Whether or not it’s too early to celebrate, of course, remains to be seen. Pushed by Bloomberg’s Erik Shatzker to compare the bank’s progress on the legal front to the innings of a baseball game, Moynihan replied: “I never like analogies like that because you never know if it goes into extra innings.” By this, he’s likely referring to three separate but ongoing legal battles.
The first concerns a series of particularly contentious lawsuits brought by bond insurers like MBIA Inc. (NYSE:MBI) which are hurtling toward trial in a New York state court. The second involves a judicial proceeding in the very same court over the legitimacy of an $8.5 billion settlement between B of A, the The Bank of New York Mellon Corporation (NYSE:BK), and 22 institutional investors, including bond giants BlackRock, Inc. (NYSE:BLK) and Pimco. And the third revolves around a constellation of securities fraud actions asserted by parties like American International Group, Inc. (NYSE:AIG) against B of A in a federal court in California. As I’ve noted before, the manner in which these battles play out will dictate not only when B of A fully emerges from the proverbial fog of war, but even if it completely emerges at all.
The Foolish bottom line
Over the past few months, I’ve joined a growing number of other bank analysts that have turned bullish on B of A. In the middle of last year, my colleague Anand Chokkavelu predicted that its shares could “double or triple over the next five years” — something that they since went on to do. This past December, Meredith Whitney said she had “not seen an opportunity like [B of A] in four or five years.” And at the end of last month, Tom Brown, the founder and head of hedge fund Second Curve Capital, predicted that B of A’s stock will “reach the low $20s over the next 18-24 months.”
After completing an extensive review of B of A’s outstanding legal liability, I remain committed to this position. At the same time, it’s also underscored the heightened degree of risk in its stock. Make no mistake about it, while there’s significant upside potential here, it will still be years before both the stock and its dividend fully and finally recover. But for those with the stomach and patience to ride out the storm, I believe you’ll be justly rewarded.
The article When Will Bank of America’s Legal Nightmare End? originally appeared on Fool.com and is written by John Maxfield.
John Maxfield owns shares of Bank of America. The Motley Fool recommends American International Group (NYSE:AIG), BlackRock, and Wells Fargo. The Motley Fool owns shares of American International Group, Bank of America, and Wells Fargo and has the following options: Long Jan 2014 $25 Calls on American International Group.
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