Bank of America, the nation’s biggest bank, is getting clobbered amid the market mayhem this week. Shares of Bank of America fell another 8% by midday on Friday after tumbling by 7.44% during Thursday’s market sell-off. The stock is now down by nearly 40% in 2011.
Spooked investors apparently did not like what they saw in a quarterly securities filing the bank made on Thursday. Bloomberg News’ Hugh Son was first to pick up that the bank disclosed that a $3 billion settlement it had earlier announced with government-sponsored Fannie Mae and Freddie Mac could increase in costs. The bank had agreed to repurchase bad loans its sold to Fannie and Freddie, which appear to be demanding more loan repurchases than the Bank had expected.
This morning a Wells Fargo analyst cut his earnings estimates for Bank of America, pointing out that the bank had suffered more than most banks from the recent recession and mortgage losses related to the purchase of Countrywide.
In more bad news for the bank, Eric Schneiderman, New York’s attorney general, moved to try to destroy a key $8.5 billion deal Bank of America had entered into with big investors like Blackrock over mortgage securities, requesting that a judge put an end to the settlement because Bank of New York Mellon had violated state law in its trustee role for the mortgage securities. Bank of America is not the only big bank getting hammered. Citigroup, the nation's third biggest bank, also saw its shares lose more than 7% of their value on Friday.
Bank of America CEO Brian Moynihan’s plan is to take questions on a public call next week hosted by hedge fund manager Bruce Berkowitz, whose sizeable position in Bank of America is shrinking by the hour.