Schwab's ultrarich U.S. Trust being sold

0 Comments | Philadelphia Inquirer, The, November, 2006 | by Joseph N. DiStefano

Bank of America Corp. will buy U.S. Trust Corp. from Charles Schwab Corp. for $3.3 billion in cash in an effort to boost its clientele among "ultra-high-net-worth households." That's what bankers call people with more than $50 million in personal investments. Bank of America is paying 32 times Schwab's estimated profit for this year - "significantly above" other money managers' market value of 24 times profit, Wachovia Capital Markets analyst Douglas Simpkin warned clients in a report.

But David A. George, an analyst with A.G. Edwards, justified the deal's cost, noting that Bank of America is paying a price equal to 3.5 percent of U.S. Trust's client assets - "not cheap, but reasonable," compared with other recent deals. Traders took the deal in stride. On a day most bank...