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Legal settlements often ease investors’ minds, but the size of BofA's (BAC -1.5%) $2.34B...

Legal settlements often ease investors’ minds, but the size of BofA's (BAC -1.5%) $2.34B tab for settling claims it misled investors about Merrill Lynch’s financial health before its purchase was an unwelcome surprise. Some analysts worry BofA’s legal exposure doesn’t seem to be tapering off; it's the bank's 11th settlement totaling $29B since the start of the financial crisis.
Comments (19)
  • Wow, $29 billion in legal settlements and still counting for BAC. That's real money even for the big public companies.
    28 Sep 2012, 06:32 PM Reply Like
  • Cha ching, how long will investors & tax payers continue to put up with such mismanagement!!
    28 Sep 2012, 06:51 PM Reply Like
  • Why tax payers have anything to do with this? the bank is not currentlty a burden of the government as far as I am aware.
    29 Sep 2012, 09:30 AM Reply Like
  • As a TBTF, it receives an implicit guarantee.

     

    And the powers that be, with whom we have no recourse, have deemed that continued growth and a continuity of the US administration require slicing a fraction off every dollar out there and giving it as an interest free loan to the banks.
    29 Sep 2012, 12:14 PM Reply Like
  • So what is the benefit of this implied guarantee? Prop up the equity? Cheap debt financing? Take more risks? If equity, FNMA actual operates with an implied guarantee of the government, not a suggested theory perpetuated by the media like the big banks. And their stocks are trading at 0.28 last I look. Cheaper debt? You said they can borrow at zero - "interest free loan" - and I am pretty sure Bank of America bond rates are higher than zero. Take more risks? The way I understand it, banks are now requiring more down payments and toughening up lending criteria and the reserves keep going up despite being encouraged to lend more with zero interest rate by the fed. So they are taking less risks. The people who bought Merril, Countrywide have been booted out. Not people who are running it. So how is the supposed implied guarantee are being abused? Not that I agree there is an implied guarantee. Go rant at people like Ken Lewis if you want to but this constant righteous hectoring of the banks by regurgitating the clueless and hostility fanning media is getting old.

     

    As to the zero interest rate policy, you may believe it is to help the bank but I am proned to believe that it is driven more to prop up the real estate market which benefits most home owners as well FNMA, Freddie and the local government who will have to deal with a housing blights. There are more beneficiaries here than just the banks. Whether I think it is fair is an entirely different opinion. But no, I don't think the tax payers are actively bailing out BAC right now.

     

    Disclosure: I do not work for BAC or any of the big banks.
    29 Sep 2012, 01:36 PM Reply Like
  • I bailed on BAC & C until someone goes to jail...after all they saw fit for Martha Stewart to spend some prison time.
    28 Sep 2012, 07:33 PM Reply Like
  • I wouldn't be surprised if it still has another 29 billion to pay! It is a never ending story with this bank.
    28 Sep 2012, 07:40 PM Reply Like
  • yup..... so much baggage in BAC between countrywide and merrill lynch. Buffet should have just stuck to Wells Fargo for this bank exposure
    28 Sep 2012, 09:19 PM Reply Like
  • I'll continue to profit going in and out. Its a fun way to kill time.
    28 Sep 2012, 09:41 PM Reply Like
  • BAC May 2021 bond today 3.48%...3 months ago 4.53%

     

    BAC November 2014 bond today 1.47% 3 months ago 3.15%
    29 Sep 2012, 01:18 AM Reply Like
  • How to ruin a great institution

     

    By

     

    A.P. GIANNINI
    29 Sep 2012, 04:44 AM Reply Like
  • This is truly worrying as BAC has potential exposure to $70 billion more in claims.
    29 Sep 2012, 05:17 AM Reply Like
  • Will the cash ever actually leave the bank until claimed? Will small investors getting the claim letters spend the time and expense to fill out the paper work or pay someone to do it for them? Photo copy expense of brokerage statements, postage with the risk that their claim may be disallowed. There is also a natural death rate to consider for those holders that have died since the period of time that the claim is in effect and thereafter. Will their estates go through the legal bother of providing proof of claimant, the costs of filing, etc.

     

    Didn't we see a return to "cash" of previous set asides? I'm not saying all but some part of it.

     

    The net immediate effect is a charge against earnings to impact the current quarter and more definitely EOY results that will still be positive earnings. The positive aspect of reduced corporate tax on earnings is a benefit. The cash not disbursed will be earning income for the bank/including the tax savings. On day one, more money is staying inside the bank just from the reduction in corporate tax payments and the interest earnings of that money if invested in bonds or loaned out.
    29 Sep 2012, 06:15 AM Reply Like
  • Present management (CEO Bryan Monyham) is doing an excellent job...unfortunately, they have to atone for the sins of Lewis, Rubin and the others that made lously acquisitions and then left with millions of severance money.
    29 Sep 2012, 08:48 AM Reply Like
  • Current management was dealt a difficult hand, but I believe Moynihan (an Attorney and MBA himself by the way) and his executive team are on the right track. Book value for BAC is now in the $14's I believe, and the stock is trading in the 8's - a ridiculously high discount to Book Value to be trading at at this point in the cycle. Attaching some real finite numbers to dispel the black hole of rumors being tossed about by bears/shorts (some as high as $100 - $300 billion in legal exposure) and to put these legalities behind the company is what needs to be done - albeit a painful process - so the market and investors will refocus on the fundamentals and the positives going on at BAC and Merrill Lynch (and there are a lot of positives going on at both companies now, particularly Merrill Lynch). There are many reputable hedge fund managers owning BAC now - many with leverage, to the upside. The stock has a lot of upside potential in my opinion as it begins to put the financial crisis behind it and returns to normalized earnings over the next several years. It's the alpha play in large cap U. S. banks right now (As JPM, U.S. Bank, Goldman Sachs, etc. are trading at or above Book Value again). And, by the way, Warren Buffet is making a killing on his investment in BAC (look up the terms of his deal) !
    29 Sep 2012, 01:22 PM Reply Like
  • I agree with NYSEGUY. It's worth the moneytary loss the get rid of the legel battles that woulda - coulda take years. I thing this is the right move on BAC's behalf. I am loving this retreat though. Am buying lots of shares and now 10.00 Jan 2014 options. I am not about to miss this chance win draw or lose I'm in.
    30 Sep 2012, 06:41 PM Reply Like
  • BAC is a total disaster. This place is a total mess and only a crazy person with money to lose would invest in an entity that has NEVER been run for shareholders. They do what is best for top management and also what the government tells them to do. Shareholders are so far down the line that they will never get anything.
    30 Sep 2012, 06:54 PM Reply Like
  • Sounds like you are really a losing trader today to come on with this kind of rant. I feel sorry for you to lose money on your probable short. I'm happy to see the "B" warrants after end of quarter dumping recover nicely. Also one of my hits from cross matrix screening CRDN. Lots of financials are also hitting my screen.
    1 Oct 2012, 10:12 AM Reply Like
  • Just as a follow-up, BAC was up apx. 107% in 2012 and was the top performing stock in the S&P 500. As the money center banks gradually return to normalized earnings, they could outperform for years.
    14 Jun 2013, 01:49 PM Reply Like
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