Why Bank of America Should Be Up Today

Shares of Bank of America (NYSE: BAC  ) have oscillated between positive and negative territory today as investors struggle to balance fears of the sequester against positive news impacting B of A specifically. At the time of writing, shares in the nation's second largest bank by assets are down by a marginal $0.01, or 0.09%.

Earlier this week, JPMorgan Chase (NYSE: JPM  ) announced that it will be cutting a total of 17,000 jobs over the next two years, mainly from its consumer banking operations. What's this have to do with B of A, you ask? A lot, actually. As my colleague Alex Dumortier observed yesterday, the cuts at JPMorgan suggest that bloated expenses in the banking industry related to mortgage delinquencies could be coming down sooner than expected. For its part, aside from massive legal expenses, these expenses are unquestionably one of B of A's biggest problems.

And speaking of legal problems, there's reason to believe that a thorn in B of A's side is on the verge of being removed. After the market closed yesterday, the bond insurer MBIA (NYSE: MBI  ) reported its fourth-quarter earnings. Notably, the company is suing B of A for billions of dollars related to mortgage-backed securities issued by Countrywide Financial in the lead-up to the financial crisis and has proven to be particularly hostile to the notion of settling. Until now, that is.

In the press release announcing earnings, the company appears to have changed its tune. "The Company believes that a timely settlement will occur because it believes a comprehensive settlement is in the best interests of both MBIA Corp. and [B of A]." As I noted at length here, a settlement to this lawsuit would be an enormous coup for B of A, as the legal issues being litigated therein threaten to harm its success rate in other legal forums.

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  • Report this Comment On February 28, 2013, at 1:22 PM, JeffreySwim wrote:

    Suppose it comes down to what the market expects but I would argue that MBIA has been virtually irrelevant to BAC for quite some time even though it has the potential to drive a headline such as this as the litigation/fighting is extremely interesting.

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