Goldman Sachs’s “Fabulous Fab” appears to be walking away without even a serious slap on the wrist, much less any threat of jail time, despite being found liable on six accounts. However, Bank of America doesn’t look like it is going to make it out quite so easily.
According to recent disclosures, America’s second largest lender now faces new subpoenas and lawsuits from states and federal agencies over securities and jumbo mortgage loans.
How Distressed is Bank of America?
The distressed bank is already seeing stocks trade for less than half the price of Facebook, which is pretty astounding when you contrast the story of the two companies. Despite efforts at a turnaround, Bank of America’s non-performing notes, poor acquisitions, and lending practices have resulted in more than $45 billion having to be shelled out to defend itself in court, pony up cash for settlements, and for buybacks. This includes $10 billion in litigation in just the last two years alone.
A good portion of recent rises in profits are likely tied to fees and other customer facing cost cutting measures, meaning they’re giving consumers less for more, which common sense suggests is not a winning strategy or sign of real health. So are Bank of America’s non-performing notes ripe for the picking?
There are absolutely some great loans on the books of this banking giant even if they may be considered non-performing right now. It is true that REOs and non-performing loans on the banks books have gradually declined from September 2012 through June 2013. However, the numbers of non-performing assets are considerably larger than most realize.
The bank has been selling mortgage notes and REOs to investors, which is a great sign. Yet, according to a second quarter 2013 report, loans and leases up for sale total less than $600 million. A peek behind the scenes shows that Bank of America is actually holding over $56 billion in non-performing residential mortgage notes alone.
This means massive opportunity for investors to negotiate with a bank that’s under some considerable pressure. Will you cash in on the bank’s possible demise?