From Dow's Worst in 2011 to One of 4Q's Best: How Did BOA Do It?

On December 30, 2011, Bloomberg reported that Bank of America was officially the worst-performing stock on the Dow Jones Industrial Average in 2011. With a 58% decline and $80 billion shareholder value loss over the course of the year, it’s not surprising that BOA also came in last in the S&P 500 for the year. “What you have is like a three-ring circus, and in all the rings for Bank of America, the show isn’t any good,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management LLC.

Fast-forward 21 days. After losing half of its value in 2011, BOA came back. At this point, the stock has gained 27% since the beginning of the year. On January 19, 2012, Bank of America announces their earnings for the fourth quarter of 2012: a remarkable $0.15 per share profit, or $1.99 billion total profit, compared to a $1.24 billion total loss in the same period last year (-$0.16 per share.)

CEO Brian Moynihan commented on the progress, “We enter 2012 stronger and more efficient after two years of simplifying and streamlining our company. We built our capital ratios to record levels during 2011 on the strength of our core businesses and by shedding those that are not core to serving customers and clients.”

More specifically, BOA cut 30,000 positions last year. It’s also considering replacing bonuses for some employees with up to $1 billion in common stock options, according to Reuters. Plus, the bank sold many of its assets last quarter ($50 billion worth) a fact that analysts say is diluting its earnings reports. From Bloomberg:

Stripped of one-time items, the results add up to a quarterly loss of about 18 cents a share, according to a research note from David Trone at JMP Securities LLC in New York, who has a “market perform” recommendation on the shares. “We would expect performance to fade today as investors process the segment results, which were generally disappointing.”

Has Moynihan put Bank of America on a fast path to recovering its profitability, or merely a path to misleading
investors?

About Beth Connolly

Beth Connolly is Head Editor, Writer, and Marketing Coordinator at the Compliance Exchange and the Wall Street Job Report. She tweets @Bethconnolly and shares her love of the good writing life at her blog, When Nutmeg Met Basil. A graduate of Middlebury College in Vermont, she works in Manhattan and calls Astoria home.

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