Mutascio maintained his price target of $13.50 for Bank of America's shares. "Our thesis on BAC has been that potential litigation and loan put-back costs would not cause a capital raise or a material decrease in tangible book value per share," he wrote. "At this level we think the 'easy money' has been made and the next material leg up in the shares will be predicated on several positive factors all coming together." Looking back, Bank of America has turned out to be an amazing play for investors who went in two years ago, when the company's efforts to work through an avalanche of mortgage loan repurchase claims from investors turned the shares into hot potatoes. Investors' confidence in Bank of America's prospects is soaring, with the company making very significant strides in its efforts to put the legacy of its disastrous purchase of Countrywide Financial in 2008 behind it. Recent mortgage repurchase wins have included a massive first-quarter settlement with Fannie Mae (FNMA), the groundbreaking settlement with MBIA (MBI) and the withdrawal of most objections to its 2010 mortgage putback settlement with institutional investors.
Of course, the $8.5 billion settlement with institutional investors -- agreed upon by Bank of America and Bank of New York Mellon as trustee in June 2010 -- isn't yet a done deal, with American International Group (AIG) continuing to hold out for a better settlement. But Bank of America has been moving aggressively, so it would not be surprising to see an agreement with AIG in the near term. The icing on the cake is that Bank of America set aside reserves for the settlement two years ago.