Bank of America’s Stock Slump Yesterday
Bank of America’s (NYSE:BAC) stock has slumped almost 10% this week to around closing at $5.50 now. These are the lowest levels for the stock since February 2009. This slide in the shares of the troubled bank are largely attributed to a series of developments over the weekend that cast a shadow over the financial sector as a whole given macro uncertainty and on Bank of America in particular given persistent legal challenges.
See our full analysis of Bank of America
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Companies across the financial sector took a beating earlier this week following Greece’s announcement that it will miss its deficit targets for the year – triggering a fresh wave of panic among global investors about the country’s impending default. [1]
And as trouble continues to brew for Bank of America on the legal front, the bank saw an additional loss of value. Over the weekend, Bank of America saw another mortgage-backed securities related lawsuit filed against it – this time by Sealink Funding which seeks compensation for losses on assets worth $1.6 billion sold to it by the bank (See Mortgage-Related Lawsuits Continue to Flood the Banks: BoA, JPM & Barclays).
The increasing list of lawsuits threaten to significantly shrink the bank’s margins in subsequent quarters due to high litigation and settlement costs.
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We currently have a price estimate of $11 for Bank of America’s stock, which we are reviewing in light of the weak global economic conditions and the string of lawsuits concerning the bank.
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Notes:- Bank stocks drop on fears of European contagion, Reuters, Oct 3 2011 [↩]