BofA To Pay Back $500 Million, But That's Not All ...
Headline-grabbing news has been obfuscating the denser operational tidbits that underlie the state of individual banks for some months now. Nowhere is this clearer than today's announcement by Bank of America that it wants to repay part of its bailout loan. Apparently, the federal government is pushing for a $500 million repayment in order to shelve a loss-sharing arrangement between itself and BofA.
This piece of news, of course, comes on the back of the revelation Monday that taxpayers have already started to see gains of $4 billion, or 15 percent a year, on TARP loans. (That's already a contentious point itself, with some market watchers pointing out that this figure is just the quote of a partial portfolio).
The reality is that with billions in loans on its books, $500 million seems to be effectively just a face-saving gesture for BofA and the government, both of which are keen to paint the picture of rapidly recovering domestic financial sector.
Don't miss the real news nugget today, however. Infinitely more interesting than the announcement of the fractional loan repayment is a Wall Street Journal article detailing BofA's desire to become a much more international bank, in order to keep pace with competitors JP Morgan Chase and Citigroup. Apparently, Tom Montag, BofA's global markets and corporate investment banking president, wants to expand the share of corporate loans the bank makes overseas to 50 percent, from the current paltry 15 percent level:
BofA has a long way to go to be a powerhouse internationally. In Dealogic's rankings of top arrangers of syndicated loans in Europe this year, BofA ranked 21st, with just $2.9 billion of loans to its credit. In the U.S., it was No. 1, at $73.9 billion. In mergers and acquisitions, BofA in Europe was No. 9, lagging behind both its ranking in the U.S. and Merrill's traditional European ranking.The article also points out that top banks have left BofA's Merrill Lynch unit's overseas operations for better opportunities at rival banks, when the task of transforming the newly-combined entity into a fully-fledged international powerhouse "got off to a rocky start, leading to key departures."
It's hard to miss the take-away here. For all the bickering in Washington D.C. over the danger of abandoning protectionist economic policy, the only strategy financial institutions seem to have come up with so far for repaying the U.S. taxpayer in full is by investing their money abroad.