Bank of America is tanking today after an announcement that the New York AG would reject its $8.5 billion mortgage settlement with BlackRock, BNY Mellon, and PIMCO.
2011 has been an awful year for Bank of America.
In March, the Fed rejected the bank’s plans to pay shareholders dividends.
(Stress tests results in March suggested that many banks have bounced back from the financial crisis and are strong enough to pay dividends and buy back stock. So banks including JPMorgan, Wells Fargo, and Citigroup all filed to do so. But the Fed stopped Bank of America in their tracks.)
Then in July the firm said that it might need $50 billion in new capital. The news sent the stock down further.
BofA’s share price is down 32% since the beginning of the year and today it dropped from around $9 to $8.45.
Last year, analysts at Branch Hill Capital projected in a popular research presentation that Bank of America’s share price could be cut in half by its exposure to the mortgage crisis.
Looks like they were right.
The $8.5 billion settlement was a big reason why BofA projected terrible earnings last quarter. Then the best news they’ve had in a while came as the bank beat lowered expectations.
BlackRock, PIMCO and BNY Mellon agreed to the settlement, but it still had to be approved by the court.
Thank goodness John Paulson dumped BofA in the first quarter.