Arab Today, arab today bank of america to pay 243 bn
Last Updated : GMT 04:27:18
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Bank of America to pay $2.43 bn

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Arab Today, arab today Bank of America to pay $2.43 bn

New York - AFP

Bank of America, struggling to recover from the 2008 financial crisis, said Friday it has agreed to pay $2.43 billion to settle a class-action lawsuit tied to its Merrill Lynch takeover. The bank said the payment would be to settle the lawsuit that was filed 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.\" The nation\'s second-biggest bank by assets was accused of hiding huge losses at Merrill Lynch in late 2008 to avoid potential shareholder disapproval of its takeover bid. The bank denied the investors\' claims that it had misled them about the financial health of Bank of America and Merrill Lynch, saying it was opting for a settlement \"to eliminate the uncertainties, burden and expense of further protracted litigation.\" The settlement agreement also provides for some governance improvements, including conducting an annual \"say-on-pay\" vote by shareholders. The settlement depends on court approval. Bank of America chief executive Brian Moynihan said the settlement was in the best interests of the bank\'s shareholders. \"As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients,\" he said in the statement. The bank plans to pay for it in part from its litigation reserves and will take a one-time charge of $1.6 billion in the third quarter. That adds to a third-quarter $1.9 billion charge for the bank\'s market value adjustment and an $800 charge related to a British tax. In total, the bank will have $4.3 billion in special charges in the July-September period, or 28 cents per share. Shares in the Dow member were down 1.1 percent at $8.87 in afternoon trade in New York. Analysts revised lower their third-quarter forecasts for the Charlotte, North Carolina-based bank to an average loss of 14 cents per share. \"The settlement is higher than expected,\" Dick Bove, a banking analyst at Rochdale Securities, told AFP. \"That\'s obviously not good but I\'m not sure anyone cares\" because the charges do not reflect the bank\'s operating performance, he said. Eric Oja, an analyst at ratings firm Standard & Poor\'s, was less optimistic. \"It\'s just one of many, many things facing Bank of America,\" he said, noting it faces huge costs in buying back mortgage loans or mortgage-backed securities. \"I think that there\'s a lot more to go,\" he said. Bove downplayed the legal issues surrounding the Merrill Lynch acquisition and other issues related to the crisis, such as the soured home mortgage loans sold by its unit Countrywide or lawsuits linked to abusive home foreclosures. \"It will weigh on the earnings of the bank for the next five to seven years,\" he said. Bove compared Bank of America with tobacco asbestos companies that have high litigation costs that could continue \"for decades\" but pointed out that did not stop them from making money. For the full year, Bank of America, which has been slashing costs and intends to cut 30,000 jobs by 2014, is expected to show a profit. The consensus estimate is it will earn 27 cents a share. \"The bank isn\'t dealing with a tremendous need of cash and capital,\" Bove said, adding that US banks are making huge profits. The US banking sector is expected to produce $142 billion in profits for 2012, near its all-time record of $148 billion in 2006, he added.

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