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Dow's biggest loser: B?of?A

NEW YORK — Bank of America was this year's worst performer in the Dow Jones Industrial Average, as concern about mounting mortgage losses and a global economic slowdown weighed on the second-biggest U.S. lender.

The 58 percent decline erased almost $80 billion of shareholder value at Charlotte, N.C., Bank of America. It's the firm's largest drop since a 66 percent plunge in 2008, when a U.S. bailout staved off a collapse.

"What you have is like a three-ring circus, and in all the rings for Bank of America, the show isn't any good," said Greg Donaldson, chairman of Donaldson Capital Management of Evansville, Ind. He cited new regulations, mounting costs of bad loans and a lack of confidence in management.

Chief executive officer Brian Moynihan, 52, told his staff in a year-end progress report last week that his effort to boost the company's value "is not yet translating into returns for our shareholders." Moynihan said he has prepared for turmoil ahead by selling assets, reducing mortgage and credit card loans and pledging to lower annual costs by $5 billion, including about 30,000 job cuts.

Larry DiRita, a Bank of America spokesman, declined to comment.

Some of Bank of America's biggest peers also made the list of laggards, with Citigroup, the third-biggest U.S. bank, dropping 43 percent. JPMorgan Chase, the largest lender, slid 21 percent.

Moynihan is trying to reverse a stock decline that began soon after he replaced Ken Lewis at the end of 2009, when the bank also repaid $45 billion of U.S. bailout funds. The company's shares, which reached $19.48 in April 2010, closed at $5.56 Friday as settlements with mortgage-bond investors and insurers failed to stanch losses tied to the 2008 takeover of subprime lender Countrywide Financial Corp.

The status of an $8.5 billion accord resolving some claims from mortgage-bond buyers including BlackRock and Pacific Investment Management is being contested by outside investors and may be tied up in courts through 2012. Meanwhile, U.S.-owned mortgage firm Fannie Mae has stepped up demands that Bank of America repurchase defective loans.

"They have this big exposure to subprime mortgages, to potentially settling with buyers of securitized subprime and buying back loans that were improperly" bundled into bonds, said Steven Persky, who oversees $1.4 billion in equities and distressed debt as CEO of Los Angeles-based Dalton Investments. "Bank of America is too big to fail, but I'm not sure I'd want to be an equity holder."

This month, Bank of America shares sold below $5 for the first time since March 2009 as concern over Europe's debt crisis grew.

Bank of America had about $363 billion of cash as of Sept. 30, enough to fund operations for two years without going to the markets. The company also has been reducing risk related to the weakest European nations, chief financial officer Bruce Thompson said in October.

"The market has given up on Moynihan, given up on their story," Donaldson said. "I may start buying Bank of America shares soon. It's priced as if it's going out of business, and it's not going out of business."

Coming Sunday

A look at the winners and losers among Tampa Bay area stocks plus the Times' annual year-end stocks report.

Dow's biggest loser: B?of?A 12/30/11 [Last modified: Friday, December 30, 2011 9:34pm]

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