Mon May 6, 2013 4:49pm EDT
(The following statement was released by the rating agency) CHICAGO, May 06 (Fitch) Today's announced settlement between Bank of America (BAC) and MBIA Corp. represents another positive step for BAC in reducing litigation risk overhang, according to Fitch Ratings. We view the settlement as manageable for BAC in the context of capital and better core earnings in the first quarter. Furthermore, this settlement eliminates all potential future liabilities from MBIA BAC will make a cash payment of $1.6 billion to MBIA, according to the terms of the settlement as well as remitting MBIA debt back to MBIA. Additionally, the settlement includes BAC's write down of a sizable receivable from MBIA. The bank will also provide MBIA with a secured $500 million line of credit and will receive warrants to purchase MBIA shares in an amount equivalent to 5% of the current equity of MBIA. Legacy litigation risks remain, but resolution of the MBIA dispute serves as another example of ongoing progress reported in reaching manageable settlements since early 2011. More recently in January 2012, BAC settled a class action suit related to representation and warranty exposure to Fannie Mae (FNM). By comparison with the $1.6 billion impact to pretax earnings due to the settlement, BAC's core pretax earnings (Fitch adjusted) totaled $3.5 billion in the first quarter, up from $2.1 billion in the fourth quarter of 2012. This represented a Fitch-calculated adjusted return on assets (ROA) of 0.6% in first-quarter 2013, a level that still lags the return of its peers. Contact: Justin Fuller, CFA Director Financial Institutions +1-312-368-2057 Bill Warlick Senior Director Fitch Wire +1-312-368-3141 Fitch, Inc. 70 W. Madison Chicago, IL 60602 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: [email protected]. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
(The following statement was released by the rating agency) CHICAGO, May 06 (Fitch) Today's announced settlement between Bank of America (BAC) and MBIA Corp. represents another positive step for BAC in reducing litigation risk overhang, according to Fitch Ratings. We view the settlement as manageable for BAC in the context of capital and better core earnings in the first quarter. Furthermore, this settlement eliminates all potential future liabilities from MBIA BAC will make a cash payment of $1.6 billion to MBIA, according to the terms of the settlement as well as remitting MBIA debt back to MBIA. Additionally, the settlement includes BAC's write down of a sizable receivable from MBIA. The bank will also provide MBIA with a secured $500 million line of credit and will receive warrants to purchase MBIA shares in an amount equivalent to 5% of the current equity of MBIA. Legacy litigation risks remain, but resolution of the MBIA dispute serves as another example of ongoing progress reported in reaching manageable settlements since early 2011. More recently in January 2012, BAC settled a class action suit related to representation and warranty exposure to Fannie Mae (FNM). By comparison with the $1.6 billion impact to pretax earnings due to the settlement, BAC's core pretax earnings (Fitch adjusted) totaled $3.5 billion in the first quarter, up from $2.1 billion in the fourth quarter of 2012. This represented a Fitch-calculated adjusted return on assets (ROA) of 0.6% in first-quarter 2013, a level that still lags the return of its peers. Contact: Justin Fuller, CFA Director Financial Institutions +1-312-368-2057 Bill Warlick Senior Director Fitch Wire +1-312-368-3141 Fitch, Inc. 70 W. Madison Chicago, IL 60602 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: [email protected]. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.