This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Bank of America: 2011 Bank Stock Stinker

Stock quotes in this article: BAC, C, MS, USB, COF, GS

NEW YORK ( TheStreet) -- Bank of America (BAC) was the worst of the worst during a year of pathetic bank stock performance, with shares plunging 58% for the year and closing Friday at $5.56.

The KBW Bank Index (I:BKX) closed Friday at 39.42 for a 2011 decline of 25%, with all 24 index components showing declines for the year, except for U.S. Bancorp (USB), which was up 2% for the year to close at $27.05. Capital One (COF), was down only slightly for the year, closing at $42.9.

Among the KBW Bank Index components, Capital One achieved the highest operating return on assets of 1.90% during the first three quarters of 2011, followed by U.S. Bancorp, with an ROA of 1.47%, according to SNL Financial.

Most of the epic drop in Bank of America's shares can be attributed to continued uncertainty over just how much risk the company faces from former CEO Ken Lewis's disastrous decision to by Countrywide Financial in 2008.

Reuters reported last week that Bank of America was considering asset sales to boost regulatory Tier 1 capital, after boosting its regulatory capital by $3.9 billion through the issuance of new common shares and retirement of preferred shares and long-term debt.

Bank of America's Tier 1 common equity ratio was 8.65% as of Sept. 30, according to SNL Financial, which was the lowest among the "big four" U.S. banks.

The shares trade at roughly 0.4 times tangible book value, with the heavy market discount reflecting the continued uncertainty over capital and ongoing mortgage putback litigation, including Federal Housing Finance Agency's lawsuits and the expected settlement between the largest mortgages servicers, federal regulators and the states' attorneys general, which Credit Suisse analyst Moshe Orenbuch has estimated could cost Bank of America between $5.6 billion to $9.4 billion.

Rochdale Securities analyst Richard Bove put out a terse note last week, saying it was time for Bank of America's management to come clean with investors by reviewing "all of the issues related to this business and to explain why it believes it is so critical for the bank to continue to hold onto this division."

Bove said that the company had refused to discuss why it wasn't "suing the sellers of Countrywide for misrepresenting of the value of the assets at the time of sale," why Bank of America was "paying legal fees and fines of a former Countrywide executive," and why it hadn't considered putting the Countrywide business into bankruptcy.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,804.71 -238.19 -1.40%
S&P 500 1,946.16 -26.13 -1.32%
NASDAQ 4,422.0850 -71.3050 -1.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs