Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Categorized | Banks

Bank of America: no easy answers


Posted on January 31, 2014

The joke is on us. Why would anyone think anything related to pre-crisis mortgage deals would be simple? A New York state Judge on Friday delivered a long-awaited decision on an $8.5bn agreement by Bank of America to settle claims by private investors over faulty Countrywide loans bundled into bonds. Questions over whether the settlement would stand have been an obstacle to BofA’s efforts to move past the financial crisis and catnip for BofA bears who believed BofA could be forced to pay a sum perhaps a few times higher. AIG led a group of investors contesting the deal as offering scant compensation. Everyone was expecting a thumbs up or a thumbs down, but that is not exactly what they got.

    Judge Barbara Kapnick approved the settlement, saying that the trustee for the bonds (BNY Mellon) did not act in bad faith. That seems straightforward enough. But then, a wrinkle. She excluded from her approval an issue over whether BofA must repurchase loans (packaged into bonds) whose terms the bank modified. So that could still be litigated. Attorneys for collateralised debt obligations (of course) called Triaxx have argued that the trustee failed to investigate modified mortgage repurchase claims worth about $31bn. BofA said it believed outstanding issues can be addressed “without undue delay”, while AIG is likely to appeal the broader approval.

    BofA has reserved for the $8.5bn. And it has made strides in resolving its legal problems, although issues remain. In the fourth quarter, litigation expense was $2.3bn. Investors these days seem more focused on when an economic recovery and higher rates can produce revenue and margin growth. Shares fell just a per cent on Friday. The punch line? Investors cannot put this pesky settlement completely in the past just yet.

    Email the Lex team in confidence at lex@ft.com