Bank of America (NYSE:BAC) is set to have its annual shareholder meeting in Charlotte on Wednesday, with company officials and investors trying to be optimistic about BofA’s prospects. While the year-long surge in stock price and the resolution of the Merrill Lynch deal have been positive for the company, numerous problems threaten the bank’s outlook forward.
Dealing with the Past
The lawsuit initiated by shareholder following the 2008 purchase of Merrill Lynch has plagued BofA for years, but a judge approved a settlement this week. BofA will pay $2.45 billion to the plaintiffs without acknowledging any wrongdoing. It is an important move for the company that wanted to put the financial crisis of 2008 behind it, after settling for $10 billion in January over mortgage problems with Fannie Mae. A third settlement, with the price tag of $8.5 billion, will likely happen soon after getting approval in New York. AIG’s (NYSE:AIG) objections in the case were ignored by the court.
Increasing Income with New Regulations in Sight
Investors and shareholders hope Bank of America can increase profitability in the coming quarters, as competitors like JPMorgan (NYSE:JPM) are scoring big despite their own legal troubles. New regulations may make that goal more difficult, but no one expects the most extreme measures (i.e. Brown-Vitter) to become law. Nonetheless, after Fed governor Dan Tarullo’s speech on Friday, a push for more clamps on the banking industry is possible. Bank of America will need to plan for more regulation as it eliminates costly burdens within the company.
The biggest concern is the 667,000 troubled mortgages still in the system. The Charlotte Observer reports that the company is trying to whittle that number down to 400,000 by the end of 2013, which would give BofA the ability to cut some of the huge staff still grappling with bad loans. At least 3,000 more job cuts could be in the offing, should the bank be able to meet its goals in the mortgage department.
Moving Beyond Sound Stock Performance
As Bank of America settles on its financial liabilities and tries to cut costs, investors can be happy about the performance of company stock, which rose over 58 percent since May 2012. Still, at $12.24, it trades at a level well below the competition. Analysts consider BAC ripe for significant growth, but it will take a push from investors on all sides to make that happen.
With these matters weighing on the company, Bank of America will host its annual meeting and try to move forward in a time when it’s struggling to increase earnings. As the New York Times reported, CEO Brian Moynihan is as invested in the future as anyone. His compensation package specifies that he stands to earn considerably more if the company’s profits grow.
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