Annual report pursuant to Section 13 and 15(d)

Transactions with Bank of America

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Transactions with Bank of America
 12 Months Ended
Dec. 31, 2011
Related Party Transactions [Abstract]  
Transactions with Bank of America
Note 2.  
Transactions with Bank of America
Merrill Lynch has entered into various transactions with Bank of America, primarily to integrate certain activities within either Bank of America or Merrill Lynch. Transactions with Bank of America also include various asset and liability transfers and transactions associated with intercompany sales and trading and financing activities.
Sale of U.S. Banks to Bank of America
During 2009, Merrill Lynch sold Merrill Lynch Bank USA (“MLBUSA”) and Merrill Lynch Bank & Trust Co., FSB (“MLBT-FSB”) to a subsidiary of Bank of America. In both transactions, Merrill Lynch sold the shares of the respective entity to Bank of America. The sale price of each entity was equal to its net book value as of the date of transfer.
The MLBUSA sale was completed on July 1, 2009, and the sale of MLBT-FSB was completed on November 2, 2009. After each sale was completed, MLBUSA and MLBT-FSB were merged into Bank of America, N.A. ("BANA"), a subsidiary of Bank of America.
Acquisition of Banc of America Investment Services, Inc. (“BAI”) from Bank of America
In October 2009, Bank of America contributed the shares of BAI, one of its wholly-owned broker-dealer subsidiaries, to ML & Co. Subsequent to the transfer, BAI was merged into MLPF&S. The net amount contributed by Bank of America to ML & Co. was equal to BAI’s net book value of approximately $263 million as of the date of transfer. In accordance with Business Combinations Accounting, Merrill Lynch’s Consolidated Financial Statements include the results of BAI as if the contribution from Bank of America had occurred on January 1, 2009, the date at which both entities were first under the common control of Bank of America.

Merger with BASH
See Note 1 — “Merger with BASH” for further information on this transaction.
Other Related Party Transactions
Merrill Lynch has entered into various transactions with Bank of America, including transactions in connection with certain sales and trading and financing activities as well as the allocation of certain shared services. Details on amounts receivable from and payable to Bank of America as of December 31, 2011 and December 31, 2010 are presented below.
Receivables from Bank of America are comprised of:
(dollars in millions)
 
December 31, 2011

December 31, 2010
Cash and cash equivalents
$
7,491

 
$
14,471

Cash and securities segregated for regulatory purposes
6,107

 
5,508

Receivables under resale agreements
26,855

 
31,053

Trading assets
700

 
643

Net intercompany funding receivable
3,567

 
7,305

Other receivables
6,252

 
1,460

Other assets
—

 
215

 
$
50,972

 
$
60,655

Payables to Bank of America are comprised of:
(dollars in millions)
 
December 31, 2011
 
December 31, 2010
Payables under repurchase agreements
$
22,647

 
$
12,890

Payables under securities loaned transactions
2,519

 
2,352

Short-term borrowings
1,450

 
1,901

Deposits
75

 
33

Trading liabilities
503

 
520

Other payables
1,935

 
2,746

Long-term borrowings(1)
2,650

 
2,579

Total
$
31,779

 
$
23,021

 
 
 
 
(1)
Amounts include $2,578 of subordinated borrowings from Bank of America (see Note 12).
Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, 2011 were $1.3 billion and $2.5 billion, respectively. Net revenues for the year ended December 31, 2011 included $322 million of investment banking revenue from transactions involving Bank of America. Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, 2010 were $906 million and $807 million, respectively. Net revenues for the year ended December 31, 2010 included a realized gain of approximately $280 million from the sale of approximately $11 billion of available-for-sale securities, $212 million of investment banking revenue from transactions involving Bank of America, and, as discussed below, a gain of approximately $600 million from the sale of Bloomberg Inc. notes receivable to Bank of America. Total net revenues and non-interest expenses related to transactions with Bank of America for the year ended December 31, 2009 were $1.5 billion and $739 million, respectively. Net revenues for the year ended December 31, 2009 included $644 million of investment banking revenue from transactions involving Bank of America.
Total net revenues related to transactions with Bank of America for the years ended December 31, 2011, December 31, 2010 and December 31, 2009 included intercompany service fee revenues of $925 million, $279 million and $200 million, respectively. Total non-interest expenses related to transactions with Bank of America for the years ended December 31, 2011, December 31, 2010 and December 31, 2009 included intercompany service fee expenses of $2.3 billion, $538 million and $573 million, respectively. Intercompany service fee revenue and service fee expense from Bank of America represents the allocations of certain centralized or shared business activities between Merrill Lynch and Bank of America. Such fees are generally determined in accordance with subsidiary transfer pricing agreements. The increase in service fee revenue and expense in the year ended December 31, 2011 resulted from the integration of Bank of America's and Merrill Lynch's methodologies for allocating revenues and expenses associated with shared services with their subsidiaries.
A portion of the consideration received from Merrill Lynch's July 2008 sale of its stake in Bloomberg, L.P. to Bloomberg Inc. was notes issued by Bloomberg Inc., the general partner and owner of substantially all of Bloomberg, L.P. The notes represent senior unsecured obligations of Bloomberg Inc. In December 2010, Merrill Lynch sold the Bloomberg Inc. notes to Bank of America at fair value and recorded a gain of approximately $600 million.
Bank of America and Merrill Lynch have entered into certain intercompany lending and borrowing arrangements to facilitate centralized liquidity management. Included in these arrangements is a $50 billion extendible one-year revolving credit facility that allows Bank of America to borrow funds from Merrill Lynch at a spread to LIBOR that is reset periodically and is consistent with other intercompany agreements. The credit facility matures on January 1, 2013 and will automatically be extended by one year to the succeeding January 1st unless Merrill Lynch provides written notice not to extend at least 45 days prior to the maturity date. There were no amounts outstanding at December 31, 2011 and approximately $6.1 billion outstanding at December 31, 2010 under this credit facility. In addition, in October 2011, Merrill Lynch entered into a short-term revolving credit facility that will allow Bank of America to borrow up to an additional $25 billion. Interest on borrowings under the credit facility is based on prevailing short-term market rates. At December 31, 2011, approximately $3.7 billion was outstanding under this credit facility. See Note 12 for further information on intercompany financing agreements with Bank of America. In addition, Bank of America has guaranteed the performance of Merrill Lynch on certain derivative transactions (see Note 6). Bank of America has also guaranteed certain debt securities, warrants and/or other certificates and obligations of certain subsidiaries of ML & Co. (see Note 12).