( Phillips Hogan) Bank of America
) stock is up just over 5% in trading so far today after positive reports from both the US
government and the firm's Merrill Lynch
investment banking division.
Early this morning, reports surfaced that the US government has plans in place to limit the bank's exposure to bad sub-prime mortgages. Recently, Fannie Mae (FNMA) and Freddie Mac (FMCC) have been demanding that Bank of America and several other investment banks, most notably Citigroup (C) and Morgan Stanley (MS), buy back a number of the sub-prime mortgages and related instruments that helped contribute to the 2008 financial crisis. Bank of America announced in May that they would buy back approximately $330 million of the bad debt, but many investors believed that the bank's exposure to the loans could be much greater. It seems that the government's announcement this morning has helped to alleviate some of that pressure on Bank of America's stock price.
Bank of America has also announced ongoing negotiations with Julius Baer (BAER), Switzerland's largest private bank, to sell the non-US portions of its Merrill Lynch Wealth Management division. Bank of America has been selling off non-essential assets to build capital for several years now to help offset the costs of huge losses and lawsuits associated with the bank's purchase of sub-prime mortgage lender Countrywide Financial in 2008. This sale reportedly could generate in excess of $2 billion for Bank of America. About two-thirds of the Merrill Lynch assets for sale are located in Asia and Latin America, and adding clients in those areas would support Baer's emerging markets growth strategy. The deal would also increase Baer's assets under management by nearly 50% to about $280 billion.
The stock has is now back above most of its moving averages, but has found some short term resistance at its 100-day moving average around $8.20 today. Next zones of resistance if it can get through the 100-day are around $8.40 and then $9.00.
*DISCLOSURES: Author has no relevant positions. Scott Redler is long BAC.