Merger Partners Bank of America, FleetBoston Financial Name Management Team

Dec. 9–Bank of America Corp. and its merger partner, FleetBoston Financial Corp., yesterday named a Fleet-dominated management team to oversee their combined investment operations once the deal iscompleted.

The new Wealth & Investment Management Group will house five investment units, including mutual funds, investment services, and private banking. Three of those units will be run by Fleet executives and two by Bank of America executives, the companies told employees in an memo.

Bank of America had previously named Fleet executive Brian Moynihan as president of Wealth & Investment Management, which will have $470 billion in assets under management after the merger is finalized in the second quarter of next year.

The Fleet-dominated team that will run the new group is being named in the aftermath of turmoil in Bank of America’s mutual funds group, the Nations Funds.

Robert Gordon, head of Nations Funds, was among a handful of Bank of America executives dismissed in September after New York Attorney General Eliot Spitzer launched an investigation into improper trading practices.

The investigation targeted Gordon and Bank of America client, Canary Capital Partners, a hedge fund. Neither the bank nor any executives have been charged in the ongoing investigation.

A Fleet-led team heading Wealth & Management “kills two birds with one stone,” said Gerard Cassidy, bank analyst with RBC Capital Markets in Portland, Maine.

The companies “needed to eliminate some of those positions but at the same time you’ve got a scandal in your own division, so you clean house.”

Richard DeMartini, the current president of Bank of America’s asset-management group, will retire when the integration is completed and his role will be assumed by Fleet’s Moynihan, the companies said.

A prominent appointment to Moynihan’s five-man team is Keith Banks, chief executive and chief investment officer of Fleet’s Columbia Management group of mutual funds. Banks, who joined FleetBoston in 2000 from New York-based J.P. Morgan, will be president of asset management in the merged institution, overseeing mutual funds and institutional and individual investments.

“We’re delighted to have this new leadership team, and Keith really has an outstanding record as an investor, and his experience speaks for itself,” said Bank of America spokeswoman Jennifer Tice.

Fleet was an attractive acquisition for Bank of America, due to its foothold in the Boston area and in New England, with its large pool of potential high-income investment clients, analysts said. Bank of America’s client assets under management of $310 billion will be combined with Fleet’s $160 billion.

Assets in the private bank, which caters to wealthy individuals and other investors, will grow from Bank of America’s $90 billion to $130 billion after the merger. Last week, Bank of America chief executive Kenneth Lewis said the company scaled back growth targets for the money management group that were made prior to the merger.

Lewis “acquired what he needs,” Moynihan said, adding the companies will focus on consolidation and growth from within.

This is the first divisional restructuring announced by the bank partners; more are expected. Combined, they will have 11,500 employees, of which 6,500 work for Bank of America.

Fleet has said preserving existing jobs levels in New England was key to the merger, but analysts anticipate layoffs at overlapping operations. Moynihan said the two companies are still in the early stages of determining how Wealth & Management will be organized. Four other top managers were also named to Moynihan’s team: Alan Rappaport, president of Bank of America’s private bank, will head the combined private bank. Alan Schroder, Bank of America’s head of brokerage, will oversee the combined brokerage operation, which includes Fleet’s Quick & Reilly. Two Fleet executives, John Bahnken, a 12-year veteran, will oversee the clearing and execution division, and Chris Quick, president for 17 years of Fleet’s specialist business on Wall Street, will continue to run that operation.

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(c) 2003, The Boston Globe. Distributed by Knight Ridder/Tribune Business News.

BAC, FBF,

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