Capital Requirements Prove Challenging for Bank of America

Bank of America (NYSE:BAC) faces an uphill task in meeting capital adequacy norms to be complied with by 2019 – worse, it’s being seen as tardy compared to its main competitors, all expected to achieve the capital norms within the next couple of years or so.

Having already sold almost $50 billion of assets, the bank may have to scrape the barrel in rustling up additional capital via asset sales. According to rumors, it may be selling its Indian back office outsourcing operations, along with previously announced, likely sales of real estate holdings and PE investments.

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The bank needs $45 billion additional capital by 2019, and these sales may not be enough, resulting in the possibility of sales of core businesses such as chunks of its investment banking, or even the Merrill Lynch brokerage division.

But the bank’s slow progress has analysts speculating whether there are management issues at work. “You have had nothing but bad news come out of the company for two years,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “At some point, the directors on the board have to say, ‘Is it systemic or the result of management?'”

J P Morgan Chase (NYSE:JPM) is likely to comply with the capital requirements by end of next year, while Citigroup has indicated that it is already heading toward that target. According to Wells Fargo CEO John Stumpf, his bank is closer than any of the big banks to that number.

Does Bank of America want to be one of the top four banks with J.P. Morgan Chase, Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC)? We should find out in 2012.

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To contact the reporter on this story: Brooke Edge at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com