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Bank of America, the largest bank in the United States, just can’t escape their purchase of CountryWide and the rest of their bad mortgage loans. The stock of BofA (BAC) hit another 52 week low of $8.03. $BAC Just this week the stock is down 16% and for the year it’s down 40%. Painful if you’re long, lovely if you’ve short.
Now their settlement over a good number of these loans for $8.5 billion is going to look more like $20 billion. And it also looks like Fannie Mae and Freddie Mac are asking for more money for their soured loans. It appears as though BofA is going to face further lawsuits and demands for bad loans in the coming years. They are not nearly out of the woods and their stock is taking a beating. Most likely, they will have to issue more shares to raise capital to pay off these bad loans and lawsuits. What’s more, they’ll have to issue more shares fast, cause their stock is falling fast and people are talking about 2008 all over again when BAC dropped down to less than $3 a share.
In a nutshell, it’s this, from Bloomberg:
“Yet again, another line in the sand from Bank of America turns out to be fungible,” said Tony Plath, a professor of finance at the University of North Carolina in Charlotte. “I don’t think it’s anything nefarious, it’s just that they don’t know what the magnitude of losses in that portfolio will be — and until they do, none of their numbers have credibility.”
The only positive thing for BofA is their China Construction Bank holdings, which if they sold could give the bank a sum of $21 billion. Yes, that’s a lot of money. In the end, BofA and the government are going to have to do something very quickly, no one an afford to bail out another bank or even endure such an event taking it’s toll on the stock market in general.
It’s really extraordinary that the stock is at these levels again.
