“Obviously, the solid performance in our underlying businesses continues to be clouded by the costs we are absorbing from our legacy mortgage issues”, according to Bank of America (NYSE:BAC) CEO Brian Moynihan, speaking about last week’s earnings report.
And those costs are casting a cloud over the S&P: Bank of America cut the S&P 500’s earnings by a third, according to Friday’s headline from MarketWatch. Specifically, the $9 billion loss the bank took as the result of a mortgage settlement during the second quarter brought the S&P 500’s growth down to 9.2% for the quarter (down from 15.2% reported by Reuters).
Even worse: without Bank of America, financials saw a 4.9% gain for the quarter … but B of A brought that down to a -29.4% loss.
And those mortgage-related losses (larger than any other major U.S. bank) easily overshadow any positives from last week's report (and without the posted losses net income would have equaled $3.7 billion).
But we don’t need any headlines to know that Bank of America is a laggard.
The stock is down 26% over the past year…and down 80% over the past five years. Granted, valuations are cheap (and after the earnings announcement the stock traded below $10 for the first time since May 2009), but cheap is not good when it’s cheap for a reason.
The stock is in a well-established downward trend, and is a long-term sell, and I would consider last week’s move to the upside little more than a bounce off oversold levels.