Shares of Bank of America (NYSE: BAC) suffered a dramatic decline on Monday (8/8), standing out even amidst a day highlighted in red as the markets continued to digest Standard & Poor’s downgrade of America’s credit rating.
According to The New York Times’ Dealbook,
Financial firms felt the brunt of the bloodbath in the markets on Monday (8/8), with Bank of America leading in the sell-off as it confronted renewed fears over its financial health.
Shares in the banking giant tumbled 20.3 percent to $6.51 on Monday, their lowest point in more than two years. Credit-default swaps tied to Bank of America’s debt reached their highest levels since the middle of 2009, indicating additional pressure on the company. Its stock has now fallen about 50 percent this year.
BAC’s standout poor performance was related to a few events. First, a downgrade:
[A] well-regarded banking analyst, Mike Mayo of CLSA, on Monday downgraded Bank of America’s stock to underperform from outperform. Among the reasons he cited in a research note was concern that the firm might need to embark on another round of capital-raising.
“The resolution of mortgage issues will take much longer and may indeed be much higher than management’s estimates, raising questions on the company’s ability to meet regulatory capital requirements in a timely manner,” he wrote.
Second, a lawsuit:
On Monday, the American International Group sued Bank of America, seeking more than $10 billion in damages. A.I.G., which was bailed out by the government during the 2008 financial crisis, accuses the bank and several firms it acquired, including Merrill Lynch andCountrywide Financial, of misrepresenting the quality of the mortgages that went into the bundled securities.
Embedded below is a copy of AIG’s lawsuit.
Covestor models that held BAC as of 8/8 include:
- Value and Growth 2
- Core Holding
- Undervalued Opportunities
- Flexible Value
- Top 5 Screener
- Financial Services
- S&P 500 Best of Breed
- Discount to Intrinsic Value
- Large Cap Value
“Bank of America Shares Fall to Lowest Point in 2 Years” NYTimes Dealbook. http://dealbook.nytimes.com/2011/08/08/bank-of-americas-no-good-very-bad-day/