Why Bank of America (BAC) Stock Is Down Today

NEW YORK (TheStreet) -- Bank of America  (BAC) fell Thursday as the bank and the U.S. government remain far apart on a deal to resolve the latter's investigation into the bank's mortgage securities sales.

The New York Times reports the two sides remained far apart on a settlement as of Wednesday night even after the bank increased its offer. The Justice Department demanded approximately $17 billion to settle the case prior to Wednesday's meeting to discuss the amount of the cash penalty. The department wanted $10 billion in cash and the rest in payments to aid struggling homeowners.

Bank of America had offered $13 billion, including $4 billion in cash, but increased that offer to $14 billion, including $7 billion in cash. The Justice Department could announce a lawsuit against the bank if the two sides do not reach an offer in the upcoming days.

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The stock was down 1.73% to $15.31 at 12:43 p.m.

Separately, 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 a few notable strengths, 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 attractive 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 86.47%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, BAC's net profit margin of 9.28% significantly trails the industry average.
  • BAC, with its decline in revenue, slightly underperformed the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. 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.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: BAC Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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