Bank of America and Countrywide Financial Discuss Alliance

Charlotte, N.C.-based Bank of America [BoA] and U.S. mortgage lending giant Countrywide Financial are discussing a possible merger or joint venture, according to the Financial Times. The putative merger would bring together the number-two U.S. bank in terms of assets and the country's biggest home lender. Analysts believe Countrywide, whose market value was about $26.1 billion as of the close on Friday, would sell for approximately $30 billion. A possible JV scenario -- and one that some analysts believe is more likely than a merger -- is the sale of Countrywide mortgages at BoA branches. BoA has 5,747 U.S. branches, about 2,300 more than any other bank, and is the largest U.S. credit card issuer. It also controls 9% of U.S. deposits, ahead of all competitors. It is considered to be relatively weak in mortgages, however. Countrywide originated $462.5 billion of mortgage loans last year. In 2004, BoA bought FleetBoston Financial Corp. for $48 billion, and last year it purchased MBNA Corp. for $34.2 billion. BoA shares fell $0.36 to $52.04 on the report while Countrywide shares climbed 12% before settling at $42, a 4% gain. Countrywide will report Q4 results tomorrow.

• Sources: MarketWatch, Reuters
• Related commentary: BoA Boosted by MBNA Acquisition, Q4 Net Jumps 47%, Beats Street, Bank of America: Impressive Numbers Prove We Were Wrong -- Barron's, Bank of America Acquires U.S. Trust in Bid To Lure the Uber-Rich, Countrywide Financial: The Price is Right, The Market Isn't
• Potentially impacted stocks and ETFs: Bank of America Corp. (BAC), Countrywide Financial Corp. (CFC). Competitors: Citigroup Inc. (C), Wachovia Corp. (WB), Wells Fargo & Co. (WFC), Washington Mutual Inc. (WM). ETFs: First Trust Morningstar Dividend Leaders Index Fund (FDL), WisdomTree HighYielding Equity (DHS), WisdomTree LargeCap Dividend (DLN), iShares S&P 500 Value Index Fund (IVE)

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Comments

[Brian Croner]

This smells. I wouldn't touch anything that's been near the mortgage market. Probably doing this to increase the value of the quality that sheer quantity alone, in itself, has. "If you close us, you have to close all of us. We are bigger together than when apart. We stand together. Don't hurt us now. They lose their jobs, we lose our jobs."