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Bank of America (NYSE: BAC ) certainly has more than its fair share of problems, but the scrappy survivor keeps on keeping on, and even scored some half-decent stock gains last week. Unfortunately, that was the best thing that happened to the banking behemoth during that time span, as it dominated a big-bank bad-news-a-thon.
Past sins come back to haunt B of A
Testimony at a conspiracy trial last week in New York City, against three former UBS (NYSE: UBS ) employees, aired some very dirty banking laundry. A onetime municipal bond marketer with Bank of America testified that he and the UBS workers routinely rigged bids in the municipal bond market to favor B of A. In return, UBS got paid by Bank of America for services it didn’t perform.
Of course, B of A isn’t the only bank involved in these kinds of shenanigans. This trial closely resembles another recently wrapped-up case in Manhattan, U.S. v. Carrollo, Goldberg and Grimm, which focused on the same activity. Many other banks were involved in that case, such as JP Morgan Chase (NYSE: JPM ) and Wells Fargo (NYSE: WFC ) , as well as UBS and Bank of America.
In other legal news, the bank was slapped with a subpoena from the state of Florida with regard to its participation in setting LIBOR rates. Again, Bank of America was not alone -- the state also sent subpoenas to 13 other banks. Fellow banks JP Morgan and UBS were subpoenaed by New York and Connecticut, as well.
Good news for others reflects badly on B of A
Even positive announcements from other housing-related companies managed to put Bank of America in a dim light. Home Depot’s (NYSE: HD ) excellent Q2 report made it the media darling last week, even as the home improvement giant briefly booted B of A from its spot on the S&P 500 list of the 30 largest companies by market capitalization, though the bank’s stock rally has closed that gap since.
Likewise, JP Morgan has announced that it will be expanding its commercial loan presence to previously unexplored territory. Good for JP Morgan, not so good for Bank of America, because the new area of conquest is Charlotte, North Carolina -- B of A’s stomping grounds. This is part of the big banks’ move downstream to serve the middle market, now that big M&A deals have dried up. It looks like Bank of America was asleep at the wheel, and is getting elbowed aside in its own territory. To add insult to injury, JP Morgan set up shop with three of its own bankers, plus two poached from B of A.
Is Bank of America down for the count? Probably not. Despite all its myriad troubles, the bank is a savvy operator, and is actively addressing issues like complying with new capital requirements, and divesting itself of its Merrill Lynch international wealth management business for around $900 million.
Bank of America is certainly never boring and, given its cheap valuation, could turn out to be a deft -- though certainly not risk-free -- long-term investment strategy, as well.
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