Why Bank of America's Continued Rise May Spark New Improvements

Yesterday saw Bank of America (NYSE: BAC  ) touch a new two-year high after it rose 2.6% in trading, while the KBW Bank Index (DJINDICES: ^BKX  ) rose only half that. This morning, the bank is on the rise again, with a gain of 0.7% just after 10:30 a.m. EDT. A few legal developments have not held back the bank in its trek skyward, but without any new opportunities to distract investors from the ongoing courtroom battles, the bank may not hold on to these gains much longer.

New York state of mind
B of A just got news that it needs to head back to the New York court system to face an ongoing legal dispute with U.S. Bancorp (NYSE: USB  ) . Though the case involves a small number of loans that Countrywide sold to U.S. Bancorp and will likely be settled, its just one more example of the financial crisis haunting the bank.

This week was supposed to be a big one for the bank, as a hearing was scheduled to review the terms of an $8.5 billion settlement with investors in a case that could cost B of A much, much more if the settlement is rejected. But unfortunately for the bank and its investors, who would like to get this matter resolved, the hearing date has been rescheduled for Monday.

And if those two matters aren't enough, there's more activity coming out of the NY Attorney General's office regarding allegations against B of A and Wells Fargo (NYSE: WFC  ) that the banks violated terms of last year's $25 billion mortgage settlement. At this point, the bank may be wishing for some way to just make these messes disappear.

Incentives
Part of today's rise may stem from CEO Brian Moynihan's steadfast vow to increase cross-selling within the various branches of Bank of America's operations. As a way to increase exposure to customers and generate more revenue, cross-selling would be an opportunity for the bank to continue its climb back to full operating strength.

But Moynihan's plan is seeing opposition from within as Merrill Lynch money managers are weary of sending their clients into the bank's main division for services like a mortgage, only to be denied or become subject to B of A's world famous customer service. Since the cross-selling will now have an effect on the Merrill Lynch branch managers' annual bonuses, there may be more efforts to reign in the negative reputation of B of A's service and focus on improvements, but so far, previous efforts haven't worked. Maybe since there's money on the line for someone within the bank, the problem will finally get the kick in the pants it needs.

Another day
With more legal troubles hovering over the bank, it's a wonder that the share price continues to rise. But as a long-term investor, you know that the pressing matters in court neither dictate the performance of the bank, nor affect its fundamentals. With that in mind, the bank's improvement since the financial crisis warrants the type of market attention its been receiving. And Moynihan's new pressure to make cross-selling work could help boost the bank even further. 

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.


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