NEW YORK (TheStreet) -- Bank of America's (BAC) pending $17 billion settlement to make its biggest remaining mortgage-related legal woes go away will let the bank's executives focus on the present and the future again. And not a moment too soon, because BofA has plenty of work to do.
Even if the settlement details are announced by early next week, as expected, investors will have to consider whether they really want to own shares in a bank that is still presiding over a shrinking base of loans -- in an economy the grew 4% in the second quarter -- and is still being held back by low interest rates.
The ideal way a bank makes money in an expanding economy is to make more loans and book wider spreads between the interest rates it pays for deposits and other funds and those it collects from borrowers and other clients. Fee income and trading income round out the picture.
But those core basics are still not going B of A's way -- instead, as rivals like Wells Fargo (WFC) begin to see loan growth, Bank of America saw its loan base shrink a little less than 1% in the second quarter. Net interest margin dropped 4 basis points to 2.22% at BofA, reflecting low rates that are hurting all banks.
However, Wells saw loans grow 4% and JPMorgan Chase (JPM) had much faster growth in commercial and construction lending, which are central to the cyclical case for banks now.