Bank of America gets second chance at commodities

By Jonathan Leff

SINGAPORE (Reuters) - Bank of America's deal to buy Merrill Lynch will give it a second chance to make a name for itself in global commodity markets, just as many prices tumble by a third from their peaks.

Bank of America Corp, the biggest retail bank in the United States but a bit player in commodities markets, will pay $44 billion (24.3 billion pounds) for Wall Street's third-largest bank, whose well-regarded energy trading franchise has thrived even as the bank itself reels from the impact of the U.S. credit crisis.

The commodities desk is only a small part of the hastily arranged deal, which could help restore a bit of calm to financial markets after months of turmoil among investment banks.

But Merrill's well-established U.S. and European gas and power trading operations and real assets, plus its global oil business, would give BofA the chance to mend its spotty record in resource markets, where it has focused mainly on paper trading.

"I would think they will have a look at it and see how to profit from it, I don't think they would sell it," said a manager at a different investment bank, who declined to be named.

"Merrill's is really a physical, asset-based business, while BofA's business before was a purely derivatives business."

The Merrill deal appeared likely to result in a bigger shake-up in the commodities and energy world than the troubles facing Lehman Brothers', which struggled to gain critical mass in commodities after rushing into the market two years ago.

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