Benzinga Radio's Luke LaVanway and Matthew Boesler spoke with Bill Black, former litigation director of the Federal Home Loan Bank Board and previous holder of other senior federal regulatory roles, and Edward Lewis, partner at Atlantic Equities, to discuss the proposed Bank of America settlement that was announced this week.
Bank of America stock is up 3% following the announcement – is this positive reaction justified? While the $8 billion figure is cheap compared to the potential liability of BofA's $425 billion loan portfolio, “it certainly doesn't resolve anything on the part of the FCC, which could bring aider-and-abettor suits,” Black said. There is a distinct possibility of additional investor suits as well. Nevertheless, Black calls the settlement a “coup” for BofA, as it resolves claims with the most sophisticated large holders of the securities in question.
Lewis still advises a cautious perspective on the stock:
We're staying on the sidelines, staying with our neutral [rating]. We cut our price target from $16 to $13.50. How are they going to fill their capital deficit? We're going to see the likes of Citigroup, Wells Fargo, JP Morgan, in much stronger capital positions. We'd far prefer to play the banks space through Wells Fargo and PNC in terms of US banks or Citibank in terms of international banks.
At the end of the day this is really about PR. If you're coming out with the right headlines and essentially ticking the box in terms of getting your house in order, investors are going to be reassured.
We covered a lot more in the discussion, so be sure to check out the full podcast below.
Be sure to check out the audio of the interview in its entirety: Bill Black and Edward Lewis: Insights on the Bank of America Settlement
Subscribe to the Benzinga Strategies podcast feed in iTunes: Benzinga Strategies
Follow us on Twitter: @lukelavanway @matthewboesler @benzingaradio @benzinga
And for our full range of podcast content, visit the Benzinga Radio homepage.