One of the first statements of the year by Bryan Moynihan, CEO of Bank of America, indicates a reversal for the large financial services companies in terms of commercial and mortgage lending. According to statements made by Mr. Moynihan to the Financial Times, he has already communicated to his staff that the bank needs to take on a more proactive stance in business lending. He also mentioned that he would like to see Bank of America surpass JP Morgan Chase in mortgage loan production by summertime.
Bank of America's performance on Wall Street was surprisingly strong in 2012. The bank has been the target of disastrous acquisitions, sharp criticism, lawsuits, and serious investigations since 2008. Keeping Bank of America from failing as a result of its heavy exposure to toxic assets and worthless mortgage-backed securities took a substantial effort from taxpayers. Despite all this, shares of the bank finished 2012 with an astonishing 109 percent increase.
According to some financial analysts, investors are impressed at the bank's resilience. Mr. Moynihan has indicated that Bank of America has been entering settlement agreements with confidence and may continue to do so, a statement that suggests the bank has enough cash reserves to make its troubles go away. On the first day of trading in the New Year, shares of Bank of America rose by three percent on the comments by Mr. Moynihan and the partial resolution of the fiscal cliff debacle.
Lending Instead of Cost-Cutting
Business and mortgage lending have not necessarily been profit channels at Bank of America over the last few years. Industry publication Inside Mortgage Finance reported that third quarter mortgage loan production at the banks was 37 percent lower than the previous three months. Catching up to JP Morgan Chase will require a lot of mortgages; the bank's origination volume from January to September 2012 was less than $53 billion while JP Morgan posted more than $80 million.
In 2012, Bank of America mostly focused on laying off employees and cutting costs. It is unclear if the bank intends to hire more staff to handle mortgage origination, although Mr. Moynihan's comment about the bank taking on an aggressive stance on mortgage lending would seem to indicate so. Catching up to Wells Fargo in terms of mortgage lending will be harder; the California-based bank originated more loans in 2012 than JP Morgan Chase and Bank of America together.