Financial Sector Updates – (AIG, BAC, MA, V)

by Trefis Team
Bank of America
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Below we present a summary of key updates that might be of interest to investors interested in financial stocks. We look at potential losses from storms for AIG (NYSE:AIG), Bank of America‘s (NYSE:BAC) struggle to settle mortgage bonds and the Fed’s announcement which sent Visa (NYSE:V) and MasterCard‘s (NYSE:MA) stock to a new high.


AIG will face costs of about $500 million from U.S. storms in April and May that are likely to pressure property- and-casualty margins in the second quarter, according to Jimmy Bhullar, an analyst at JPMorgan. [1]

Federal Reserve is halting its sales of mortgage bonds which it acquired in the rescue of AIG after coming under criticism that auctions were damaging credit markets. The Fed has earlier rejected a $15.7 billion bid from AIG for the entire pool. [2]

Bank of America

Big banks like Bank of America and JPMorgan are cutting the debt and easing the mortgage terms for tens of thousands of borrowers who have not even asked for help but whom the banks deem to be at special risk. [3]

Bank of America entered into an  $8.5 billion settlement with investors who took a beating on mortgage bonds issued by Countrywide before the housing market collapsed. The bank also will swallow an additional $5.5 billion to buy back other defective mortgages in the future. It has already taken a $6.6 billion hit for lawsuits, foreclosure snarls, a write-off in the value of its mortgage business and loan-servicing adjustments. [4]

Of the top 23 credit card issuers, Bank of America delivers the highest level of security according to a Javelin study. [5]

Visa, MasterCard

The Federal Reserve announced its final decision on the regulation of debit-card swipe fees. The new fee is set at $0.21, a little less than half the fee currently charged by banks on debit card transactions, but it is nearly double the $0.12 that the Fed had initially proposed. Shares of Visa and MasterCard jumped to a new high after the decision was announced. [6]

  1. AIG May Have $500 Million in Disaster Losses, JPMorgan Says, Bloomberg []
  2. New York Fed Halts AIG Bond Auctions on Market Conditions, Bloomberg []
  3. Big Banks Easing Terms on Loans Deemed as Risks, NYTimes []
  4. BofA Haunted by Countrywide Deal, WSJ []
  5. Bank of America is Most Secure of Credit Card Issuers, Financial News []
  6. Visa, MasterCard Climb as Fed Increases Caps on Debit-Card Fees, Bloomberg []
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