Shares of Bank of America (NYSE:BAC) are up considerably this afternoon amid a broader rally that's sent blue-chip stocks to record highs in intraday trading. With roughly two hours left in the trading session, the nation's second largest bank by assets is up by $0.23, or 1.97%.
B of A's ongoing legal battles
The ongoing legal battle between B of A and bond-insurer MBIA (NYSE:MBI) made headlines yesterday after a federal judge in New York dismissed B of A's challenge to MBIA's corporate bifurcation. The ruling affirmed an approval by state insurance regulators with respect to the 2009 restructuring. MBIA's share soared more than 20% on the news yesterday, and despite the adverse decision, B of A's ended the day higher as well.
The ruling didn't impact B of A because the case is a mere sideshow compared to its larger and more substantive legal problems. Since the financial crisis, the bank has paid out more than $40 billion in legal claims related primarily to its acquisition of Countrywide Financial. In addition, according to my estimate, it still has between $15 billion and $25 billion to fork out beyond allocated provisions before all is said and done.
Critically, however, the now-dismissed case didn't fall into either of these categories. In a rare occurrence, the bank was actually the plaintiff looking for relief as opposed to a defendant from which relief is sought. As a result, the legal loss didn't necessarily translate into a financial one as well. Not to mention, B of A has promised to appeal the ruling and still has an analogous case pending before a state judge in New York.
The stress tests results are due out this week
Going forward, moreover, investors and analysts are much more interested in what happens at the end of this week. On Thursday, the Federal Reserve is scheduled to release the results of the 2013 stress tests covering the nation's largest banks including JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC), among others. While there's little question that either of these banks, or B of A for that matter, will pass the tests, there's less certainty over what that means.
The bigger issue is whether or not the Fed will allow certain lenders to increase their dividends and/or share buybacks. I've made no secret of my belief that Wells Fargo will get the requisite go-ahead, but B of A isn't as sure of a shoo-in. Either way, however, we're set to find this out at the end of next week when the Fed informs banks of its decision.
B of A reveals new credit card
In other news, The Wall Street Journal reported yesterday that B of A is marketing a new credit card designed to attract credit card customers who carry balances from month to month. The new card, known as the BankAmericard Better Balance Rewards card, offers cardholders $25 for every quarter that they pay any amount more than the monthly minimum due and make payments on time. Additionally, the quarterly reward increases to $30 if the customer also has a checking, savings, or other qualifying account with B of A.
"For consumers who typically pay off credit card balances over time, paying more than the minimum due each month can help pay off debt faster," said Titi Cole, retail products executive at the bank. "We also want customers to know that we appreciate their business by rewarding them with an added bonus when they have additional banking relationships with us."
The move comes amid a broader push at B of A to improve customer service. At the end of January, CEO Brian Moynihan sent a letter to the bank's 270,000 employees extolling the necessity of satisfying customers after it's consistently scored the lowest among big banks on the American Customer Satisfaction Index survey. It followed this up by announcing a new marketing campaign designed to repair the bank's tarnished reputation. "It just boils down to being better than we are today," Moynihan said at a gathering to inaugurate the campaign.