Regionals Buying B/D Branches, It’s All About AIG, BofA’s Reassurances

This week, Stifel Nicolaus announced it was buying 55 UBS wealth management branches spread across 24 states, which include $15 billion in assets under management, 320 reps and over $100 million in revenue. The St. Louis regional b/d will make an upfront cash payment of $27 million for the branches, which are said to consist of mostly lower level producers. UBS says the deal allows it to divest itself of producers that don’t fit into its high-net-worth strategy, and sell them to a firm that’s willing to take them on.

This week, Stifel Nicolaus announced it was buying 55 UBS wealth management branches spread across 24 states, which include $15 billion in assets under management, 320 reps and over $100 million in revenue. The St. Louis regional b/d will make an upfront cash payment of $27 million for the branches, which are said to consist of mostly lower level producers. UBS says the deal allows it to divest itself of producers that don’t fit into its high-net-worth strategy, and sell them to a firm that’s willing to take them on.

While it’s not the first time a firm has sold some of its branches to another b/d, Alois Pirker, senior analyst at the Aite Group, says the UBS/Stifel deal might spark a series of similar deals. “Ultimately there is over capacity at many firms right now. At Morgan Stanley, Smith Barney there must be people stepping on each other’s toes. There is plenty of opportunity to sell branches,” he says. In fact, D.A. Davidson says it bought two Smith Barney branches located in Washington and Oregon, which included 8 brokers, last November. Kerr says Smith Barney approached his firm about a possible sale. When asked about the deal, however, a Smith Barney spokesperson declined to comment. For more on this story, check out Registered Rep.’s Wealth Management e-newsletter, here.


Betrayed By AIG

Meanwhile, fallout from the AIG bonus kerfuffle continues to dominate the news. Jake DeSantis, executive vice president in AIG’s financial products division, resigned Wednesday over the company’s request that the bonuses be returned to the company. In a letter to AIG CEO Edward Liddy in publishedThe New York Times, DeSantis voiced anger over Liddy’s treatment of AIG employees. “Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you,” DeSantis writes in the letter. The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats.”

But outrage over the bonuses seems to be cooling somewhat after 15 of the top 20 executives agreed to return their payments, and following unenthusiastic comments from President Barack Obama about the executive-bonus-tax legislation in Congress, says an article in The Wall Street Journal. Last week, the U.S. House passed a bill that would to impose a 90 percent tax on all bonuses awarded to executives at those institutions receiving financial bailout money, but some predict it will not pass the Senate. “The legislation’s course in the Senate will depend on the administration’s moves on executive pay and whether anything further emerges that could rile lawmakers and the public, such as bonuses or other spending by banks perceived as unwarranted,” the article says.

Two editorials in The Wall Street Journal today take sides on the way the current administration has handled the AIG bonus outrage. Conservative-leaning Holman W. Jenkins Jr., in his column, “Business World,” argues that both President Barack Obama and Treasury Secretary Timothy Geithner encouraged unjustified public hysteria over the bonuses, which were being paid out not to those Financial Products executives who brought the firm to its knees, but to those who could keep the firm alive. Moreover, they probably would have been upheld in bankruptcy court, he writes.

Left-leaning journalist Thomas Frank, in his column, “The Tilting Yard,” on the other hand, says the recent populist outrage is a good thing. “It is directed at exactly the instruments that steered the economy into the ditch and the executives who built the system—and who will demand to do business the old way as long as they have breath to bellow,” Frank writes. “What’s more, it is only thanks to populist members of Congress that we know our bailout of AIG sluiced billions to foreign banks, and it’s only thanks to public outrage that the administration feels any pressure at all to exert a firmer hand on the institutions it has rescued from bankruptcy.”

Lewis’ Reassurances

Meanwhile, Bank of America CEO Ken Lewis told the L.A. Times Wednesday that the bank plans to begin repaying its TARP money in April, after the government has concluded its stress test of the bank. At least one analyst is not so sure, according to the story. “Analyst Paul Miller of Friedman, Billings, Ramsey & Co., a frequent Lewis critic, said he expected Bank of America to struggle to keep a solid capital cushion against losses over the next 18 months, and suggested Lewis was posturing.” In an interview with the paper, Lewis also expressed confidence in the government’s current stimulus efforts.

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