ranging from fixed-income trading to stock underwriting to credit card lending, which will rival Citigroup, the largest US bank in terms of assets.

Should the deal proceed, Bank of America will be able to offer Merrill’s retail stockbroking services to its vast customer base. However, there are fears that the combination could result in job losses.

The deal comes after Wall Street giant, Lehman Brothers, announced it is filing for bankruptcy protection.

There have been fears that investors of Merrill Lynch would lose confidence as the bank has been questioned over its mortgage-backed securities. Merrill has written down over $40 billion of assets in the last 12 months alone.

Under the terms of the deal, which is expected to be finalised next year, Merrill is protected by Bank of America’s substantial current account, credit card and lending businesses.

Bank of America will pay around $29 for each Merrill share. In a statement, Bank of America chairman and chief executive, Ken Lewis, said acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders.

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