2011 Make Or Break Year for BofA’s Moynihan
With the announcement of additional write-downs and Bank of America’s second straight quarterly loss, Bank of America leader, Brian T. Moynihan is facing a make or break year in 2011 as institutional investors turn up the heat and look for some serious stock price appreciation. Given the money that equity mutual funds have invested in this financial services firm, such high expectations are not unreasonable after the Moynihan revealed $12.4 billion in impairments for 2010.
Retail Banking Hit Hard
In a step to reinvent itself, Bank of America purchased Countrywide Financial for $2.8 billion in 2008 in the midst of the financial services collapse. At the time, Countrywide was the largest mortgage lender in the United States… and it was arguably on sale. However, that bet, which was not made by Moynihan, has proven to be an expensive one. In Friday’s release, Moynihan admitted that operations related to this unit could trigger an additional $7 billion to $10 billion in losses.
Equity Funds That Are Impacted
Some of the country’s most prolific and best-performing equity investment funds are set to feel the brunt of BofA’s setbacks. Those covered at the Mutual Fund Site that hold Bank of American in its Top holdings include the following:
As well, the Vanguard Wellesley Fund (VINX) lists Bank of America Mortgage, which is not a security that trades on an active market, as its 2nd top holding, making up 1.98% of its $18.9 billion under management.
In a report published at Bloomberg.com, Jason Tyler of Ariel Investments was quoted as saying that it is typical for new leadership report big losses at the start of the term so as to lower investor expectations; this may be one of the last opportunities that Moynihan has to take advantage of such losses before he starts getting blamed for such losses.
For a company the size of Bank of America, domestic large cap equity funds will expect a quick turnaround from the company and, just as importantly, its stock price.
