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The biggest winner in the Dow Jones Industrial Index (DJINDICES: ^DJI ) this morning, Bank of America (NYSE: BAC ) is making a strong rebound as we move toward the weekend. The much-maligned bank started off low, but it has steadily risen since early morning trading, moving as high as 2.58% and now sitting around 1.58%.
Last week saw the stock tumble at the thought of the Fed closing out its stimulus program early, causing rates to rise and bank spreads to shrink. And while there is solid evidence that Bank of America would survive such rate pressure, Fed Chairman Ben Bernanke assuaged any fears with his testimony before Congress earlier in the week.
With the release of its annual report yesterday, B of A disclosed some good and not-so-good news for investors to chew on, and so far it seems the good is outweighing the bad.
Cuts, cuts, everywhere
Bank of America, according to its annual report, cut 5% of its workforce in 2012. This brings its total cuts since 2011 to a solid 22,000. Though job cuts are not a favorite of Main Street's, they are a useful tool for businesses to cut excess weight. JPMorgan Chase (NYSE: JPM ) is fully aware of this fact and announced this week that it will be cutting up to 17,000 jobs over the next two years. My fellow Fool Alex Dumortier noted that these cuts may signal that the time for bloated bank work forces, once needed to manage high mortgage default situations, have come to an end. With its default rates plummeting and its underwater home equity loans decreasing faster than any other bank's, B of A may find the room necessary to make more cuts in the future, saving itself some serious cash.
The bank has reduced its legal reserves by half a billion, with the confidence that its legal losses are coming to an end. In related news, current legal foe MBIA (NYSE: MBI ) stated in its earnings release this week that it is looking for a timely legal settlement that would benefit both itself and BAC -- a 180 from its previous stance on the two companies' current court battle. A settlement would be a huge win for B of A since the outcome of its MBIA suit may have implications on its other legal matters.
Also in its filing, Bank of America disclosed that the New York Attorney General is investigating it for its purchase, underwriting, and securitization of mortgage loans. B of A is the third bank to be investigate by the NYAG, and it noted that it is cooperating with the investigation.
There are a few very important dates coming up for Bank of America. Next Thursday is the release of the Fed stress test results, which will show whether the nation's banks could withstand another financial crisis. Of the five largest banks, Bank of America, Citigroup (NYSE: C ) , and JPMorgan were the top capitalized banks according to their fourth-quarter capital balances. The following Thursday (March 14) is the release of the Fed's Comprehensive Capital Analysis and Review, which works in tandem with the stress test to show whether a bank is capable of increasing its dividend or repurchasing shares. After being denied its request to raise its dividend in 2011, many analysts expect that Bank of America will be granted an increase this time around.
Working for the weekend
B of A has had a decent run so far today and looks to be heading into the weekend on a positive note. With its annual report only published yesterday, there is sure to be more coverage on the bank in the coming days, and who knows what impact that will have on the stock price.
Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy, and as an added bonus, you'll receive a full year of FREE updates and expert guidance as key news breaks.