Bank of America has a lot of haters out there, but Rochdale Securities analyst Dick Bove isn’t one of them.  The bank analyst jumped to the defense of the nation’s second largest bank by assets after the Wall Street Journal’s Dan Fitzpatrick wrote that BofA is facing fresh scrutiny from regulators.  The Journal piece says U.S. regulators have told BofA’s board that the bank could face public enforcement action if it doesn’t improve its strength. That’s not what BofA shareholders want to hear right now considering CEO Brian Moynihan has been promising that the bank is on the right path in terms of shedding unnecessary assets and raising capital through normal earnings power.  But according to Fitzpatrick’s scoop a memorandum of understanding that BofA has been operating under since May 2009 is far from being repealed:  The nation’s second-largest lender has been operating under a memorandum of understanding since May 2009, following repeated tussles with regulators over the purchase of securities firm Merrill Lynch & Co. and a downgrade of the company’s confidential supervisory rating. The memorandum, which isn’t public, identified governance, risk and liquidity management as problems that had to be fixed, according to people familiar with the document.  In recent months, regulators met with Bank of America‘s board and said they wanted to see more progress on the bank’s compliance with the memorandum. Otherwise the informal order could turn into a formal and public action, which would likely mean intensified scrutiny and greater restrictions as Chief Executive Brian Moynihan tries to shed problems tied to the financial crisis.  Bank of America’s directors were taken aback, said people familiar with the situation. It “put the board on the ground,” one of these people said.  Outspoken bank analyst Bove is calling bull on the WSJ piece. In a note this morning Bove likens the story to something out of Rupert Murdoch‘s troubled tabloid News of the World. He goes as far as to say that the Journal is deliberately misleading investors.  This article may have deliberately attempted to create a false impression that banking regulators (unstated as to who in the article) had recently contacted the bank (it was not stated as to when the event had occurred other than months ago) with complaints concerning the bank’s moves to improve its financial condition.  Calls and emails to Bank of America have yet to be responded to, and and WSJ declined to comment.  Bove’s rosy outlook on banks, particularly BofA, are not new. He’s famously bullish on banks saying the Fed and other regulators are part of the reason for banks’ recent woes.  Last week he said that the troubles in Europe are actually an opportunity for investors to buy banks. “If we look at what’s happening now in the world today for banks, everything is moving in a positive direction. I think you should be buying these stocks hand over fist. But I believed that when they were substantially higher than they are right now,” he said about falling bank shares.  The Financial Select Sector SPDR ETF is down nearly 25% on the year closing down 1% today. BofA peers like JPMorgan Chase and Citigroup are down 30% and 48% respectively. JPM, most recently named the largest bank by assets, closed down 1.67% while Citi was down just over 2% to close at $24.46. Wells Fargo closed down 1% at $23.93.  As for BofA, Bove notes that the bank has made positive progress from the dark days of 2009 noting that from the first quarter of 2009 to the third quarter of 2011, the bank has shed slightly over $100 billion in assets. He also notes that the bank’s common equity in the same period rose by just under $45 billion and tangible common equity is up by 99.8%. The Tier 1 Common Ratio has advanced from 4.49% to 8.65% and is now estimated to be over 9.00% under Basel 1, he notes.  “The regulators can only be very pleased by what is happening at this institution,” Bove declares.  Unfortunately the same can’t be said for shareholders. BofA shares lead the decline among financials today closing down 2.19% at $5.37. That’s following yesterday’s 5% plunge that sent its shares under the $5.50 mark for the first time since March 2009.  Says Mark Williams, a former Federal Reserve Bank examiner who teaches finance at the Boston University School of Management,“Bank of America is in serious trouble. At a stock price of about $5 and falling, the nation’s second largest bank is teetering close to bankruptcy. Global turmoil, a second U.S. recession and a further decline in housing prices and rising defaults would be the final nail in BofA’s coffin.”
Are things that bad at BofA? Dick Bove doesn't think so. He says the Wall Street Journal is misleading the bank's investors.