“The past is never dead. It’s not even past.” Faulkner’s famous line neatly sums up the bear case on Bank of America. The excesses of the credit boom, the sceptics think, are not yet buried.
The bears may yet be right but they have had a miserable 2012 and their ranks have thinned of late: BofA was the Dow’s best performer, rising more than 100 per cent. Europe calmed down and US housing rallied, helping all US banks. BofA’s bounce has been especially dramatic, though: it exited the crisis worse off than many rivals after its ill-fated purchase of mortgage lender Countrywide. BofA’s shares ended 2011 trading at 0.4 times tangible book value amid fears that a rights issue was on the way. That never materialised. Instead, the bank ended the third quarter with an estimated tier one common capital ratio of almost 9 per cent under Basel III – above JPMorgan and Wells Fargo.