Tomahawk, WI 11/12/2013 (BasicsMedia) – Bank Of America Corp (NYSE:BAC) was not expected to take Fed’s $864 million fine application lying down. The troubled bank has asked the court to reject the petition. For a bank that is already facing a backlog of lawsuits and with billions of dollars already burned in settlements, caving in easily to such cash draining fine was out of question.

The major banks in the U.S. from JPMorgan to Wells to BAC have had quite some issues with the industry regulatory agencies and investors, largely over their involvement with bad mortgages at the height of the financial crisis. So while BAC is not alone as far as the lawsuits go, the bank is losing a lot. First, the bank’s image, the price-less asset, is at stake. Even as it tries to salvage whatever remains of its good reputation, a lot of legal onslaught keep on coming its way and they paint it in bad light.

Reputation factor

That the bank deliberately misled fed-back mortgage investors Fannie Mae and Freddie Mac into buying bad loans does not auger well for its reputation. Also, claims that the bank caused investors millions of dollar in losses due to its insincerity also hurts its social standing.

It is too late for the financial institution to regret its $4 billion acquisition of the mortgage giant Countrywide which is the author of its present legal challenges. Taking over Countrywide at the time of the housing boon in 2008 seemed a lucrative deal. Obviously the institution was acting in the best interest of its shareholders by acquiring a mortgage business that was promising as a money making machine. Unfortunately that was not to be as the bank is now paying more than it may have made through the acquisition.

As part of the settlement, the bank in 2010 agreed to pay $600 million to settle lawsuit of class-action following its failure to disclose the financial risk in its mortgages. The bank has paid other billions of dollar in similar settlements. Unfortunately the more it tries to get over these troubles, the more they seem to come its way, raiding its cash reserve and almost sending it to losses.

Financial loss

Apart from reputation issue, the bank is also facing huge financial losses in the lawsuits. It has lately had to increase its cash reserve to meet the growing settlements. This means that the bank’s net income will be getting trimmed in the coming quarters if these cases persist.

In order to stay clear from the legal troubles, some investors have considered having management change at the bank. The bank needs to increase its revenue and reduce its spending so that it can limit cash loss to ensure that its bottom-line improves. Cost-cutting will help the bank save on financial losses and also improve return on investment. Up to now, even in the eye of these legal storms, the bank deserves credit considering that it has maintained its revenue and customer growth. This means that as soon as it gets free from the legal troubles it’s currently facing, it will be able to soar beyond estimates.

Currently the bank’s stock trades around $14.40 a share and it has a market cap of $153.84 billion.

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