Wells Fargo & Co (WFC), Bank of America Corp (BAC): Still Feeling the Impact of a Deal Gone Wrong

It is still heavily exposed to the mortgage business. If the housing market shows an improvement and credit quality gets better, it might have some upside as it could recover some of the loan loss reserves ($42.6 billion).

The bottom line

Bank of America Corp (NYSE:BAC)’s performance will depend on how quickly it can deactivate the Countrywide Financial issue. The Fannie Mae deal, the cost cutting scheme and the sale of the MSRs will definitely impact the company as it could give an aggregate saving of $13 billion. Total deposits at $1.1 trillion could help the company get better earnings if interest rates do increase in the next years. And as it is properly capitalized this could lead to a better dividend and payout ratio. However, it is still exposed to the housing market recovery and the economic upturn.

Damian Illia has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup Inc , JPMorgan Chase & Co., and Wells Fargo.