Wednesday, October 24, 2012

Morgan Stanley Earnings Review: Downward Spiral


Morgan Stanley reported QE September 2012 financial results on October 18

Morgan Stanley reported a $956 million net loss resulting in a loss per share of $0.55. The operating loss was a quarter-busting $1.48 billion. This is the 3rd loss per share in the past 4 quarters, 4th in the past 6 quarters, and 5th in the past 9. This sums up overall financial performance or lack thereof. Financial position is weak and capital is marginal. Risk management is ineffective.

Morgan Stanley does this to themselves and to their clients. CEO James Gorman noted 3 quarters ago that MS continues "addressing a number of outstanding strategic and legacy issues." I guess that's one way to say it. Another way to say it is: we lie, cheat, and steal. The general public is not as familiar with Morgan Stanley as they are Goldman Sachs, JPMorgan, Bank of America, Citigroup, et al. in the Wall Street Banksters syndicate. They are just as criminally inclined if not more so.

At QE 9-30-12, I have rated Morgan Stanley an "E-" on a scale of A+ to G-. This is a downgrade from "E+" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







James P. Gorman, Chairman and Chief Executive Officer, said, “Our third quarter results show a balanced, strategically focused franchise that has attained stronger revenues and executed on key goals. The rebound in Fixed Income & Commodities sales and trading indicates that clients have re-engaged after the uncertainty of the rating review in the previous quarter. We are beginning to unlock the full potential of the Global Wealth Management franchise, having increased our ownership of, and agreed on a purchase price for the rest of, Morgan Stanley Wealth Management. I am confident in our potential to enhance profitability and increase value for our shareholders in the quarters ahead.”

$MS $XLF

Bank of America Earnings Review: Ongoing Volatility


Bank of America reported QE September 2012 financial results on October 17

Bank of America, the World's Most Unstable Bank, is inexplicable at this point in their corporate life cycle. I continue to have the vague, hopeful feeling that BAC has moved on from the very worst of their troubles. However, doom is most likely alive and well in the background and may be in the form of junk mortgage repurchases and retribution for various morally reprehensible deeds performed. For now, a sigh of relief is in order as we wait and see what financial catastrophe the next quarter might bring.

CEO Brian Moynihan continues cleaning up the carnage from the biggest debacle in American banking history. Moynihan announced last quarter Project New BAC: a multi-year, multi-billion dollar cost cutting plan which will include a workforce reduction of tens of thousands. The past "banking" model was broken (actually it shattered and collapsed into rubble).

The foremost problem is contingent liabilities, ongoing legacy losses, that surface and the lawsuits and government regulatory actions that result. After reserving billions of dollars, the worst of the incredible and extraordinary losses appear accounted for. Only time and fate will tell.

Therefore financial performance is and will be volatile. Risk management consists of all hands on deck searching the skies for incoming realized losses and hoping they are adequately reserved for. Financial position has stabilized and capital is actually strong.

At QE 9-30-12, I have rated Bank of America a "B-" on a scale of A+ to G-. This is a downgrade from "B" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







"We are doing more business with our customers and clients: Deposits are up; mortgage originations are up; we surpassed 11 million in mobile customers; small business lending is up 27 percent year over year; loans to our commercial clients rose for the seventh consecutive quarter; and our corporate clients made us the second-ranked global investment banking firm," said Brian Moynihan, chief executive officer. "Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues."

"Our focus on strengthening the balance sheet continued this quarter," said Chief Financial Officer Bruce Thompson. "We ended the quarter with record Tier 1 common capital ratio of 11.41 percent and an estimated Basel 3 Tier 1 common capital ratio of 8.97 percent, up from 7.95 percent as of the second quarter of 20121. With these gains, we have turned our attention to driving core earnings."

$BAC $XLF

Tuesday, October 23, 2012

Goldman Sachs Earnings Review: Moderate Rebound by Banksters


Goldman Sachs reported QE September 2012 financial results on October 16

Goldman Sachs, The World's Most Hated Bankers, led by CEO Lloyd Blankfein, the World's Most Corrupt Banker, reversed the financial performance downtrend with a moderate rebound. Financial position has been stable, but capital continues questionable. The 7 Deadly Sins have superseded risk management. We await what hell this Epitome of Evil will contrive next for America, currently they are busy focusing on scamming Europeans.

At QE 9-30-12, I have rated Goldman Sachs an "F-" on a scale of A+ to G-. This is an upgrade from "G+" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







“This quarter’s performance was generally solid in the context of a still challenging economic environment,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “We continue to be disciplined in managing our operations and capital, while effectively serving our clients’ needs. The focus on these priorities will serve our shareholders and the firm well over the longer term.”

$GS $XLF

Citigroup Earnings Review: Masquerading as Financial Institution


Citigroup reported QE September 2012 financial results on October 15

CEO Vikram Pandit continues his incredible legacy of proving he is neither an investment banker nor a traditional banker, yet is steward of almost $2 trillion in assets. Never has so much been so mismanaged, with the exception of Bank of America. Financial position is stable but financial performance is downtrending. Capital is adequate. Risk management has been trumped by incompetence. Citigroup is in the Trillion Dollar Assets Club with JPMorgan, Bank of America, and Wells Fargo.

Another colossal error in judgement resulted in a $2.9 billion after-tax loss. That would be the partial sale and impairment of the Morgan Stanley Smith Barney (MSSB) joint venture, which wiped out the quarterly financial results. Only a kindred, i.e. depraved, soul would have entered into a partnership with that den of iniquity.

At QE 9-30-12, I have rated Citigroup an "E+" on a scale of A+ to G-. This is a downgrade from "D-" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







Vikram Pandit, Citi’s Chief Executive Officer, said: "Our core businesses showed momentum during the quarter as we increased lending and generated higher operating revenues. These earnings highlight the strength of Citicorp and its diversification by product and region. For the third straight quarter, we had positive operating leverage in each of our three core businesses. Citigroup in total also had positive operating leverage as Citi Holdings had a smaller impact on our overall results."

"Last month’s price agreement on MSSB has given us more certainty on our exit from that business and added to the reduction of Citi Holdings, which is now only 9% of our balance sheet. We generated additional capital during the quarter, and our Tier 1 Common Ratio was estimated at 8.6% on a Basel III basis at the end of the period. We are managing risk very carefully given global economic conditions so we can continue to grow our businesses safely and soundly,” concluded Mr. Pandit.

$C $XLF

Saturday, October 20, 2012

Wells Fargo Earnings Review: Another Record Performance!


Wells Fargo reported QE September 2012 financial results on October 12

Wells Fargo reported yet another superb quarter. CEO John Stumpf has continued to improve both financial performance and position. Capital is strong. Risk management appears excellent. Earnings per share of $0.88 is yet another all-time high.

Wells Fargo is easily the preeminent USA bank with assets greater than $1 trillion and the largest traditional American bank. The other banks in the Trillion Dollar Assets Club are JPMorgan, Bank of America, and Citigroup.

At QE 9-30-12, I have rated Wells Fargo an "A-" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







“Through the efforts of our more than 265,000 team members, we've now achieved six consecutive quarters of record net income and EPS,” said Chairman and CEO John Stumpf. “By focusing on earning all of our customers' business and providing outstanding service, we continued to generate growth across our diversified set of businesses. In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses. We remained diligent in managing costs and continued to have strong underlying credit performance as our loss mitigation efforts and the low interest rate environment helped improve affordability for our customers.”

$WFC $XLF

JPMorgan Earnings Review: Solid Quarter!


JPMorgan reported QE September 2012 financial results on October 12

CEO Jamie Dimon and accomplices reported a solid quarter with an impressive earnings per share of $1.40, a post-financial crisis high. Both financial performance and position improved. Capital is adequate. Risk management is always the great uncertainty at the largest of the Wall Street Banksters.

At QE 9-30-12, I have rated JPMorgan a "D" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







Jamie Dimon, Chairman and Chief Executive Officer, commented on financial results: "The Firm reported strong performance across all our businesses in the third quarter of 2012. Revenue for the quarter was $25.9 billion, up 6% compared with the prior year, or 16% before the impact of DVA. These results reflected continued momentum in all our businesses."

Dimon continued: "The Investment Bank reported favorable Fixed Income Markets results and maintained its #1 ranking for Global Investment Banking fees. Consumer & Business Banking average deposits were up 9% and Business Banking loan balances grew for the eighth consecutive quarter to a record $19 billion, up 8% compared with the prior year. Mortgage Banking originations were $47 billion, up 29% compared with the prior year. Credit Card sales volume1 was up 11% compared with the prior year. Commercial Banking reported record revenue and grew loan balances for the ninth consecutive quarter to a record $124 billion, up 15% compared with the prior year. Treasury & Securities Services assets under custody rose to a record $18.2 trillion, up 12% compared with the prior year. Asset Management reported positive net long-term product flows for the fourteenth consecutive quarter and record loan balances of $75 billion."

Dimon commented: "Importantly, we believe the housing market has turned the corner. In our Mortgage Banking business, we were encouraged that credit trends continued to modestly improve, and, as a result, the Firm reduced the related loan loss reserves by $900 million. Despite this improvement, the absolute level of charge-offs remains elevated. We also expect to see high default-related expense for a while longer. We are acting responsibly to help homeowners and prevent foreclosures, offering nearly 1.4 million mortgage modifications and completing 578,000 since 2009. Credit trends in our credit card portfolio continued to improve, and the wholesale credit environment remained stable."

$JPM $XLF

Monday, October 8, 2012

American Express & Walmart Launch Bluebird: Alternative to Debit & Checking Accounts

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American Express and Walmart Launch Bluebird®: a New Alternative to Debit and Checking Accounts

Bluebird addresses the need for an affordable, transparent way to manage everyday finances, with premium features, no minimum balance, monthly, or overdraft fees

BENTONVILLE, Ark.--(BUSINESS WIRE)--Oct. 8, 2012-- Walmart and American Express today announced the launch of Bluebird, an alternative to debit and checking accounts designed to help consumers better manage and control their everyday finances. Bluebird has been developed for the tens of millions of Americans who are looking for advanced capabilities such as deposits by smartphone and mobile bill pay, fee transparency, and no minimum balance, monthly, annual or overdraft fees. Bluebird puts the power back in the hands of consumers and will be available next week online at www.bluebird.com and in more than 4,000 Walmart stores.

Building on a pilot program launched in late 2011, Bluebird was shaped by feedback from consumers who said they were not getting the value they expect from traditional checking account and debit services because of increasingly higher fees. According to an independent study by Bretton Woods 1, consumers now pay an average of $259 per year for a basic checking account and that cost is rising due to higher minimum balance requirements and a growing list of fees being added to these services.

"Our customers tell us that they're tired of navigating a complex maze of dos and don'ts to avoid the ever growing list of fees found on checking products. Bluebird solves this problem and we believe it's the best product on the market to help customers affordably manage their everyday finances," said Daniel Eckert, vice president of financial services for Walmart U.S. "At Walmart, we are always looking for ways to make a difference by using the strengths that come with our size, scale and reach to take on the challenges that matter most to our customers. Reducing the costs and frustration that come with high fees is one of these issues."

"The financial services landscape is changing. Technological advances, regulatory changes, and evolving consumer needs are redefining payments ranging from prepaid, to checking and debit. Bluebird is our solution to help consumers who currently may be poorly served by traditional banking products. It allows them to easily and safely move, manage, and spend their money. In an era where it is increasingly "expensive to be poor," we have worked with Walmart to create a financial services product that rights many of the wrongs that plague the market today," said Dan Schulman, group president, Enterprise Growth, American Express.

Read more

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Thursday, October 4, 2012

USA Small Business Outlook Retreats As Election Looms

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U.S. Small Business Outlook Retreats As Election Looms

PNC Survey Findings Show Decline in Hiring, Expectations; Majority Say They Are Not 'Better Off'

PITTSBURGH, Oct. 4, 2012 /PRNewswire/ -- A soft outlook on sales has only one in four small business owners planning to hire in the next six months as business optimism retreats ahead of next month's presidential election, according to the latest findings of the PNC Economic Outlook.

The fall findings of PNC's biannual survey, which began in 2003, show a decline in owners' expectations for sales and profits as the lackluster economic recovery struggles to gain steam. Business owners have less optimism about their local economies and are significantly more negative on the national level compared to last spring. Despite this dip in sentiment, owners remain more upbeat than this time last year, when optimism hit near-historic lows.

"The pace of the U.S. economic and jobs recovery remains disappointing," said Stuart Hoffman, chief economist at PNC. "Despite significant headwinds like the deepening recession in Europe and impending 'fiscal cliff,' the hiring plans and business outlook reflected in this survey are just enough to keep the modest recovery persistent into 2013."

Are You Better Off?
One out of two (48 percent) owners say they are currently "worse off" compared to 2007, when the recession officially began, while only 26 percent claim they are "better off." When asked how they have adapted to survive in the new economic environment, more than two-fifths (42 percent) said they seek greater productivity or efficiency from their employees, and one-third (33 percent) have reduced or consolidated their operations since 2007.

Highlights: Sales, Profits and Hiring Take a Hit
 The survey, which gauges the mood and sentiment of small and medium sized business owners, found that only 46 percent expect their sales to increase in the next six months, significantly lower than last spring (58 percent). Profits are also expected to be lower, as only 38 percent expect an increase compared to 43 percent in the spring. Only 23 percent expect to add new employees, lower than in spring (28 percent) but still higher than a year ago (20%).

Other findings about the next six months include:

* Optimism is Fading: Six in 10 (57 percent) are now pessimistic about the national economy over the next six months, up from just 43 percent in the spring. Seven out of 10 (69 percent) are pessimistic about the global economy over the same period.

* Capital Spending Declines: Only 58 percent plan to spend on capital investments in the next six months, down significantly from 70 percent last spring. Spending on technology equipment remains the top priority.

* Loan Demand Flattens: Less than one-fifth (19 percent) will probably or definitely take out a new loan or line of credit in the next six months, compared to 23 percent last spring. Nearly one in three (30 percent) have no current need for credit, a major increase from 13 percent last spring.

* House Prices Rebounding: In a dramatic turnaround from the past five years, two-fifths (37 percent) expect home prices in their local market to rise in the coming year, while only 13 percent expect them to drop. A year ago those numbers were almost exactly reversed (14 percent expected a rise, 32 percent expected a drop).

* Healthcare Hurts Hiring...: More than two-fifths (42 percent) believe the Supreme Court ruling to uphold the Affordable Care Act will negatively affect their hiring plans in the coming year.

* ... But More Federal Action Could Help: Nearly two-thirds (63 percent) think Federal action following the election will positively influence their hiring plans, with reduced regulations the top choice and reduced government spending a close second.”

The PNC Financial Services Group, Inc. (www.pnc.com) is one of the nation's largest diversified financial services organizations providing retail and business banking; residential mortgage banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. Follow @PNCNews on Twitter for breaking news and announcements from PNC.

Methodology
The PNC Economic Outlook survey was conducted between July 23 to September 10, 2012, by telephone within the United States among 1,697 owners or senior decision-makers of small and mid-sized businesses with annual revenues of $100,000 to $250 million. The results given in this release are based on interviews with 506 businesses nationally, while the remaining interviews were conducted among businesses within the states of Florida, Georgia, Illinois, Indiana, Michigan, New Jersey, North Carolina, Ohio and Pennsylvania. Sampling error for the national results is +/- 4.3 percent at the 95 percent confidence level. The survey was conducted by Artemis Strategy Group (www.ArtemisSG.com), a communications strategy research firm specializing in brand positioning and policy issues. The firm, headquartered in Washington D.C., provides communications research and consulting to a range of public and private sector clients.

U.S. Small Business Outlook Retreats As Election Looms

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NCUA Sues Credit Suisse over Faulty Securities

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NCUA Sues Credit Suisse over Faulty Securities

Legal Action is the Agency’s Eighth against Wall Street Investment Firms

NCUA has previously filed similar actions against J.P. Morgan Securities, LLC, RBS Securities, Goldman Sachs, Wachovia, UBS Securities, and Barclay’s. NCUA has already settled claims worth more than $170 million with Citigroup, Deutsche Bank Securities and HSBC, making it the first federal regulatory agency for depository institutions to recover losses from investments in faulty securities on behalf of failed financial institutions.

Recoveries from these eight additional legal actions will further reduce the total losses resulting from the failure of the five corporate credit unions. Losses from those failures must be paid from the Temporary Corporate Credit Union Stabilization Fund. Expenditures from this fund must be repaid through assessments against all federally insured credit unions, so any recoveries would help reduce future assessments on credit unions.

(NCUA; September 25, 2012)

ALEXANDRIA, Va. (Oct. 4, 2012) – The National Credit Union Administration (NCUA) today filed suit in Federal District Court in Kansas against Credit Suisse Securities (USA).

NCUA’s suit alleges Credit Suisse, a subsidiary of the Swiss-based financial services firm, violated federal and state securities laws through misrepresentations in connection with the underwriting and subsequent sale of mortgage-backed securities to U.S. Central Federal Credit Union (US Central), Western Corporate Federal Credit Union (WesCorp) and Southwest Corporate Federal Credit Union (Southwest).

The price paid for the securities by the three corporates exceeded $715 million. All three corporate credit unions subsequently failed.

“Credit Suisse is one of several firms that sold faulty securities to corporate credit unions, which led to their collapse,” said NCUA Board Chairman Debbie Matz. “These Wall Street firms ran a bait and switch operation, and the effects were felt not only in credit unions, but throughout the financial industry. NCUA and credit unions have successfully worked together to restore stability to the credit union system. Now we are holding responsible parties, like Credit Suisse, accountable for their actions.”

NCUA’s complaint alleges Credit Suisse made numerous misrepresentations and omissions of material facts in the offering documents of the securities sold to the failed corporate credit unions. The complaint also alleges systemic disregard of the underwriting guidelines stated in the offering documents. These misrepresentations caused the credit unions to believe the risk of loss was minimal, when in fact the risk was substantial.

As liquidating agent for US Central, WesCorp and Southwest, NCUA has a statutory duty to seek recoveries from responsible parties in order to minimize the cost of any failure to its insurance funds and the credit union industry.

Corporate credit unions are wholesale credit unions that provide various services to retail credit unions, which in turn serve consumers, or “natural persons.” Retail credit unions rely on corporate credit unions to provide them such services as check clearing, electronic payments, and investments.

NCUA Sues Credit Suisse over Faulty Securities

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Wednesday, October 3, 2012

OCC: Mortgage Performance Deteriorates from Prior Quarter, Improves from Year Ago

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OCC News Release: Mortgage Performance Improved from a Year Ago, OCC Report Says

(OCC; September 27, 2012)

WASHINGTON — The overall quality of first-lien mortgages serviced by large national and federal savings banks improved from the same period a year ago but showed seasonal decline from the prior quarter, according to a report released today by the Office of the Comptroller of the Currency (OCC).

The OCC Mortgage Metrics Report for the Second Quarter of 2012 showed the percentage of mortgages that were current and performing at the end of the quarter was 88.7 percent, compared with 88.9 percent the prior quarter and 88.1 percent a year earlier. The percentage of mortgages that were 30 to 59 days past due was 2.8 percent, up 12.1 percent from the prior quarter but down 7.5 percent from a year ago. Seriously delinquent mortgages—60 or more days past due or held by bankrupt borrowers whose payments are 30 or more days past due—fell to their lowest level in three years. The percentage of mortgages that were seriously delinquent was 4.4 percent, down 0.8 percent from the prior quarter and 9.2 percent from a year earlier.

Several factors contribute to the year-over-year improvement, including strengthening economic conditions, servicing transfers, and the ongoing effects of both home retention loan modification programs as well as home forfeiture actions.

Servicers continued to emphasize alternatives to foreclosure during the quarter. Servicers implemented 416,036 new home retention actions during the quarter, while starting 302,636 new foreclosures. The number of home retention actions implemented by servicers increased 17.9 percent from the prior quarter but decreased 8.8 percent from a year earlier.

Other key findings included:

* On average, the modifications implemented in the second quarter of 2012 reduced borrowers’ monthly principal and interest payments by 24.6 percent, or $381. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 35.3 percent on average, or $576.

* Modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less. At the end of the second quarter of 2012, 55.4 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 34.3 percent of modifications made during that time that reduced payments by less than 10 percent.

* Since the beginning of 2008, servicers have modified 2,645,290 mortgages through the end of the first quarter of 2012. At the end of the second quarter of 2012, 48.6 percent of those modifications remained current or had been paid off. Another 7.6 percent were 30 to 59 days delinquent, and 14.9 percent were seriously delinquent. There were 10.5 percent in the process of foreclosure and 6.5 percent had completed the foreclosure process.

The report covers 30.5 million first-lien mortgages worth $5.2 trillion in outstanding balances, about 60 percent of all first-lien mortgages in the United States. The complete report can be downloaded from the OCC Web site, www.occ.gov.

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FDIC Penalizes American Express Centurion Bank for Deceptive Debt Collection Practices and Credit Card Marketing

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FDIC Announces Settlement With American Express Centurion Bank for Unfair and Deceptive Practices in Debt Collection and Credit Card Marketing

(FDIC; October 1, 2012)

The Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) have reached a settlement with American Express Centurion Bank (Bank), Salt Lake City, Utah, for deceptive debt collection and credit card marketing practices, in violation of section 5 of the Federal Trade Commission Act.

This action results from a FDIC and Utah Department of Financial Institutions examination, in which the Consumer Financial Protection Bureau (CFPB) joined last year. The CFPB, the Office of the Comptroller of the Currency (OCC), the Utah Department of Financial Institutions, and the Board of Governors of the Federal Reserve System took separate actions against various entities related to the Bank (collectively referred to as American Express). Under the settlements, American Express agreed to the issuance of Consent Orders, Orders for Restitution, and Orders to Pay (Orders) which result in total restitution from all entities of approximately $85 million to more than 250,000 affected consumers, and the imposition of civil money penalties totaling approximately $27 million.

The FDIC and the CFPB determined that the Bank violated federal law prohibiting unfair and deceptive practices by, among other things:
=>  Misrepresenting to consumers that if they entered into an agreement to settle old debt (that was no longer being reported to consumer reporting agencies), such settlement would be reported to consumer reporting agencies and thereby improve the consumers' credit scores. In fact, no such reporting occurred.
=>  Using settlement solicitations that implied that consumers who entered into settlement agreements to partially pay such debts would have the remaining balance of their debts forgiven, when in fact the balance remained a debt owed to American Express.
=>  Using solicitations that misrepresented the points and awards consumers would receive upon enrollment in one of American Express' credit card products.

In addition to restitution and CMP, the Consent Order requires the Bank to correct all violations, provide clearly written disclosures on debt collection statements, and stop using deceptive credit card solicitations. In addition, the Bank will improve its compliance management system and improve board oversight of affiliates and third-party service providers in order to adequately manage third-party risk.

In agreeing to the issuance of the Order, the Bank neither admits nor denies any liability



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Monday, October 1, 2012

Bank of America Reaches $2.43B Settlement Related to Merrill Lynch Acquisition

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Bank of America Reaches Settlement in Merrill Lynch Acquisition-Related Class Action Litigation

Total Third-Quarter 2012 Litigation Expense Estimated to Be Approximately $1.6 Billion Litigation Expense, Valuation Adjustments for Improvement in the Company’s Credit Spreads and U.K. Tax Charge Are Expected to Negatively Impact EPS by Approximately $0.28 in Third Quarter 2012

(Bank of America; September 28, 2012)

CHARLOTTE, N.C., Sep 28, 2012 (BUSINESS WIRE) --Bank of America today announced it, and certain of its current and former officers and directors, have agreed, subject to court approval, to settle a class action lawsuit brought in 2009 on behalf of investors who purchased or held Bank of America securities at the time the company announced plans to acquire Merrill Lynch.

Under terms of the proposed settlement, Bank of America would pay a total of $2.43 billion and institute certain corporate governance policies. Plaintiffs had alleged, among other claims, that Bank of America and certain of its officers made false or misleading statements about the financial health of Bank of America and Merrill Lynch. Bank of America denies the allegations and is entering into this settlement to eliminate the uncertainties, burden and expense of further protracted litigation.

“Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders,” said Chief Executive Officer Brian Moynihan. “As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients.”

The proposed settlement will be reviewed by Judge Kevin Castel in the United States District Court for the Southern District of New York, where the class action is pending. Further information concerning the details of the settlement are available from the court’s docket, In Re Bank of America Securities Derivative & Employment Retirement Income Sec. Act (ERISA) Litigation, 09 MDL 2058 (PKC) or from plaintiffs’ lead counsel, Bernstein Litowitz Berger & Grossmann LLP; Kaplan Fox & Kilsheimer LLP; and Barroway Topaz Kessler Meltzer & Check, LLP.

The amount to be paid under the proposed settlement will be covered by a combination of Bank of America’s existing litigation reserves and incremental litigation expense to be recorded in the third quarter of 2012. The company estimates total litigation expense will be approximately $1.6 billion for the three months ended September 30, 2012, which includes the incremental costs of the related settlement above previous accruals and other litigation-related items.

The settlement agreement also contemplates that Bank of America will institute and/or continue certain corporate governance enhancements until January 1, 2015, including those relating to majority voting in director elections, annual disclosure of noncompliance with stock ownership guidelines, policies for a board committee regarding future acquisitions, the independence of the board’s compensation committee and its compensation consultants, and conducting an annual “say-on-pay” vote by shareholders.

Litigation expense, improvements in the company’s credit spreads and the U.K. tax charge are expected to negatively impact reported third-quarter EPS by approximately $0.28

In addition to the litigation expense, the company expects that its third-quarter 2012 financial results will be adversely impacted by approximately $1.9 billion (pretax) in negative fair value option (FVO) adjustments and debit valuation adjustments (DVA) related to the improvement in the company’s credit spreads, and the previously reported charge of approximately $800 million to income tax expense for changes in the U.K. corporate tax rate and the related effect on the deferred tax asset valuation.

Bank of America is scheduled to report third-quarter 2012 financial results on October 17.

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Federal Reserve Penalizes American Express for Deceptive Debt Collection Practices

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Federal Reserve Board Issues Consent Order and Order of Assessment of a Civil Monetary Penalty

(FRB; October 1, 2012)

The Federal Reserve Board on Monday announced a formal enforcement action, including a $9 million civil money penalty, against American Express Company (Amex) and American Express Travel Related Services Company, Inc. (TRS) to address deceptive marketing and debt collection practices and associated deficiencies in compliance risk management and internal audit. Amex and TRS are both registered bank holding companies based in New York.

TRS provides debt collection and marketing services to its subsidiary banks, American Express Centurion Bank (AECB) and American Express Bank, FSB (AEFSB), and also services its own credit card portfolio. In providing those services, TRS allegedly led customers to believe that their defaulted debt would be "waived" or "forgiven" by acting on a settlement offer without also disclosing the effect that settling for less than the full debt would have on the customers' future credit opportunities. TRS also allegedly made deceptive representations in credit card solicitations concerning the benefits customers would receive by acting on the offer. The Federal Reserve also found that deficiencies in compliance risk management and internal audit, which are firm-wide functions at Amex, allegedly allowed these practices to occur.

The Board's action was taken in coordination with the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Utah Department of Financial Institutions. Each agency is announcing formal enforcement actions against entities in the American Express organization that they supervise, which include AECB and AEFSB. TRS's credit card customers affected by the allegedly deceptive practices will be compensated according to the CFPB's enforcement action against TRS.

In addition to the $9 million civil money penalty, the Board's enforcement action requires Amex and TRS to improve consumer compliance oversight and compliance risk-management and internal audit programs.

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OCC Penalizes American Express for Deceptive Debt Collection Practices

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OCC Assesses Civil Money Penalty Against American Express, Orders $6 Million in Restitution

(OCC; October 1, 2012)

WASHINGTON - The Office of the Comptroller of the Currency (OCC) today announced a $500,000 civil money penalty against American Express Bank, FSB, for violations of section 5 of the Federal Trade Commission Act and ordered the bank to provide approximately $6 million in restitution to an estimated 17,000 affected customers.

The OCC also ordered the bank to establish an effective vendor management program to oversee the provision of products to the bank’s customers.

The OCC based its penalty on the bank’s failure to properly manage vendors who engaged in deceptive debt collection practices in violation of the statute. The estimated $6 million in restitution will be paid to compensate consumers for the injury suffered as the result of these violations.

The OCC is taking these actions in coordination with separate actions by the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau (CFPB), and Federal Deposit Insurance Corporation against American Express companies under their jurisdictions. In addition to the penalty assessed by the OCC against American Express Bank, FSB, the CFPB is assessing a $1.2 million penalty which covers both violations of the Truth in Lending Act, for which the bureau has exclusive enforcement authority, and the deceptive debt collection practices addressed by the OCC penalty and order.

Restitution payments made by the bank pursuant to the OCC’s order will also satisfy identical payment obligations required by the CFPB. The civil money penalties assessed by the OCC are payable to the U.S. Treasury.

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