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Bank of America Fire Sale to Continue in 2011

NEW YORK (TheStreet) -- Even though Bank of America (BAC) has sold billions in assets to pay back the government bailout, the bank still has plans on trimming down by selling "non-core" businesses.

"Any future subsidiary sales would not be to satisfy the TARP requirements. Bank of America has a specific strategy to streamline its model, and I would expect them to sell more," said Jefferson Harralson, an analyst at Keefe, Bruyette & Woods.

The Charlotte, NC-based institution received $45 billion in assistance through the U.S. Treasury Department's Troubled Asset Relief Program (TARP) following the 2008 financial crisis. According to published reports last week, Bank of America told regulators that it will meet the final conditions of its TARP repayment by year's end.

"They had to raise enough assets to pay back TARP and the company will continue to sell to raise capital," said Paul Miller, analyst for FBR Capital Markets. "I think they are under a couple different pressures between shareholders and the regulatory environment and this would cause them to really sell as much as they could. I think they are selling everything at a discount."

Just during the third quarter of this year BofA has done several sales, including:

  • The sale of the company's preferred and common shares of Itaú Unibanco Holding S.A., which generated a $1.2 billion pretax gain.
  • The sale of the company's equity position in MasterCard, resulting in a pretax gain of approximately $440 million.
  • An agreement to sell the company's entire 24.9 percent stake in Grupo Financiero Santander, S.A.B. de C.V. back to an affiliate of its parent company, Banco Santander (STD), in a private transaction for $2.5 billion which generated a pretax loss of $428 million.
  • The sale of Columbia Management's long-term asset management business, which generated a $60 million pretax gain and resulted in a reduction in goodwill and intangibles of approximately $800 million.
  • An agreement to sell a $1.9 billion portfolio of limited partnership interests in private equity funds to AXA Private Equity at a pretax loss of approximately $160 million.
Since the end of the third quarter, Bank of America announced the sale of a portion of its BlackRock stake for a total $8.2 billion and announced the sale of our portion of a rights offering for China Construction Bank.

Bank of America spokesman Jerry Dubrowski told The Street that all told, BofA has generated more than $17 billion in gross proceeds from asset sales this year and the bank is still not done shedding assets.

The assets that Bank of America has publically announced it is selling is Balboa, a force-placed insurance subsidiary. The bank has actively been shopping the asset since July. Bank of America acquired Balboa with its purchase of mortgage lender Countrywide Financial in 2008. Possible bidders for the insurance company could include Assurant (AIZ) and Sterling Insurance Company, which also sell force-placed insurance.

"That asset has been on the block a while," said Rochdale Securities analyst Richard Bove. "I assume they may have had a bit of trouble selling it because of what is happening with foreclosures in the mortgage market."

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