BAC Starting to Turn It Around?
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Bank of America (NYSE: BAC) has certainly been in the news as of late, and much of it has been pretty bad news. Monday the stock was notable for flirting with the $5 per share mark and ending the day just under it. And everyone’s favorite super investor, Warren Buffett, is currently holding warrants that are $1.5 billion dollars underwater, as the financial news media has been very quick to point out.
Shareholders have not had a comfortable ride, but the recent string of news might be better than it appears at first glance. First, and probably most importantly, Bank of America has settled two large suits that until now have been clouding the bank’s future. Paying out $650 million might not seem like welcome results for shareholders, but having both the Merrill Lynch mortgage-backed investment suit and the Countrywide fair-lending case resolved helps clear out some of the uncertainty surrounding the company.
Other positive news in the recent weeks is the various divestures, restructurings, and even the closure of several units. It appears the bank is trying to trim its footprint and refocus on the more profitable divisions. They’ve closed their private banking unit in Brazil, sold off more than $1 billion in credit card assets, sold their NYSE floor trading operations, and committed to reducing their staff by a significant amount. CEO Brian Moynihan seems to be paying attention and doing what he can to winnow the firm and strengthen its position so it can begin to move forward and return value to shareholders and that’s encouraging.
Should investors take this progress as an indication to invest new money in the company? I don’t think so, but if you’re a current shareholder like me, maybe things are starting to move in the right direction. To put it bluntly, Bank of America isn’t a buy right now, but I’d argue it's less of a short than it has been.
Fool blogger Chris Moore is long BAC.