Should One Invest In Bank of America?

Yes and no. The banking industry was hit very hard in 2008 and has been improving itself since then. The sub-prime crisis left banks with so many mortgages and unpaid debts that many banks went under. Many surviving banks were saddled with unpaid mortgages which are still weighing them down.

This is what happened to Bank Of America Corp in 2008. The Bank of America’s was also criticized for purchasing Merrill Lynch which also put it further into debt. Since then the banking industry in general and Bank of America in specific has made changes to improve financial responsibility and profitability. The purchase of Merrill Lynch caused such criticism that the then CEO, Kenneth D. Lewis was forced to step down and Brian T. Moynihan replaced him as CEO. Ironically, when the first quarter results of 2010 came in, Brian Moynihan gave much of the credit to profits to the Merrill Lynch division. Since becoming CEO, Moynihan has sold over 20 non-core business segments in order to focus on the core profit-making activities.

Aside from the real estate sector, the bank made a 3.7 billion dollar profit for the second quarter. This was wiped out by a real estate court settlement, but shows that the company will be fundamentally strong when it clears up its problems from the sub-prime disaster, including a major suit by AIG. Should one invest in Bank of America? Yes, but not now. Give it time to heal from its sub-prime problems and then buy. My estimate is to buy in 2014.

About James Cannon

James Cannon is an experienced hedge fund analyst. He has served on the advisory boards for various different Fortune 500 companies as well as serving as an adjunct professor of finance. James Cannon has written for a variety of Financial Magazines both on and off line. Contact James at james[at]