3 Things Bank of America Must Do Before Next Year

It's common knowledge that Bank of America (NYSE: BAC  ) doubled its stock value last year and achieved several milestones -- such as putting many stewing lawsuits behind it, plumping its capital cushion, and reducing the number of delinquent mortgages on its books.

Much work needs to be done, however, and it's not difficult to come up with several things that B of A would do well to concentrate on this year. Here are three really big issues that I feel the bank should try to put to bed before the end of 2013.

Earnings must grow
This is a bit of a sore spot for Bank of America, particularly because of its retraction from the mortgage market after Countrywide blew up. As peers Wells Fargo (NYSE: WFC  ) and JPMorgan Chase (NYSE: JPM  ) can attest, the mortgage business has been booming, and they have profited handsomely, unlike B of A.

CEO Brian Moynihan has had this issue on his mind for some time. Back in 2011, he predicted that the bank would be producing pre-tax earnings in the $35 to $40 billion range once things got back on an even keel. That was quite a call, considering the fact that the bank only saw $32 billion in the go-go days of 2006. Last year, B of A had pre-tax income of $4.19 billion, so there's obviously quite a bit of ground to cover.

But, fear not. Mr. Moynihan is right now rallying the troops, nudging them to step up the earnings pace, perhaps pushing his executives to increase cross-selling -- something at which rival Wells Fargo excels.

Improvements are needed in its mortgage-servicing division
Bank of America has never had a great reputation for customer service, and it's even worse when it comes to servicing mortgage loans. The bank has the lion's share of complaints in this regard, thanks to Countrywide. The bank is working hard to put these issues in the past, and it has given nearly one-quarter of its aggrieved customers some relief, more than any other big bank. Nevertheless, B of A should speed up this process if it is humanly possible, since this particular problem weighs the heaviest on its image.

B of A should settle with MBIA
As I've noted before, this issue, which should be minor in the scheme of things, has been blown all out of proportion. Bank of America's strange refusal to settle this old problem with the much-smaller mortgage insurer MBIA (NYSE: MBI  ) has turned into a slapping contest, making B of A look somewhat like a bully.

Bank of America is one of only two banks that haven't settled various issues with MBIA, and recent court rulings are making a settlement look like the best resolution for the bank. Early in March, a judge ruled against the bank's attempt to stop the insurer's restructuring of its business. Just this week brought another ruling against B of A, this time regarding repurchasing loans it securitized -- indicating that it may be required to do so, whether or not the loans are defaulting.

In my opinion, settling up and clearing the decks of yet another problem caused by toxic Countrywide mortgages will not only enhance the bank's tarnished reputation, but will also free up time and energy to pursue other, more important goals this year.

Can Bank of America get all this done before the end of the year? It's a distinct possibility -- and its stock price will show the effects of its efforts. However, significant challenges are still ahead, so 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.


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