Bank of America Still Has Potential for Rebound
Andrew Leckey

Bank of America Jobs & Careers, Quote, Opinion, Profile, Chart

Q. I am a disgruntled Bank of America shareholder. Is there reason to expect improved results going forward?

A. The question for shareholders is how quickly it can put past mistakes in the rearview mirror, significantly improve its controls and use its enormous size to greater competitive advantage.

It became the biggest U.S. bank following acquisitions of Countrywide Financial and Merrill Lynch, but is likely to slip into second place in assets in coming months behind JPMorgan Chase. Sluggishness stems from bad loans from acquisitions and from lax practices in the past.

It agreed to pay $8.5 billion and set aside $5.5 billion to settle claims by institutional clients that bought toxic mortgage securities. That settlement, under investigation by the New York attorney general, helped lead to a record $8.8 billion loss in the second quarter.

Meanwhile, an arbitration panel ordered a Merrill Lynch clearing unit to pay $63.7 million in damages to a California hedge fund manager for unexpected margin calls that caused losses.

Bank of America (BAC) shares, included in the Dow Jones industrial average, are down 23 percent this year following last year's 11 percent decline. The firm faces an expected hit from a settlement between banks and the 50 state attorneys general over mortgage-servicing practices, as well as additional litigation and ongoing federal scrutiny.

Nonetheless, this consumer and small business bank is dominant in growing regions, its deposit base provides it with low-cost funding and management says it has ample capital. It operates in all 50 states, the District of Columbia and more than 40 countries.

Improving operations and pulling together disparate business units is key. Terry Laughlin, its negotiator of settlements for bad loans and foreclosure, has been named chief risk officer, starting late in the third quarter.

Consensus analyst rating of Bank of America shares is between "buy" and "hold," according to Thomson Reuters, consisting of eight "strong buys," nine "buys" and 14 "holds."

It has potential to attract more affluent customers. Notably, on Barron's list of "America's Top 100 Women Financial Advisers," Merrill Lynch Wealth Management placed 33 advisers and two of them in the top 10.

The bank received the highest score for consumer data safety among top U.S. card issuers for the fifth consecutive year in a study by Javelin Strategy & Research. It is third-largest U.S. credit card issuer based on money spent using its cards.

Earnings are expected to increase 22 percent this year and 61 percent in 2012, according to Thomson Reuters. Five-year annualized growth rate is forecast as 8 percent compared to 9 percent expected for the banking industry.

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