BofA Struggles With Double the Trouble
The fallouts from the foreclosure crisis are still hitting Bank of America (NYSE:BAC), which is expecting an onslaught of opposition at its annual meeting on Wednesday — from protestors outside and shareholders inside.
Waves of protests have been planned in Charlotte, North Carolina, with people upset about high executive pays as subprime mortgages continue to contribute to thousands of people losing their homes. Protestors also targeted Wells Fargo’s (NYSE:WFC) annual meeting last month, but have made Bank of America, which acquired the country’s main subprime lender Countrywide Financial Corp in 2008, the main target of their complaints.
The concerns of Bank of America shareholders stem from the same basic issue that has plagued the banking industry, and in turn the rest of the economy: foreclosures. But they will now be looking to demand an end to legal troubles and focus on growth.
The lender’s stock price has fallen nearly 40 percent since the 2011 annual meeting and any recovery has been smaller than that of competitors. Bank of America’s stock has been the worst performer in the Dow Jones industrial average, and has only managed to earn a mere 1 cent per share for its investors. The bank lost almost $18 billion last year just on dealing with troubled mortgages. It still faces liability for additional mortgages that can go into billions.
While chief executive Brian Moynihan has said that a $25 billion settlement among the federal government, states, and five of the largest mortgage servicers will help the industry and has pledged a significant cut in expenses by the end of the year, shareholders will demand to know the bank’s earnings plan going forward.
“For Bank of America, it’s still 2009,” analyst Dick Bove of Rochdale Securities said. “The other banks have gotten out of that because they don’t have the same degree of litigation. They don’t have the same degree of problems on their balance sheets and they are earning a lot of money.”
But while Citigroup (NYSE:C) shareholders recently voted to decrease executive pay, the Bank of America top team does not appear to be facing that threat yet, with two major shareholder advisory firms supporting the pay packages.
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