Has Bank of America hit bottom?

The troubled financial institution is slowly crawling out of the hole it dug for itself.

By Jonathan Berr Dec 26, 2011 2:29PM
Image: Bank Vault (© Radius Images/Jupiterimages)Everything that could go wrong for Bank of America (BAC) in 2011 did go wrong. Signs are emerging, however, that this dog may see better days in 2012.

According to Reuters, the Charlotte, N.C. company is considering unloading additional assets to comply with new capital rules. That's not surprising, given that the company has been selling everything -- $50 billion since 2010 -- that wasn't nailed down, including its stake in the largest Pizza Hut franchisee and the China Construction Bank.

Regulators "are trying to have us have more capital, more liquidity, so in a time of crisis, we can be there to support the economy and not have to shrink and retrench," CEO Brian Moynihan recently told the Boston Globe."We’re all for that."

As if he has any choice.

Bank of America is lagging competitors in efforts to comply with the Basel III rules that go into effect in 2019. As Reuters notes, most large banks expect to comply with the standards sooner than that, which will only intensify the pressure on Moynihan. Compliance could cost as much as $45 billion, said an analyst quoted by the news service.  

That means Bank of America will need to sell more assets including some, if not all, of what it acquired from Merrill Lynch in 2009 for $50 billion -- a buy the Wall Street Journal dubbed "a deal from hell."

Bank of America, though still troubled, is scratching its way out of the hole it dug for itself.  The company recently agreed to a $335 million settlement with the U.S. Department of Justice over charges of discrimination at its Countrywide mortgage business. The company will save money through its planned layoffs of 30,000 over the next decade. As it disposes of assets under its Project New BAC, that level of layoffs may not be necessary.

Wall Street analysts have not lost all hope in the stock either. Their average price target is $9.60, well above the $5.60 where it recently traded.

Warren Buffett, history's greatest investor, invested $5 billion in the bank this summer.  Though Buffett's investment is underwater, Buffett can demand payment at any time and is guaranteed a 5% premium. Buffett has made his fortune is finding value in stocks that other people miss.

--Jonathan Berr does not own shares of the listed stocks.


Tags: BAC
78Comments
Dec 27, 2011 8:11AM
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BOA are true scumbags.  Three years ago I applied and was approved for a modified mortgage with them only to find out 6 months after I had been paying the new modified mortgage that they were reneging on their own contract.  I continued to pay the modified mortgage for two years while I sued them.  They ruined my credit and reported that I didn't pay my mortgage in over two years and I lost every credit card I possessed.  BOA did everything imaginable in court to get my modified mortgage thrown out and defied the judge time after time.  It became a joke to the point the judge was going to sanction BOA for their sheer disregard for the court.  When it became apparent that they weren't going to win after they spent well over $100,000 to try and not honor my modified mortgage, one day they called up my attorney and wanted to settle.  After three years of fighting with them and they screwing me over, in less than three days they agreed to honor my modified mortgage, fix my credit that they ruined and pay over $10,000 to my attorney for his time.  It was hell and I was very fortunate to have an attorney do this at no cost to me otherwise I would have never been able to outwait them and win my case.  They are truly slimy and dishonest and I'd recommend that no one ever do business with BOA unless they want to deal with the devil.    

 

Dec 26, 2011 8:09PM
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I have zero sympathy for any major banks. They had no problem doing illegal foreclosures and god knows what other wrong doings they were involved in. Every time B of A stock goes down an angel gets their wings.
Dec 26, 2011 10:42PM
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Why anyone would have an account with BOA blows my mind.
Dec 26, 2011 8:09PM
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I just opened an account at a local credit union after earning 8 cents interest and being charged $17 in fees on two accounts. I plan to close my BOA accounts as soon as last checks clear.
Dec 26, 2011 9:13PM
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And this is why the stock market does not work for the bulk of investors.  Buffett gets to keep the $ he sunk into BofA regardless.

 

Though Buffett's investment is underwater, Buffett can demand payment at any time and is guaranteed a 5% premium.
Now if the stock market can guarantee me the same, I will actually consider investing for the first time in my life.
Dec 27, 2011 1:09PM
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BoA has earned it's bad reputation. It didn't just happen overnight.
Dec 26, 2011 8:24PM
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Our Countrywide (now Bank of America) mortgage was sold by B of A a month ago to another company.  Since this property is underwater by over $90,000, we are wondering what the new company paid for what is now this piece of junk--are they "bundling" again, just like they did in the first place and got into trouble? 

 

We assume B of A gets to write off the difference (?) and the new company can just pray we continue to make our payments.  If not, they will be asking for a bailour down the line.  How do we get them to stop this stuff? 

Dec 26, 2011 11:31PM
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My house was also sold to BOA by Taylor Bean and Whitaker. I refinanced it though a credit union and sent my payoff to BOA electronically, and they sent the payoff money to some company I never heard of and then have been calling me and sending foreclosure notices. I have called and wasted hours of my time talking to people and managers who have no idea what they are doing. Over a month of phone calls and the problem still exist. I think what they are doing is fraud. Trying to get money from me for their mistakes. Any comments?

Dec 27, 2011 1:45PM
Dec 27, 2011 2:05AM
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My printed check (yes, an actual printed check which I no longer use with the exception of a couple I fold up and carry in my wallet just in case -- e.g. The U.S. Forest Service still accepts checks for campground fees) says "Valued Member Since 1974". What have I received in recognition for being such a "Valued Member"? Well, 200 printed checks cost almost 30 bucks. Checking account fees have risen 100% over the past few years, BofA credit card is now charging me a $59.00 annual fee, and of course they raised the interest rate from 9% to 15%. I have now moved to a credit union. As soon as I pay off the credit card I have every intention of closing the c/c and checking accounts, and I sold my position of BofA stock over a year ago at a loss. Just  a matter of time before they go bye, bye.
Dec 26, 2011 7:42PM
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nothing changed still bank of sleaze bags money is their god don`t care about any one but them
Dec 27, 2011 11:22AM
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We bought and paid off the land then built our humble, three bedroom, ranch style home twelve years ago with hard work and ethics. BOA acquired our home from Wilshire and modification in place due to my husbands reduction of income from loss of hours in manufacturing industry. We have no credit cards and paid our modification agreement according to terms then at end of agreement were told by BOA they don't have to honor modification and put us in foreclosure. My question is how is this our fault and how is this ethical for BOA to do? It is not! Hire an attorney to pursue the American dream to own your home and fight for rights of home ownership! BOA is the most unethical bank and have put us in hell for two years! I have went through their hoops, affordable housing, Housing of Urban development, and all the other programs they have offered to finally at the end have them screw us because they don't have to honor a contract. I'm going to keep fighting and piece of advice. I made detailed notes of every conversation and documents back and forth with BOA and this is proof to prove the unethical business practices that BOA is doing to take people's homes!! Those who are struggling with BOA, I wish you courage and strength. Don't give up and if need be contact your state's attorney general, and the president of BOA to have your voice heard!

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maybe if they had treated their customers with respect, instead of like crap, people like myself would not have dumped them as a bank and as a mortgage company.  I switched everything out of B of A and am better off for having made that decision.  This happened because the bank got too large and corporate to take care of the man on the street and small town America..
Dec 26, 2011 7:51PM
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I hope they go broke and get sued.  You can bet they're still sticking it to their borrowers.  I would spit in church before I let them back into my financial affairs.
Dec 26, 2011 9:10PM
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Just 'cause Buffet's in is not a buy sign. He'll pull the plug and leave you "little people" holding the bag.Let them go under.
Dec 27, 2011 11:45AM
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I had second loan with BofA.  Like many others, I worked a second job to pay it off early.  Even though I was two months ahead is payments, when I paid it off, they still wanted to charge me more interested.

They are a rip off and have gotten away with robbery for so long.

Customer service is next to nothing,  a lot of their offices in Washington DC were dirty and

they could care less what kind of service you received. 

RIP BofA. 

Dec 26, 2011 6:15PM
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As life goes on, we are all having to face the reality of the times, even big banks.

Dec 27, 2011 9:32AM
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And you heard that B of A foreclosed on one of the few remaining veterans from one of the ships that sank at Pearl Harbor?  Happened in Grass Valley, CA. B of A evicted this veteran. 91 years old.  I am ashamed that the greatest soldiers from the greatest generation are treated this way.  Those soldiers died so that B of A can ruthlessly, with no ethics, throw a WWII soldier from his home? B of A needs to fix this and give the guy (he lost his equity) his home.
Dec 27, 2011 12:27PM
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I like the way some state look at the individuals and see what they did wrong to go into foreclosure. Bull, this whole meltdown was caused by repeal of Glass-Stegal. GS was a law to protect us from banks using our money in the stock market. GS was a depression era law that had protected us for over 65 years. Once repealed it too less than 10 years to get us right back in full blown depression. Gramm-Leach Bliley act is what caused this meltdown, not poor suckers buying too much home. Wall st. caused this mess and are least affected by it. Bank of America, what a great name for a band of crooks and thieves. Instead of bankers they should be called "Banksters". They would not even exsist if not for the American Taxpayer....Buffet screw him where is our 5%!!
Dec 27, 2011 7:30AM
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ended up with B of A due to Countrywide, Lost job due to company filing bankruptcy found out BofA pulled company's line of credit that started reason they filed bankruptcy. Looking for work for over 2 1/2 years now kept up mortgage payments every month. BofA making homes affordable is a joke does not work if you are not employed. just one month past due this Nov mtg pmt and in Dec I receive notice of intent to accelerate says serious past due???... what the .... only Nov past due they know I have over $100k equity and they now want to take my home over not making Nov pmt one month out of 2 1/2 years looking for work and paying each month this is first past due and this is what B of A is really like. I have neighbors that lost their homes due to same issue Country wide to B of A and now homes stand empty and in ruins depreciating my home value even further. If was working full time would refi with anyone else anyone to get away from B of A till then I am screwed...notice of intent to accelerate over one month payment GREED... our state does not have a branch only ATM's good thing I would take the paper of intent and .......
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