Why Meredith Whitney Couldn't Save B of A Today

Over the last few months, multiple high-profile analysts have published rosy predictions for shares of Bank of America (NYSE: BAC  ) , the nation's second largest lender by assets. But nobody has been more vocal than Meredith Whitney, the former Oppenheimer & Co. analyst that presciently predicted the downfall of Citigroup in 2007.

In the middle of December, she told CNBC's Maria Bartiromo that she hadn't "seen an opportunity like this in four or five years," and that, with its "junk out of the trunk," B of A will be able to quadruple its dividend in 2013.

Whitney has now doubled down on her prediction. In an interview today on Bloomberg Surveillance -- see the video here -- Whitney postulated that "Bank of America is the stock to own this year without a doubt." In addition, she believes the stock "easily goes to $15 in the next six to nine months."

Despite Whitney's best efforts, however, shares of the bank are nevertheless down in afternoon trading. What gives?

The answer to this can likely be found in, of all places, a federal court in New York. On Tuesday night, the always entertaining Judge Jed Rakoff issued a ruling that doesn't bode well for lenders like B of A that are busily litigating claims related to the financial crisis.

In a case involving monoline insurer Assured Guaranty's (NYSE: AGO  ) breach-of-contract claims against Flagstar Bancorp (NYSE: FBC  ) , Judge Rakoff gave the former essentially everything it asked for from the latter. This matters because B of A is currently embroiled in a number of virtually identical cases involving other monolines like MBIA (NYSE: MBI  ) , Ambac Assurance, and Financial Guaranty.

Although it's still too early to predict what impact Judge Rakoff's ruling will have in, say, B of A's contentious case against MBIA, it's safe to assume that it won't be good. To read more about the Assured Guaranty case, check out Reuters' take on it here.

Finally, in other news, Bloomberg also reported this morning that B of A has changed the compensation structure for its wealth-management unit, U.S. Trust. While bonuses had previously been tied to total client revenue, the new system more heavily incentivizes adding clients and boosting account balances.

The move comes amid a wave of similar announcements on Wall Street. Earlier this year, Morgan Stanley said that it was capping cash bonuses for 2011 at $125,000 and that its top executives wouldn't receive any cash as a part of their bonuses. And according to the New York Times, overall compensation on Wall Street is expected to drop this year by at least 30%.

Suffice it to say, changing the compensation structure involves a delicate dance for B of A. On the one hand, it's ardently trying to lower expenses under its so-called Project New BAC. But on the other hand, it needs to keep its employees sufficiently content so they'll continue producing for the nation's second largest lender.

Want to learn more about B of A?
To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


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  • Report this Comment On February 07, 2013, at 3:31 PM, Sotograndeman wrote:

    "Despite Whitney's best efforts, however, shares of the bank are nevertheless down in afternoon trading. What gives?"

    Does TMF really believe they can rationalize a movement of a stock over a few hours? And furthermore, does TMF think it's worth trying and writing about? Crazy waste of time.

  • Report this Comment On February 07, 2013, at 4:02 PM, Maax wrote:

    The Motley Fool articles are so ridiculous that I can't read them anymore. No value whatsoever.

  • Report this Comment On February 07, 2013, at 6:22 PM, Rusty56 wrote:

    All the Motley Crew does is write stupid BS hoping they will entice some "real fools" to buy their crummy newsletters. Go figure, must be a fair share of idiots who buy off on these 20 something know it alls and actually take the bait. Again, go figure! The real reason BAC went down is because the rest of the market went down - end of analysis!

  • Report this Comment On February 08, 2013, at 9:51 AM, tmeareidiots wrote:

    The Motely Crew are idiots. They provide NO value to the investors. There is a reason their logo is a jester. I really wish they would stop posting their crap..

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