DJ BofA Has Made "A Lot of Progress" To Strengthen Itself# Stock
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By David Benoit
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Bank of America Corp. (BAC) Chief Financial Officer
Bruce Thompson, in an attempt to assuage employee fears, told them the bank
has made "a lot of progress in a short period of time" to strengthen itself.
Thompson reassured employees the bank has more than enough capital to
operate and a clear path to meet new capital regulations looming in 2013 and
2019, according to a posting on an internal website that was obtained by
Dow Jones. Thompson said the bank's Tier 1 common ratio of capital to assets
would now be 8.75%, meaning the bank's recent actions have overcome more
than $20 billion in mortgage-related costs the bank swallowed in the second
quarter.
The comments come as investors have sent Bank of America shares sliding,
down 7.6% to $7.31 Friday and now off 45% year-to-date and 35% over the past
three months. Investors have questioned whether the bank has the ability to
raise capital to new global standards particularly in the face of mounting
mortgage issues and lawsuits, a charge the bank has struggled to rebuff
completely.
Friday, the Wall Street Journal reported the Federal Reserve had asked the
bank what it would do if the environment worsens, showing regulators are
watching the nation's biggest bank by assets with increasing concern as well
.
Thompson answered questions from the bank's internal communication website--
known as Flagscape--about why the bank is selling assets and why it agreed
to an investment with Warren Buffett for $5 billion last week if it didn't
need capital. "It sounds like this was an expensive deal for us and a good
deal for him," one question to Thompson read.
Thompson responded that Buffett is "one of the world's most admired
investors" and provided a "strong validation" of management. He also
reiterated that Buffett came to the bank and was initially told no.
Thompson was also asked about media reports on the plethora of mortgage
lawsuits hitting the bank, and how the bank could be sure it wouldn't need
more capital with "new issues coming up every day."
In response to that question, Thompson said the $8.5 billion settlement the
bank reached with investors in some mortgage-backed securities was expected
to face some questions, and the bank continues to believe it is fair. That
settlement has received attention as dozens of investors sought this week to
ensure they had a voice in it and some, including the New York attorney
general, have questioned it.
Other investors, such as American International Group Inc. (AIG), have sued
the bank for losses from the financial crisis. Bank of America is also
reportedly among the banks about to be sued by mortgage giants Fannie Mae (
FNMA) and Freddie Mac (FMCC) over billions in mortgage-backed securities, a
suit that could be filed in the coming days.
Thompson said the bank has been successful in defending securities claims
and that "In some cases, some of the most deeply sophisticated investors,
such as AIG, are alleging they didn't know what they were purchasing," an
argument the bank will fight.
-By David Benoit, Dow Jones Newswires; 212-416-2458; [email protected]
com
(END) Dow Jones Newswires
September 02, 2011 13:51 ET (17:51 GMT)
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Bank of America Corp. (BAC) Chief Financial Officer
Bruce Thompson, in an attempt to assuage employee fears, told them the bank
has made "a lot of progress in a short period of time" to strengthen itself.
Thompson reassured employees the bank has more than enough capital to
operate and a clear path to meet new capital regulations looming in 2013 and
2019, according to a posting on an internal website that was obtained by
Dow Jones. Thompson said the bank's Tier 1 common ratio of capital to assets
would now be 8.75%, meaning the bank's recent actions have overcome more
than $20 billion in mortgage-related costs the bank swallowed in the second
quarter.
The comments come as investors have sent Bank of America shares sliding,
down 7.6% to $7.31 Friday and now off 45% year-to-date and 35% over the past
three months. Investors have questioned whether the bank has the ability to
raise capital to new global standards particularly in the face of mounting
mortgage issues and lawsuits, a charge the bank has struggled to rebuff
completely.
Friday, the Wall Street Journal reported the Federal Reserve had asked the
bank what it would do if the environment worsens, showing regulators are
watching the nation's biggest bank by assets with increasing concern as well
.
Thompson answered questions from the bank's internal communication website--
known as Flagscape--about why the bank is selling assets and why it agreed
to an investment with Warren Buffett for $5 billion last week if it didn't
need capital. "It sounds like this was an expensive deal for us and a good
deal for him," one question to Thompson read.
Thompson responded that Buffett is "one of the world's most admired
investors" and provided a "strong validation" of management. He also
reiterated that Buffett came to the bank and was initially told no.
Thompson was also asked about media reports on the plethora of mortgage
lawsuits hitting the bank, and how the bank could be sure it wouldn't need
more capital with "new issues coming up every day."
In response to that question, Thompson said the $8.5 billion settlement the
bank reached with investors in some mortgage-backed securities was expected
to face some questions, and the bank continues to believe it is fair. That
settlement has received attention as dozens of investors sought this week to
ensure they had a voice in it and some, including the New York attorney
general, have questioned it.
Other investors, such as American International Group Inc. (AIG), have sued
the bank for losses from the financial crisis. Bank of America is also
reportedly among the banks about to be sued by mortgage giants Fannie Mae (
FNMA) and Freddie Mac (FMCC) over billions in mortgage-backed securities, a
suit that could be filed in the coming days.
Thompson said the bank has been successful in defending securities claims
and that "In some cases, some of the most deeply sophisticated investors,
such as AIG, are alleging they didn't know what they were purchasing," an
argument the bank will fight.
-By David Benoit, Dow Jones Newswires; 212-416-2458; [email protected]
com
(END) Dow Jones Newswires
September 02, 2011 13:51 ET (17:51 GMT)