Bank of America closes Countrywide acquisition

Mistaaaaake!. C-wide is getting and will get slammed by attys general on mega lawsuits. BofA made a huge mistake.

Not really. They now have a national footprint by turning Countrywide's offices into BofA branches. That is worth a fortune over the long-term.

WSJ says today some AG suing CW for predatory lending. That will become a cottage business. Moreover, BofA better paint over those CW signs real quick as CW is the Enron-esque posterchild of the MBS collapse.

Wachovia just stopped issuing option ARMS and CW has a portflio full of those as well as other garden variety under to malperforming loans which BofA has to babysit now. BofA doesn't need that kind of footprint, IMHO.

Actually, a national footprint is a huge goal, and has been from the days when I worked for BofA in the 80's, and they had a national loan company that they planned to turn into branches when interstate banking was allowed. Unfortunately, being the Citigroup of the 80's, they were forced to sell it before that happened. The purpose is competitive advantage and geographic diversification.

BofA never issued subprime loans, and now neither will Countrywide, as its business model is turned upside down. A lot of those loans can be saved if they are reworked, and that's how they'll settle with the AG's. BofA basically got a free back office platform and sales force. They bought a distribution network, fully intending to fix or write off most of the loan portfolio.

It's a brilliant business move. No bank will come close to its presence in the US retail market, unless JPM mergers with Wachovia, which is problematic because of the 10% deposit cap, though that can be gotten around. Citi isn't a big national retail bank, and it's about to get smaller.

stevejhx "Not really. They now have a national footprint by turning Countrywide's offices into BofA branches. That is worth a fortune over the long-term...It's a brilliant business move"

What are you talking about?!. BAC was so early and never anticipated the problems they are stuck with. They could have waited 6 months bought C-wide out of bankruptcy. The deal is awful for BAC and its shareholders. For what C-wide is going cost them they could have built a WORLDWIDE footprint, because that is really the goal.

Cpalms just smacked you down hard, Steve. He is very right.

"It's a brilliant business move."

Not having access to the loan portfolio I do think that BofA had no idea how bad it really is. Maybe you're right and they come out smelling like a rose but I think CW's problems get worse and that syllogistically means BofA gets worse. We'll see. Maybe there's a lot more "friends of angelo" to come out of the woodwork.

BofA has effectively priced itself out of the mortgage market in the last three weeks. Their rates are higher than the national average on just about every product. I'm sure the Countrywide acquistion is playing into that.

jsey9 is right - with a 25% market share they have pricing power now. They don't work with mortgage brokers and don't sell bulk mortgages. They don't need to make mortgage loans, but you need to take them out.

BofA did 6 weeks of due diligence, they know exactly how these products will behave.

You can't build a national footprint like that - you can open a branch, but you have no customers. Countrywide has millions of customers all throughout the country, with 500 or so branch offices and an S&L and an insurance company (likely to be sold). They can now cross-sell branch banking and credit card products to all of Countrywide's customers. Granted they have a lousy loan portfolio but they have the best back office and front office in the industry. It's no surprise they're moving their national mortgage headquarters to Calabasas, California.

"You can't build a national footprint like that"

maybe, but BofA didn't have to pay the outrageous sum of $18/share for it when they could have had it for nothing. BofA paid 6 billion for W-wide and it will cost them another 20-30 billion in bad debt writeoffs, not to mention the potential fines if they Feds find any fraud (want to place a wager on whether there was fraud?) Like he has in the past, Ken Lewis overpaid massively, this time it was for a busted business with some depreciating real estate, pissed off client base (but hey, great cross selling opportunities there, worked for Citigroup), currently being served by many many other banks...

Again, Cpalms, you nailed it. A lot of BofA people are bailing out to Citizens bank. RBS is solid and already global.

When BofA paid $18 the Feds asked them to capitalize it to prevent it from going under - wink wink nod nod - and that was below the share price at the time.

FYI mortgage fraud is something consumers and brokers due, not the banks: they're the ones getting defrauded. Countrywide may have a problem with their appraisal unit, but given new regs that will probably get sold along with its insurance company.

BofA did enormous due-diligence this time. They did not overpay for this, they did not overpay for MBA or for La Salle. They are masters at cost-cutting, retail banking is a commodity, every branch uses the same systems, sells the same products. There are tremendous economies of scale.

Full disclosure: I hate BofA and closed all my accounts (except my co-op loan) and don't own any of its stock and will never open an account there again.

1 - How many of us who clicked on this discussion knew as they were clicking, just knew 100% without a doubt, that this discussion was started by stevejhx? Admit it, you knew it was stevejhx.

2 - Stevejhx hates BofA. How do you hate an inanimate corporation? "and don't own any of its stock and will never open an account there again." Waah waah waah. What was it stevejhx? When you called to check your balance on your co-op loan, the IVR (voice response) system didn't understand your ranting about marginal and effective tax rates?

3 - Did everyone know that stevejhx was a high level IT translator at BofA, and that is why he is qualified to tell you that BofA did not overpay for Countrywide but you definitely overpaid for your condo or co-op or home?

Did everyone know that stevejhx was a high level IT translator at BofA, and that is why he is qualified to tell you that BofA did not overpay for Countrywide but you definitely overpaid for your condo or co-op or home?

LOLOLOL
or LMAO as Steve would say.

HPman, actually at BofA I was a senior technical auditor, before moving to Price Waterhouse where I quit as a senior audit manager and managing consultant specializing in financial systems and systems security, counting among my clients Chase, Barclays, Banesto, Visa, and so on. I was stationed in London, Madrid, and Singapore, and worked in close to 30 countries around the world.

Now I translate the documents that I used to prepare, and I work for the largest law firms in the world. I charge 12 cents for each word I type, which though it means I don't quite make what I would had I stayed with PW, I make a very nice and comfortable living and can do my job anywhere.

Just FYI.

"How do you hate an inanimate corporation?"

Never heard anybody say, "I hate Wal*Mart"?

I won't disclose the reasons why I closed my accounts, but suffice it to say that the problem was escalated to the Regional Executive Vice President, and I got a call from Ken Lewis' office apologizing.

"you definitely overpaid for your condo or co-op or home?"

I never said anyone in particular overpaid.

I was also an expat at 27.

eah, you're still being ignored.

eah, you're still being ignored.

that's ok..i don't need your direct engagement to enjoy my time here.

lol, I had a problem with an order I placed for a desktop from Dell that was stolen off a UPS truck, and Michael Dell's office called me to apologize and offer me $100 off another purchase.

"wink wink nod nod"

total BS, they paid $18/ share because their crappy convert deal in august went bust and they tried to buy their way out of a bad spot,which by looking at the share price has not worked.

"BofA did enormous due-diligence this time. They did not overpay for this"

Haha!!, thats almost as good as the being on the Obama campaign team or whatever that other chucklehead said

"being on the Obama campaign team"

That was surely better than anything I ever said!

You can disagree with me on whether it's a good purchase, but unlike Wachovia and Merrill Lynch, none of their purchases has yet failed.

Now, if they were buying an investment bank I would might wonder since they know very little about that business, but they do know the mortgage business quite well.