How Will Bank Of America (BAC) Stock React To Liability Finding In AIG (AIG) Lawsuit?

NEW YORK (TheStreet) -- The second U.S. Circuit Court of Appeals in New York announced on Monday that Bank of America (BAC) was not liable to shareholders for allegedly hiding a $10 billion fraud lawsuit filed by American International Group Inc. (AIG) in 2011, Reuters reported.

The court said it found no evidence that Bank of America officials, including CEO Brian Moynihan acted with intent to mislead shareholders by not reporting the lawsuit before it was filed.

On August 8, 2011 AIG sued Bank of America over an alleged $28 billion loss of mortgage-backed securities, which the insurance company bought from Bank of America and its Merrill Lynch units, Reuters said.

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In November 2013 U.S. District judge John Koeltl first ruled that Bank of America was not liable and Monday's decision by the appeals court upheld the November ruling.

Shares of Bank of America are up 0.62% to $14.60.

TheStreet Ratings team rates BANK OF AMERICA CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BANK OF AMERICA CORP (BAC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for BANK OF AMERICA CORP is currently very high, coming in at 84.82%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.08% is in-line with the industry average.
  • BANK OF AMERICA CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BANK OF AMERICA CORP increased its bottom line by earning $0.91 versus $0.25 in the prior year. This year, the market expects an improvement in earnings ($0.94 versus $0.91).
  • BAC, with its decline in revenue, slightly underperformed the industry average of 0.4%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF AMERICA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • You can view the full analysis from the report here: BAC Ratings Report
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