Bank of America may be a bargain stock again
Bank of America (BAC) remains enmeshed in the aftermath of the 2008 financial crisis and its acquisition of Countrywide’s legacy mortgage assets, but Seeking Alpha published one commentary that suggests BAC’s stock is possibly heading toward greener pastures.
Seeking Alpha notes that:
Countrywide is still a big cost to shareholders, exceeding $50 billion and counting. As of the second quarter earnings call, Legacy Asset Servicing expenses were moving lower ahead of schedule. In Q2, LAS was down nearly $800 million on the quarterly basis, falling to $2.3 billion from the $3.1 billion peak. At an annualized rate, LAS costs are still just shy of $10 billion. However, we have seen the peak. By the end of this year, according to a KBW analyst, those per quarter costs should drop to below $2 billion before being cut in half each of the next two years. That puts annual LAS costs in 2015 to $2 billion - savings of $7.2 billion over current levels.
The bank remains in limbo as it wrangles with investors over an $8.5 billion RMBS settlement to cover losses on toxic Countrywide loans sold off to investors. However, when that's over with, the firm's stock could see an upside, Seeking Alpha said.
Buying Bank of America here - closing at $14.49 on Friday - would certainly mean bearing that risk. But, I believe that this issue will be resolved in 2013, removing the overhang from BAC's share price. And, when that overhang is gone, investors will once again realize that Bank of America is discounted.