Bank of America Corp. has its hands full keeping customers happy as it completes its integration of U.S. Trust Corp. this year, but the Charlotte company remains optimistic and has managed to retain a majority of the clients inherited in the acquisition.
Analysts say that it is critical for B of A to win over wealthy consumers now as the economy teeters and the industry faces headwinds from other business lines, including lending.
Private banking accounted for less than 15% of the nearly $15 billion that B of A earned last year, but it is one area that has plenty of room to grow.
"It's still not large enough to really give them outsized growth, but anything is better than zero," said Ganesh Rathnam, an analyst at Morningstar Inc. in Chicago. "If you look at private banking alone, there's tremendous opportunity for growth."
B of A's client base has held steady, maintaining most of the 134,000 relationships inherited from U.S. Trust. Before agreeing to buy U.S. Trust from Charles Schwab Corp. for $3.3 billion, B of A had relationships with 8 million customers who held $100,000 to $3 million of investable assets.
At that time it was already doing business with 300,000 customers that had more than $3 million of investable assets and had relationships with 80% of firms with $200 million or more in pension funds.
"The number of clients that are served by Bank of America, but yet to be served by U.S. Trust, is immense," said Alan Rappaport, B of A's New York president. "We create new … [client relationships] every day."
Burton Greenwald, a Philadelphia analyst with BJ Greenwald Associates, said B of A has faced a challenge in terms of retaining "standout" U.S. Trust executives.
U.S. Trust's chief investment officer, Leo P. Grohowski, moved to a similar role at Bank of New York Mellon Corp. in the fall. Peter Scaturro stepped down in April as U.S. Trust's chief executive officer, and three months later he was hired to run Goldman Sachs Group Inc.'s private wealth management unit.
Mr. Greenwald said their exit indicates "a brand with considerable prestige has diminished."
Richard Bove, an analyst at Punk, Ziegel & Co., had a different take. "Every time Bank of America makes an acquisition, they pay too much, the good people leave, the clients don't want to do business with them, and then a year afterward nobody takes a look at what happened," he said. "But if they do, they find that Bank of America is in a stronger position with the company it acquired than the company was beforehand."
On Tuesday, B of A announced Pat Phillips, who has led its private banking and investment arm since 2005, will retire this spring. Dean Athanasia, a Northeast division executive for private banking and investments, will succeed him, as the president of the unit.
"There will [always] be plenty of integration issues, so there's no surprise there," said Charles Roame, the managing principal of the California consulting firm Tiburon Strategic Advisors. "If they're having some growing pains, I wouldn't judge them. I'd let the growing pains happen and let it play out a bit."
B of A has taken steps to protect itself from further attrition, including having more than one person working with each wealth management client. It also has been recruiting aggressively in recent months, adding people in places such as San Diego, Macon, Ga., and Richmond, Va.
At the same time, the private banking unit is expanding in Chicago. In October, B of A acquired LaSalle Bank Corp. and its subsidiaries from the Dutch company ABN Amro Holding NV.
As B of A expands nationally, its private banking unit, which was renamed U.S. Trust, Bank of America Private Wealth Management, is trying to persuade its clients that it now has a stronger array of services as a result of the U.S. Trust acquisition.
For example, customers inherited from U.S. Trust now have access to research from B of A's asset management arm, Columbia Management Group LLC, and can withdraw cash from the parent's network of nearly 17,000 automated teller machines.
