This Day On The Street
Continue to site
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

Bank of America Shares Shrug Off Rise In Legal Costs

NEW YORK ( TheStreet) -- Bank of America (BAC - Get Report) saw a rise in mortgage-related litigation costs and the market didn't care.

Mortgage-related litigation costs rose to $350 million in the third quarter vs. $100 million in the second quarter, and several analysts focused on the issue right away following the bank's third-quarter earnings release Wednesday.

Still, the shares rallied 2.25% on the day, and many news reports chose to highlight declining costs vs. last year as opposed to the rise in costs vs. the previous quarter.

While $350 million is, of course, chump change when you earn $2.5 billion in a quarter, as Bank of America just did, one could interpret the rise in legal expenses as an indication of trouble on the horizon.

Bank of America has still set aside just the minimum $8.5 billion to cover a critical and controversial proposed settlement with a large group of mortgage backed securities investors. Opponents to the deal include, most notably, AIG (AIG). The settlement has been the subject of 31 days of court hearings so far. CLSA analyst Mike Mayo has argued the bank should set aside another $16 billion to $22 billion in case the settlement is not approved. FBR Capital Markets analyst Paul Miller has also expressed skepticism the $8.5 deal may unravel.

But the market was in a bullish mood Wednesday anticipating Congress' agreement to raise the federal borrowing limit. And even over the past few weeks, a rise in legal costs at JPMorgan Chase (JPM) that looks to be outpacing both analyst and press expectations has nonetheless been met with a yawn by investors.

It is tempting to argue the bear case is already priced in. More likely, though, investors are merely in a forgiving mood. Bank of America investors will just have to hope it lasts until the final word on the Bank of America settlement is handed down.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.35 -2.80%
AAPL $95.19 1.70%
FB $117.44 -0.95%
GOOG $692.33 -0.84%
TSLA $232.12 -4.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.76 -17.67 -0.85%
NASDAQ 4,764.5850 -53.0090 -1.10%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs