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A Bank of America branch is shown in Charlotte, N.C., Friday, April 16, 2010.
A Bank of America branch is shown in Charlotte, N.C., Friday, April 16, 2010.
(Chuck Burton/AP)

FINANCIAL TIMES

Bank of America’s outlook cloudy with chance of settlement

Lex is a premium daily commentary service from the Financial Times. It helps readers make better investment decisions by highlighting key emerging risks and opportunities.

Pre-crisis clouds still hang over Bank of America. On Monday, a hearing is set to begin on an $8.5-billion (U.S.) settlement over mortgage bonds bundling faulty loans arranged by Countrywide, which BofA bought in 2008. It will be up to a New York state judge to approve or reject the settlement, which investors such as BlackRock have endorsed, but another group, including AIG, has contested as offering far too little compensation for anticipated losses. Uncertainty over whether the settlement will stick has served as a refuge for BofA bears as the stock price more than doubled last year. Their case is based on the settlement unravelling, ultimately setting BofA up for much higher payments related to the faulty loans. BofA has set aside $8.5-billion in reserves to cover the settlement.