As Lehman Brothers is bankrupt currently, the sale was made to its bankruptcy estate. The stake will be sold for $1.58 billion and represents the remaining share that Bank of America and Barclays (BCS) own in the company. The company will soon belong in its entirety to the Lehman bankruptcy estate. When the transaction is finalized, Lehman's estate will have full ownership of Archstone. Archstone is a "company that owned all or part of 434 apartment communities in the U.S. and Europe as of the end of March." The companies have also released each other from all claims related to Archstone.
Following Lehman's purchase of the stake, it filed a bankruptcy suit against the two companies in the U.S. Bankruptcy Court in Manhattan. Court cases never look good for a company even if it is innocent, so this is a potential blow for Bank of America should Lehman be successful with its claim.
Lehman successfully exercised its right to first offer on Archstone and has therefore successfully shut down the attempts of several other realty companies that were interested in acquiring the apartment company. If the sale to Lehman closes, Bank of America and Barclays will pay an $80 million break-up fee to Equity Residential (EQR).
As far as I can see, Lehman benefits in three key ways from this transaction. Firstly, it will be in a position to protect its substantial investment. Secondly, it will give the company a degree of stability, something which it has so far been lacking. And thirdly, Lehman will now have control of Archstone's future. The deal is probably the result of an increase in the strength of the apartment market of late. This naturally leads me to wonder whether it was the best decision possible for Bank of America to sell its stake in Archstone as it may have just given away a very good source of revenue for the near future.
Shortly after this sale was announced and finalized shares rose slightly for the Bank of America. The Bank will look to reinvest its money into a profitable endeavor and judging from recent reports, it better do it fast.
These reports put the Bank of America in a far worse position than its competitors following the foreclosure settlements earlier in the year that involved no less than five banks.
Apparently Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) are all in a slightly better position than Bank of America. This follows the news that the Bank of America is looking to notify a number of "mortgage loan customers of their possible eligibility for principal forgiveness". As far as I am concerned, Bank of America is looking less than healthy in the current climate. As recovery goes, Bank of America is just not able to get to the same level as the other banks that were involved.
In other news Citigroup recently made some gains as well as some losses. Fortunately, the gains outweigh the losses substantially. The losses to which I refer are those experienced by the company due to Facebook's (FB) bad start on the NASDAQ. The stock started 30 minutes late causing the Citigroup unit Automated Trading Desk to lose about $20 million. On the other hand Citigroup recently sold 10.1% of its equity interest in Akbank for about $1.15 billion in order to increase capital.
JPMorgan may have finally found a way to get out of the bad position its numerous losses have left it in. The company plans to boost its presence in China. This is an emerging market where the demand for financial services is on the up. As a result, companies like JPMorgan have taken the hint and are making their presence felt in this part of the world. This could be the bank's ticket back to success in the banking world, and it seems to me that there is a lot of merit in a play like this that other banks could learn from.
Wells Fargo has made its mark on the industry by introducing a facility that allows Mac users to make deposits directly to Wells Fargo from any location. This streamlines the process for companies that receive a lot of checks. Wells Fargo has teamed up with Apple and Panini Scanner to bring a facility that allows the scanning of checks that are then deposited immediately. This is the kind of innovation that gives Wells Fargo its good name and good reputation that investors feel that they are able to easily trust.
As far as I am concerned when it comes to the financial market, U.S. Bancorp (USB) is the best stock to put your money on. The stock, which is currently one of the top most valuable companies in the world, is really making a name for itself with innovations such as the new Android app that allows customers to apply for a virtual cobranded credit card in store and then use it to make purchases almost instantly. Similar to the app already introduced for iPhones, this makes your shopping experience substantially easier, a service only available form this financial services provider. US Bancorp has also avoided some of the backlash directed at big banks as of late, and looks to continue to profit as an innovative banking leader.
Bank of America is looking more sour by the day. Selling off Archstone may have been a good idea, provided that it can reinvest in something that will yield higher profits than the apartment industry. It's definitely possible, though Bank of America has not inspired a lot of confidence in its investors recently. Unless something changes, this just does not seem like the bank to get behind right now, especially if you consider the competition at the table.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.