Bank of America may need to consider selling Merrill Lynch
Bank of America may need to consider selling Merrill Lynch.
The bank recently disclosed that expenses related to soured home loans could total $20.4 billion in the second quarter. The bank has racked up legal and settlement costs to resolve demands that it buy back soured mortgages sold into securitizations, many of which were originally made by Countrywide Financial, which the bank acquired in 2008.
The ongoing costs from Bank of America’s mortgage exposure are set to run headlong into the higher capital requirements global regulators want to see implemented. As a result, Bank of America may find that it is unable to keep the promise of its CEO to raise its dividend.
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The stock is down 27 percent for the year, and the dividend is stuck at the crisis level of a single penny per share. Regulators have refused to permit Bank of America to increase its dividend until the bank’s capital position improves.
Pressure is building from outside investors and inside Bank of America for a dramatic change. There have been talks at high levels about the possibility of selling portions of the bank—including the Merrill Lynch business it acquired at the height of the financial crisis.
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