Shares of the nation's second largest bank by assets, Bank of America , have whipsawed today as investors and analysts struggle to digest a bevy of important news this week, both good and bad.
On the positive side, we learned today that global investment banking fees rose 6% in the first quarter according to data from Thomson Reuters. This amounted to the strongest start in two years. B of A had a particularly strong showing, beating out both JPMorgan Chase and Goldman Sachs in terms of revenue. For the first three months of the year, its investment banking operations earned $1.52 billion in fees compared to JPMorgan's $1.48 billion and Goldman's $1.27 billion.
Earlier in the week, moreover, it was announced that B of A has settled with the National Credit Union Administration, setting aside claims related to the alleged sale of faulty mortgages. As I noted at the time, the agreement marks a small but nevertheless important victory because it further lifts the cloud of legal uncertainty off the bank.
But on the other side of the equation, investors learned two days ago that an appeals court ruled against B of A in its legal battle against bond insurer MBIA . The protracted case has been going on for nearly five years, and the momentum has lately swung in MBIA's favor. After the ruling, the struggling bond insurer no longer has to prove that B of A's defective underwriting caused mortgages to default. To be entitled to damages now, all it must show is that the underwriting process was, in fact, faulty and that B of A (or more accurately, Countrywide Financial, which the bank regrettably purchased in 2008) concealed this. To read more about this, click here.
Finally, B of A continues to perform abysmally on the customer service front. The recently created Consumer Financial Protection Bureau released its accumulated list of complaints against the nation's largest banks this week and, not surprisingly, B of A topped the charts (and not in a good way). In an effort to reverse this reputational damage, and to promote cross-selling of its multiple financial products, CEO Brian Moynihan is corralling the lender's regional managers for a two-day conference in Chicago. Whether he's successful, of course, remains to be seen.
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