I argued that shares in the nation's second largest bank by assets have been trading for a large discount to book value since the financial crisis because of its toxic loan portfolio, exposure to liability related to the Countrywide Financial acquisition, and the need to buttress regulatory capital. But because these three things seem now to be under control, I believe its share price will continue to reflect the improvement -- and particularly once it's given the go-ahead to raise its dividend payout.
In response, I got a number of comments from readers. But unlike the typical response that disparages my opinion or analysis, the vast majority homed in on one thing: B of A's customer service.
Take this response from Colinnyc:
Forget about the financials: what's more significant is [B of A]'s toxic culture. The bank always has treated its customers poorly -- first with nickel and dime fees, a champion of uncompetitive rates, and wretched customer service. The uncaring face the bank presents to its customers and whether or not it take serious steps to improve that profile is the real stress test.
Virtually everyone I know left [B of A] long before Occupy Wall Street.
Or this one from thommittag:
I would never touch [B of A], They have an unscrupulous culture and do not care if thieves misuse their products and ruin consumer Credit Reports.
And this from Panther007:
[B of A] has forged documents on foreclosed home loan proceedings. They have changed lawyers for customers trying to modify their loans more than 10 times hoping that weary homeowners who have a right to their own property will just give up and leave so they can have property. [It] has repackaged loans so that deeds are lost....it is an absolute nightmare of a problem for homeowners holding any kind of loan with [B of A].
So, the question from the investor's perspective is: What to make of all this?
It's clear that B of A has a lot of room for improvement on the customer service front. This point was underscored in a recent survey of mortgage servicers by J.D. Power and Associates. Out of the nation's 14 largest servicers, B of A scored dead last, far behind the likes of BB&T (NYSE:TFC), SunTrust Banks (NYSE:STI), and Wells Fargo (NYSE:WFC).
According to the survey's director, paraphrased here, the high-performing lenders "generally did a better job of meeting customer expectations, keeping the borrowers aware of loan processes, and establishing a trustworthy relationship with their clients." If the reader comments I've included here are any indication, it seems obvious why B of A performed so abysmally.
At the same time, it's only fair to acknowledge that B of A is taking steps to remedy these problems. With respect to mortgage servicing in particular, it's purportedly assigned customer service representatives to specific mortgagees to streamline the experience from the latter's perspective. And following a recent decision to increase face-to-face contact with clients in its investment banking division, the bank was harangued by the financial press.
I think it's also important to realize that, for very good reason, not everyone is going to be satisfied with his or her bank. As our readers have pointed out, B of A has done some pretty unscrupulous things over the past few years to make a quick buck. But so have other banks. Just the other day a woman was complaining to me about Wells Fargo's customer service. Yet it's been one of the best performing bank stocks over the past few years.
For the investor, in turn, the issue isn't about what B of A did in the past, but rather where it's going in the future. And it's for this reason that I stand firm in my conviction that B of A currently offers investors a great opportunity going forward.