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Here’s a look at some of the leading stories from the financial sector (NYSE:XLF) -1.08% this morning:
Bank of America (NYSE:BAC) continues to be the American lender hit hardest by litigation emerging from its activities in sales of mortgage-backed securities. Bloomberg reports that the company has already recorded losses exceeding $30 billion in legal settlements and write-downs of mortgage related assets, with that number expected to increase when the bank reports its second quarter earnings tomorrow. “[BofA] has told investors to brace for a loss of as much as $9.1 billion.” The continued losses may stunt CEO Brian T. Moynihan’s ability to deliver on his promise of raising dividends, and the bank’s ability to raise capital, as it rushes to boost its reserve requirements in accordance with new Basel III standards.
Analysts say the leading US lender is roughly $50 billion short of cash it needs to meet an additional 2.5% capital reserve ratio, a mark it has until 2013 to achieve. BofA’s CEO has assured investors that the bank will not have to issue any more common stock to raise cash, though it may sell bonds. According to Chris Kotowski, Analyst with Oppenheimer & Co., the bank may be about three years behind its rivals JP Morgan (NYSE:JPM), Wells Fargo (NYSE:WFC), and others and could take until 2016 to reach the full 9.5% capital reserve goal outlined by the Basel standards for a SIFI, or systematically important financial institution, which are subject to the strictest set of the new regulations.
In other news, The Financial Times reports that Richard Branson’s ‘Virgin Money’ banks are among the leading bidders in a competition to scoop up a portfolio of some 632 branches on the selling block from U.K.-based Lloyd’s Group (NYSE:LYG). The company is looking for compensation in the sum of 2-3 billion euros. Lloyd’s has struggled to perform since it received large bailout sums from the British government, which currently holds a 41% stake in the bank, in 2008. Shares have tumbled 34.55% in 2011.
Lastly, a large-scale mortgage settlement between major U.S. banks and federal and state attorney generals is still “weeks away” according to a column in the New York Post. “Key sticking points include the amount each bank will have shell out and whether the firms will be released from future lawsuits once a broad accord is struck, sources said. Banks could be hit with as much as $25 billion in fines.” The banks reportedly involved in the settlement are JP Morgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), Bank of America (NYSE:BAC), and Ally Financial.
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