Bank of America sinks over mortgage liabilities

Still seeing red.

Shares of Bank of America (BofA) tumbled as investors fretted about the bank facing additional legal liabilities over mortgages. A report in the Wall Street Journal noted that U.S. federal and state officials are clashing with banks over how wide-ranging their legal settlements over mortgages should be. Banks including BofA and JPMorgan Chase & Co (JPM) are looking to be released from a wide array of potential litigation linked to mortgages in exchange for paying penalties of $20-$25 billion, the newspaper reported. Investors had hoped that banks could negotiate this settlement and be much closer to ending their legal problems from mortgages, but that may have been too optimistic, investors said.

Separately, BofA agreed to retain at least half its 10% holding in China Construction Bank (CCB), spurring new debate on the American firm’s capital plans. CCB President Zhang Jianguo told reporters Monday the two banks are in talks to extend their ongoing cooperation beyond 2012, adding that the U.S. lender will hold no less than 5% at any one time.

BofA and other big banks are under investor pressure to control expenses and bolster profits amid concerns over the bank's exposure to the slowing U.S. economy and a slew of mortgage-related losses and lawsuits. Investors worry that if BofA keeps some part of CCB, it will be more likely to need to raise capital down the line. Analysts note that BofA’s stake in CCB is worth nearly $20 billion, which would go a long way toward plugging whatever capital holes BofA has.

Bank of America (BAC: NYSE: US$6.42), Net Change: -0.55, % Change: -7.89%, Volume: 381,417,637

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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