(BAC) Bank of America Continues to Shrink

Although Bank of America Corporation (BAC) strived and passed requirements of Federal Reserve’s stringent capital criteria, BofA is still banking on its plan to shrink balance sheet in order to streamline its operations, focus on its core businesses and improve top-line growth. Earlier this week, BofA has come up with the divestiture of its consumer credit card operations in Ireland to Apollo Global Management LLC’s (APO) fund affiliate, Apollo European Principal Finance Fund I (Apollo EPF).

BofA’s Irish card unit includes more than 200,000 customer accounts with a balance of more than €650 million ($860 million) in receivables. The unit will continue to be managed in Ireland by its existing 250 staff. However, the financial terms of the agreement were undisclosed and the deal is still subjected to regulatory approvals.

New York-based Apollo is an alternative investment management firm, which also acquired BofA’s Spanish consumer credit card operations in August 2011. Following the closure of the Irish deal, Apollo EPF will have approximately €1.3 billion ($1.72 billion) of credit card receivables acquired from BofA in total. In addition to this, Apollo EPF will also have consumer loan servicing platforms both in Ireland and Spain with a combined staff of about 550 people.

Over the last several quarters, BofA has been striving hard to soar up its capital levels through the sale of its non-core assets and businesses. Further, the company has also begun trimming its workforce to bring down its operating expenses by $5 billion through the end of 2014.

Apart from selling its consumer credit card portfolios in Spain and Ireland, last year BofA also divested $8.6 billion Canadian credit card portfolio as well as certain other assets and liabilities to Toronto Dominion Bank (TD). Furthermore, the company has plans to sell its card business in U.K.


We believe that BofA should carry on with its plans to streamline its operations through sale of its non-core assets and operations. The company should not get complacent with its capital enhancing initiatives and must continually strive for improvement of its balance sheet and capital ratios.

Currently, BofA retains its Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we are maintaining our long-term “Neutral” recommendation on the shares.

APOLLO GLOBAL-A (APO): Free Stock Analysis Report

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TORONTO DOM BNK (TD): Free Stock Analysis Report

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