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Bank Of America Continues Firesales To Shore Up Liquidity, Sells Canadian Credit Card Business To TD Group

Tyler Durden's picture




 

After it was disclosed that Bank of America's firesale of its China Construction Bank is not going as well as expected, Moynihan's company, which was trounced by the market in the past week, continues to shed assets, this time offloading its $8.6 billion Canadian credit card portfolio to TD Bank for an unknown amount, a deal about which all BAC said was that the "transaction is expected to have a positive impact on the company's Tier 1 common and tangible common equity and the respective ratios." So it may also have a negative impact? That's encouraging. This news follows earlier disclosure that BAC has sold its UK and Ireland credit card business. Unfortunately for BAC shareholders, as long as the CFC bad bank is not nationalized by the Fed (sending its tracking CDS to parity with US default risk) such incremental asset sales will continue. Which also means that as BAC retains the non-performing assets, it is forced to sell its cash-generating trophies. At what point will there be nothing left of BAC but a husk that promises to everyone that going forward its Tier 1 ratio will be over 6% for real this time. And how long until the next Reps and Warranties lawsuit against BAC's mortgage handling practices?

From the press release:

Bank of America Corporation announced today that it has agreed to sell its credit card business in Canada to TD Bank Group and that it will exit its credit card businesses in the U.K. and Ireland.

"Our strategy is clear: We have been transforming the company to deliver the franchise to our core customer groups, and building a fortress balance sheet behind that," said Chief Executive Officer Brian Moynihan. "While the credit card remains a fundamental core product for our U.S. customers, an international consumer card business under another brand is not consistent with that strategy."

The move also continues the transformation of Bank of America's credit card business, following the sale of the U.K. Business Lending portfolio, the agreement to sell the Spanish card business, and the company's continued exit from the depository institution affinity credit card business with the recent sales of the Regions and Sovereign credit card portfolios.

Sale of Canadian Card Business

Bank of America and TD Bank Group announced a definitive agreement by which TD Bank Group has agreed to purchase Bank of America's $8.6 billion Canadian credit card portfolio as well as certain other assets and liabilities.

The transaction is expected to close in the fourth quarter, subject to regulatory approval. The transaction is expected to have a positive impact on the company's Tier 1 common and tangible common equity and the respective ratios.

The transaction is also expected to result in a modest increase in tangible book value per share, which has grown 12 percent from January 1, 2010 to June 30, 2011(1).

At June 30, 2011, Bank of America's tangible common equity ratio was 5.9 percent, up from 5.1 percent at January 1, 2010(1), and its Tier 1 common equity ratio was 8.2 percent, up from 7.1 percent at January 1, 2010. Over the same period, risk-weighted assets are down from $1.56 trillion to $1.39 trillion, and global excess liquidity sources have nearly doubled from $214 billion to $402 billion.

European Card Business

Bank of America manages one of the largest credit card businesses in Europe, with portfolios in the U.K. and Ireland. Combined, these businesses have $19 billion in credit card loans and more than 4,000 employees.

Spain Card Business

Bank of America signed a definitive agreement on August 3, 2011 to sell the Spain card business to Apollo Capital Management, Inc.

U.K. Business Lending

Bank of America sold its $200 million portfolio of small business card loans to Barclays in April 2011.

(1)Tangible book value and tangible common equity are non-GAAP measures. For reconciliation to GAAP, please refer to the company's second quarter 2011 and fourth quarter 2010 earnings materials.

 

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Mon, 08/15/2011 - 07:55 | 1560971 FLUSA.com
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"You sell the good, you keep the bad....you take them both and there you have the BAC's of Life".....

Mon, 08/15/2011 - 07:58 | 1560978 Thomas
Thomas's picture

Pull out the flowers and leave the weeds; you end up with a weed garden. That, however, is their goal. They are setting up Monsanto to make a fortune on Roundup.

Mon, 08/15/2011 - 08:06 | 1561004 FLUSA.com
FLUSA.com's picture

All BAC has to do if they really wanted to drive the stock price up is declare they are going to liquidate all the Real Estate they are holding in the next 90 days....the stock would double or triple in value immediately....selling good business arms....not so much....

Mon, 08/15/2011 - 11:21 | 1561587 sitenine
sitenine's picture

With mark to unicorn, that only works if you can sell to unicorn.
Last I checked, unicorns aren't buying...

Mon, 08/15/2011 - 07:55 | 1560972 Gmpx
Gmpx's picture

Canadian payment system is the worst I have seen. You cannot transfer money from your bank account to your grandma's bank account if it is in different bank. In Australia it is free.

Mon, 08/15/2011 - 07:58 | 1560979 Flakmeister
Flakmeister's picture

Looks like BofA is to become the "bad bank" where all the toxic shit will settle to the bottom...

 

Mon, 08/15/2011 - 08:14 | 1561022 ZeroPower
ZeroPower's picture

They became the bad bank with countrywide mortgage feces, and then meryll's CDO feces. So now, theyre just one big dump. They also have zero respect around the community, which is funny because they specifically acquired Merylls just to be able to say they are a 1st class bulge i-bank. Anyone whos worked there always come back witih the same story - the BAC old timers think they are the shit when they really arent and never were, and the merylls think they still are the shit despite having the unfortunate BAC logo attached to them now.

Nothing good going fwd for BAC.

Mon, 08/15/2011 - 08:35 | 1561064 Captain Benny
Captain Benny's picture

Hate to break it to you, but BAC was never a good bank to begin with.  They've been a bad bank long before their name was Bank of America.

Mon, 08/15/2011 - 08:51 | 1561112 Flakmeister
Flakmeister's picture

I recall the day BoA bought CW.... I was the only one in the office full of MBS, CDO, ABS types that said this was a bad deal and that BoA just had a big bite of a shit sandwich... I was informed that I did not understand the mortgage servicing business to which I replied that they did not understand solvency....

People used to look at me like I was from Mars when I discussed gold or showed them "real money", i.e. Franklin halves picked up for ~$5 each.... 

Mon, 08/15/2011 - 10:23 | 1561397 Votewithabullet
Votewithabullet's picture

There must have been some brainiacs in that office. CW stock was in free fall in the days leading up to that sale. Lewis said he tried to get out of the Merrill sale aber .gov had other plans. That CW sale was the fucked uped strangest thing I've ever seen. Has to be other forces at work behind that shit. 

Mon, 08/15/2011 - 10:42 | 1561449 Flakmeister
Flakmeister's picture

Yeah, a bunch of braniacs. I lost all respect for MBAs and other financial wizards during my sojurn there. Some of these guys were very sharp while being blind to underlying fundamentals. I guess the big bonus cheques were the source of the cog. diss. I was the relative newbie, telling guys make high 6 and 7 figures that it was a shitshow... Hell, what did I know, they only hired me to model MBS and CDOs....

Mon, 08/15/2011 - 10:43 | 1561464 ZeroPower
ZeroPower's picture

Buyside?

Mon, 08/15/2011 - 10:45 | 1561475 Flakmeister
Flakmeister's picture

In a sense, it was a monoline.

Mon, 08/15/2011 - 10:42 | 1561459 ZeroPower
ZeroPower's picture

Yes, there were. BAC had many off b/s items tied into cuntrywide. Taking over CW meant these massive losses could, at least temporarily, not be shown to the market. When a firm fails, all its books are open. When a firm is taken over, only the party taking it over (well, all keen to take over do but regardless..) has a real look as per the DD required. In this case, surely the DD came back telling Lewis the firm had negative tangible value after taken into consideration all liabilities. But BAC couldnt let CW fail because it was the equivalent of AIG for GS.. i.e. the firm surviving would take too big of a hit from counterparty risk that they had to step in and save the firm (BACs case) whereas GS had the taxpayers happy enough to save AIG themselves.

The market is finally coming to grips i believe with BAC being the turd that it is.

Mon, 08/15/2011 - 10:47 | 1561478 Flakmeister
Flakmeister's picture

Yes, BofA had huge exposure to CW... best to sweep it under the table. I imagine the game Lewis was playing was that if CW went too low, there was no guarentee that he could still buy it. Called it the "Dead Body Premium"

Mon, 08/15/2011 - 11:07 | 1561544 Goldenhands57
Goldenhands57's picture

Yes.. it is a turd..but all you need to see is who were "friends of Angelo" to understand why CW was part and parcel of the 5 Bank Cartel we now have on our hands, and future hands too(collectivly..by that I mean the Tax Payer, which by default is what is left of the Middle class). CW had a VIP Loan group.. and a LOT of Jumbo's on the big side were made at prices and terms that simply could not be matched anywhere to key persons in D.C.  There is a reason BAC is tied in like this. For those of you looking to see BAC implode I would caution you to be very very careful. Citi was on the ropes...remember? Lehman fell.. Bear Sterns also.. Wa Mu.. October 2008 stuff; and what happens? Over the weekend Citi was handed the keys by Paulson to OUR Treasury!!!!  I was Short big time Citi in Puts that week before.... so I'm talking this from the pain side of things gentlemen, not theory!!! I got hammered hard by that one.  Our crooked ass shamful bloodsucking Government can and WILL do anything it can to defend the Status Quo. We all know Government Sachs IS the Treasury now, and BAC is the trashcan. So? Lissen.. I hate these fuckers more than you can imagine...and I will NOT sell my metals...not until they are all TOAST! NOT until I can buy sa median sized American home for 100 Silver Eagles. I pay taxes and all other obligations to them with the funny money they print, but the fact is I can and I will take advantage of how this is going to play out to gain physical metals anytime I can. I learned my lesson on Citi! BAC is not going to go down unless for whatever reason they piss off the other members of the Cartel. These fuckers are all tied in together in this...and QE3 by way of default of BAC is in the cards. Markets are prices determined by opinions of those involved UNTIL the time interventions happen. We're gonna get screwed again because BAC is kin to these evil fuckers.   

Mon, 08/15/2011 - 11:15 | 1561568 Flakmeister
Flakmeister's picture

Not angry are you??? 

I got reamed being short 1000 COF when they changed the rules and the fucker jumped 20 pts.... 

Mon, 08/15/2011 - 08:05 | 1560999 Catullus
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Good move, BofA.  You know you're undercapitalized.  It's time to raise cash to pay back your creditors and depositors.

Mon, 08/15/2011 - 09:44 | 1561269 A Man without Q...
A Man without Qualities's picture

The cash will be used to pay legal settlements, there will be nothing for creditors or depositors.

Mon, 08/15/2011 - 08:05 | 1561000 somethingelse
somethingelse's picture

 

BAC = Bad Asset Corporation

Mon, 08/15/2011 - 08:16 | 1561024 fwchiro
fwchiro's picture

It's moves like this that make me wonder what the other hand is doing...

Mon, 08/15/2011 - 08:16 | 1561027 Cursive
Cursive's picture

Which also means that as BAC retains the non-performing assets, it is forced to sell its cash-generating trophies.

BAC has non-performing assets?  I don't remember them disclosing a material amount of these non-performing assets.  And they would disclose them, right?

Mon, 08/15/2011 - 08:16 | 1561028 gwar5
gwar5's picture

BAC is now subprime like they made the rest of us. Too bad. 

Nationalize them, break them up, sell them off, and hang their head on a pike at the entrance to the city as a warning to others.

Mon, 08/15/2011 - 08:20 | 1561033 Drag Racer
Drag Racer's picture

where the turkey is done, you carve it up and eat the good meat. whats left is the carcass that gets tossed. sorry folks abut the pop up meter signaled the bird was done a while ago...

Mon, 08/15/2011 - 08:35 | 1561066 j0nx
j0nx's picture

If your BAC debt gets sold to another company for pennies on the dollar then tell the new company you will pay them the same pennies on the dollar plus 3c for their trouble to pay it off. Why should they get 100c on the dollar for YOUR debt when they only paid a dime for it?? F that. If they say no then tell them they get DICK. That's my plan for when BAC folds.

Mon, 08/15/2011 - 10:06 | 1561342 rufusbird
rufusbird's picture

Problem with that is the Fed is going to promise the buyer (Goldman) to make them whole. Using Taxpayers dollars of course...

Mon, 08/15/2011 - 08:38 | 1561072 Seasmoke
Seasmoke's picture

what will be the knockout punch.......lawsuits, Helocs, origination fraud, fraudclosure, robosigning, undercapitalization....... the problems are endless, but the knockout is coming

Mon, 08/15/2011 - 09:10 | 1561173 Eugend66
Eugend66's picture

Failing while ZIRP is guarateed for two more years ..... . HUGE smile !

Mon, 08/15/2011 - 09:22 | 1561213 bankruptcylawyer
bankruptcylawyer's picture

bank of america is experiencing a slow motion bank run like lehman and is being handled by the fed . the fed wants to delay the qe3 announcement as long as possible, which requires that they give bank of america the encouragment to start selling their crap to the business world before conditions arise in which no one will buy it, in turn, necessitating an announcement of qe3. the timing on qe3 is NOT as everyone on wall street predicts...it's not going to be now. it's going to be after obama's re-election. 

 

yes folks......the plan is for the stock market to trudge along with dow above 9k until 2013. 

Mon, 08/15/2011 - 09:44 | 1561267 Pegasus Muse
Pegasus Muse's picture

If that's the plan a second term for Barry Hussein O. is looking kinda weak.

Mon, 08/15/2011 - 09:29 | 1561229 azusgm
azusgm's picture

It's an unwind outside of bankruptcy court.

 

Bye bye BAC.

Tue, 08/16/2011 - 00:14 | 1564135 unununium
unununium's picture

It's wiping the mud off your shoes outside the house of bankruptcy.  You still have to go inside and throw everything else into the washing machine.

Mon, 08/15/2011 - 10:35 | 1561435 runlevel
runlevel's picture

tyler durden group? EH ? EH? aw :(

Mon, 08/15/2011 - 13:00 | 1561950 traditionalfunds
traditionalfunds's picture

Have we all been underestimating the value of the BofA patent portfolio?

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