Bank of America Corp (BAC): This Bank Is Well Positioned to Lead California’s Market

The bank’s total deposits stand at $1,081 billion, with 20.5% share coming from California’s deposits. The bank serves approximately 52 million consumers and small business relationships, with nearly 5,400 retail banking offices and approximately 16,300 ATMs.

The change in regulatory policy announced by Ben Bernanke on 2^nd July demanded large internationally active banks to report their leverage ratios after incorporating off-balance sheet risk exposures. Bank of America Corp (NYSE:BAC) falls under this category. This will increase the reported asset base and reduce the leverage ratio reported by the bank. The Fed is expected to raise the minimum supplementary leverage ratio to 5-6 percent for all holding companies. The bank reported its tier 1 leverage ratio to be 7.49 percent, as of June 30, 2013. If this proposed regulation is approved, this would put Bank of America Corp (NYSE:BAC) at the risk of failing to meet the new regulatory requirement as it expects supplementary leverage ratio to be approximately 4.9% – 5.0%.

Bank of America Corp (NYSE:BAC) has recently been directed to confront Texas property fees suit relating to the fees it attempted to evade by using MERS to track property transactions.

Conclusion

The combined company’s shareholder returns and capital ratios will be among the highest in the U.S. PacWest provides CapitalSource a steadier and lower cost deposit base while CapitalSource will help PacWest by providing a more strong and diverse lending presence. In the light of the PacWest’s bright outlook, I would recommend buying this stock. The bank also provides a regular stream of income in the form of dividends, with its dividend yield rising at a CAGR of 22.39% in the last three years.

Bank of America Corp (NYSE:BAC) should be sold due to it’s continuously rising NPLs, weak ROA 0.74% owing to the drastic decline in its interest and non-interest income, very high efficiency ratio of 85.59%. The recent changes expected in the laws also put the bank at high risk of failing to meet the regulatory requirements in the future and to tie up additional capital.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Bank Is Well Positioned to Lead California’s Market originally appeared on Fool.com is written by Awais Iqbal.

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