Bank of America CEO says mortgage process ‘healing’

NEW YORK – Thu Mar 8, 2012: Though costly for banks, a $25 billion settlement over foreclosure abuses will help a slowly improving housing market, Bank of America Corp. CEO Brian Moynihan said Thursday.

“The mortgage process is healing, which is good for all of us and the economy,” Moynihan said at an investor conference in New York.

The settlement, which will cost Bank of America $11.9 billion in cash payments and loan modifications, was announced Feb. 9, but final documents have not yet been filed.

Moynihan’s presentation was interrupted twice by protesters, including one who called for the breakup of the second-largest U.S. bank. Bank of America has lagged its peers in recovering from the financial crisis, as it struggles with losses and lawsuits tied to its 2008 purchase of subprime lender Countrywide Financial.

Massachusetts subpoenas Bank of America documents

BOSTON – Massachusetts securities regulators said on Friday that they were subpoenaing Bank of America for documents to determine if the lender knowingly overvalued assets in certain investment products.

Local investors lost about $150 million in investment vehicles structured by Banc of America Securities LLC, said William Galvin, the state’s top securities regulator.

Now his office is asking the Charlotte, N.C.-based bank to supply documents for its activities involving collateralized loan obligations.

The CLOs include LCM VII Ltd. and Bryn Mawr CLO II Ltd., which were structured by the bank and sold to investors in 2007.

Galvin, who has been especially aggressive in looking into how big banks hurt small investors during the housing crisis and financial crisis, said he wanted to find out if the issuer “was knowingly overvaluing assets in the portfolio to get them off their books and onto investors.”

The news comes one day after Bank of America and other large lenders agreed to a $25 billion settlement over alleged foreclosure abuses.

There was no immediate comment from Bank of America.

The company’s shares were down 1.2 percent at $8.08 in afternoon New York Stock Exchange trading.

Group calls for U.S. to break up Bank of America

NEW YORK – A group of consumer advocates, academics and economists want to end “too-big-to-fail” banks, starting with Bank of America Corp.

The group, led by consumer advocacy organization Public Citizen, plans to file a petition with the Federal Reserve Board and other regulators on Wednesday asking them to carve the bank into simpler, safer pieces.

The Fed and the coalition of regulators known as the Financial Stability Oversight Council have the authority to take such action under the Dodd-Frank financial reform law passed in 2010, the group said.

Nearly two dozen professors and groups have joined the effort.

It’s not clear how much effect the petition will have, and some community groups have declined to sign on.

However, the petition is a dramatic criticism of regulators who have so far done little to shrink giant banks after the 2007-2009 financial crisis.

“Bank of America currently poses a grave threat to U.S. financial stability by any reasonable definition of that phrase,” the 24-page petition said.

It said Bank of America, the nation’s second-largest bank, is too large and complex, and that its financial condition could deteriorate rapidly at any moment, potentially causing the market to lose confidence in the bank.

“An ensuing run on the bank could cause a devastating financial crisis,” the petition said.

David Arkush, director of Public Citizen’s Congress Watch division, said a lot of the group’s concerns apply to other large banks, but that Bank of America is the institution most exposed to the housing crisis.

Bank of America posts fourth-quarter profit, reversing recent trend

NEW YORK ― Bank of America Corp reported a fourth-quarter profit, reversing a year-earlier loss, boosted by one-time items and lower expenses for bad loans.

Under pressure to shore up its balance sheet, Bank of America sold assets and completed a stock swap during the quarter that boosted its capital levels. And in 2012, the bank said it was considering issuing $1 billion in common stock to certain employees in lieu of a portion of their year-end cash bonuses.

That move would further pad the bank’s capital levels, but would dilute existing shareholders and likely stir discontent among some bankers.

“Bank of America looks like it’s making good progress on the capital build-up,” said Derek Pilecki of Gator Capital Management in Tampa, Florida. “It’s a work in progress with expense cuts continuing. They have to issue stock to make capital targets, but the dilution isn’t overwhelming.”

The second-largest U.S. bank by assets on Thursday said net income applicable to common shareholders was $1.58 billion, or 15 cents per share, compared with a loss of $1.6 billion, or 16 cents per share, a year earlier. Like other large banks, Bank of America reported a decline in investment banking and sales and trading revenue.

The Charlotte, North Carolina-based bank benefited from pretax gains of $5.3 billion from the sale of China Construction Bank Corp shares, and gains from the exchange of trust preferred securities and the sale of debt securities. Various accounting charges and litigation expenses reduced earnings by $3.7 billion.

The bank set aside $2.9 billion in the fourth quarter for loan losses, down from $5.1 billion a year ago.

Bank of America lawyer says settlement challenger is Baupost

NEW YORK ― Walnut Place, a group of undisclosed investors who oppose Bank of America Corp’s. $8.5 billion mortgage bond settlement, is the Baupost Group, a distressed debt fund, according to an attorney for the bank.

“Walnut Place is actually a made up name,” Theodore Mirvis, an attorney with Wachtell, Lipton, Rosen & Katz who represents Bank of America, said at a hearing in New York state Supreme Court Thursday.

The “real” firm, which sued Bank of America and Bank of New York Mellon, as trustee, over mortgage-backed securities trusts is Baupost — “known as a distressed debt or sometimes a vulture fund,” Mirvis said.

Baupost spokeswoman Elaine Mann declined to comment on whether the Boston-based hedge fund was behind Walnut. David Grais, an attorney at Grais & Ellsworth LLP in New York who represents the Walnut entities, also declined to comment on whether Walnut was Baupost.

Like most hedge funds, Baupost doesn’t usually disclose its earnings or investments, but was reported to have $23 billion in assets last year.

Walnut Place is involved in separate cases against Bank of America.

In August, 11 entities sharing the name Walnut Place filed to remove the global $8.5 billion settlement case from New York state to federal court, citing its size and complexity.

The settlement was intended to resolve much of Bank of America’s remaining legal liability tied to its disastrous 2008 purchase of mortgage lender Countrywide Financial Corp. The deal, which was reached with over 20 institutional investors, would apply to other investors as well.

The decision to remove the case to U.S. District Court for the Southern District of New York is on appeal to the U.S. Court of Appeals for the 2nd Circuit.

Bank of New York Mellon is the trustee for the 530 mortgage securitization trusts covered by the proposed agreement.

Mirvis and Grais were in state court Thursday, arguing on a motion by Bank of America to dismiss a separate case that the Walnut Place entities brought against Countrywide Home Loans for breaching the agreements governing two mortgage-backed securities trusts. Trustee Bank of New York Mellon is also a defendant.

Getco to buy Bank of America’s NYSE market-making business

CHICAGO ― Getco LLC, an electronic market maker and high-frequency trading specialist, on Wednesday said it agreed to buy Bank of America Corp’s floor-trading operations at the New York Stock Exchange, significantly expanding its market-making operations.

Terms were not disclosed. Getco said the transaction will make it the second-largest NYSE-designated market-maker, responsible for trades in about 650 companies and 850 securities.

Among the companies it would be responsible for are blue-chip names such as Coca-Cola Co., General Electric Co. and McDonald’s Corp.

The transaction will leave just four designated market makers at the exchange: Getco, Barclays Plc, Goldman Sachs Group Inc and Knight Capital Group Inc. Barclays is the largest.

They had been preceded by so-called specialists, which according to the NYSE numbered 25 as recently as 2000, but the need for human traders has declined as the Big Board moved toward an electronic model.

Getco attained designated market-maker status in February 2010. It said it will assume responsibility for its new assignments from Bank of America over the course of December.

Bank of America is the second-largest U.S. bank, but has been shedding assets in an effort to comply with new international capital standards.

BofA learned a lesson from debit card fury, CEO Moynihan says

CHARLOTTE, N.C. ― Bank of America Corp. learned a lesson from its abandoned debit card fee and will work to provide transparency and fair pricing to customers while producing a return for shareholders, CEO Brian Moynihan said on Tuesday.

The bank and its peers are updating product offerings even as they “address new regulations that have reduced our revenues in this business,” Moynihan said in opening remarks at the Bank of America Merrill Lynch Banking and Financial Services Conference.

Bank of America, the No. 2 U.S. bank, faced a backlash from customers and politicians after it disclosed plans in September to charge customers a $5 monthly debit card fee. As other banks retreated from such charges, Bank of America canceled plans for the fee a month later.

Consumer banking will become a “smaller platform” at Bank of America and derive its profitability from lower expenses and deeper relationships with customers, Moynihan said. Bank of America is testing new account packages where customers won’t pay fees if they do significant business with the bank, he said.

Customers can avoid fees by using direct deposit for their paycheck, using a Bank of America credit card or taking out a mortgage with the bank, he said.

Moynihan also addressed the bank’s efforts to boost its capital levels ahead of new international rules. He called a plan disclosed last month to issue up to 400 million common shares in exchange for outstanding preferred shares a “prudent way to manage capital.” The move will boost capital levels and reduce the bank’s interest payments, but will also dilute the holdings of current stock holders.

On Tuesday, Bank of America began asking certain security holders for their consent to a procedural maneuver required as part of the exchange.

In another move to build capital, Bank of America on Monday said it was selling most of the remaining shares it owns in China Construction Bank Corp to generate a gain of about $1.8 billion after taxes.

Moynihan said the 1 percent stake Bank of America will still own in CCB remains its largest private-equity investment. “It’s a great company and we will continue to support it,” he said.

Bank of America wanted to be transparent on debit card fee

LAS VEGAS ― Bank of America Corp., which earlier this week canceled plans to charge a $5 monthly fee to use a debit card after loud protests, was not sure how to implement the plan and disclosed it only in an effort to be transparent with customers, a bank executive said.

Laurie Readhead, Bank of America’s retail banking executive, said the bank abandoned the plan because of customer feedback and a broader shift in the market as other banks scrapped debit fee plans.

“We did not now know yet how we were going to do it, but we wanted to put it out there,” she said during a presentation at the ATM, Debit and Prepaid Forum.

News of the fee garnered widespread criticism ranging from angry customers to U.S. President Barack Obama.

As the market shifted, “we shifted,” Readhead said.

Large U.S. banks tested or introduced the fees earlier this year in response to new caps on the amount they can charge merchants for processing debit card transactions.

Known as interchange fees, the charges were capped at 21 cents per transaction — roughly half the previous industry average — by the Durbin amendment to the 2010 Dodd-Frank financial reform law.

Readhead said the industry lost $6 billion to $8 billion in revenue as a result of the new price cap.

As rival banks backed away from such fees, Bank of America initially planned to make it easier for customers to avoid the charges, but on Tuesday it canceled plans for the fee entirely.

The bank in the past has been able to roll out fee hikes that were later embraced by competitors. But in this case, it found itself isolated as other banks shunned the practice or backtracked from their original plans.

The reversal was another embarrassing episode for Chief Executive Officer Brian Moynihan. Last spring, he signaled the bank planned a modest dividend increase this year, only to have the Federal Reserve deny the bank’s request.

New regulations have changed how banks can price their products, and consumers clearly do not want to pay higher fees, Wells Fargo & Co. Chief Financial Officer Tim Sloan said at a separate industry conference on Thursday.

Bank of America, under pressure, drops $5 debit card fee plan

NEW YORK ― Bank of America Corp is dropping plans to charge a $5 monthly fee for debit card use, the bank said in a statement on Tuesday.

The second-biggest U.S. bank said the move was in response to customer feedback and competition. Bank of America was under pressure to make the change as rivals backtracked from plans to charge customers for using their debit cards.

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, the bank’s co-chief operating officer, said in a statement.

JPMorgan Chase & Co and Wells Fargo & Co last week decided to cancel test programs, while SunTrust Banks Inc and Regions Financial Corp said on Monday they would end monthly charges and reimburse customers.

Bank of America had planned to start charging customers next year. Banks began crafting the monthly charges to make up revenue lost to a law that slashes the fees they charge retailers when consumers swipe their cards. The fees sparked a firestorm of criticism from consumers and politicians, and many smaller banks and credit unions shunned the practice.

Bank of America began softening its stance on the fee last week. The Charlotte, North Carolina, bank planned to give customers more ways to avoid the charge, such as maintaining minimum balances, having a paycheck direct-deposited or using their Bank of America credit card.

The reversal is another embarrassing about-face for Bank of American CEO Brian Moynihan. This spring, he signaled plans for a modest dividend increase this year, only to have the Federal Reserve Board deny the request.