After losing as much $292 million in the last quarter of 2017, Bank of America Corp (NYSE:BAC) has decided to offload high risk loans. BAC is reaching out to the rival lenders to divest risky margin loans.
The bank is mainly planning to divest the non-recourse single stock margin loans. Loans are offered to corporate borrowers or individuals for certain investments against derivatives, shares, cash or other instruments that can be traded as the surety.
Nonrecourse single stock margin loans are highly risky when compared to other types of margin loans. Therefore, if the price of such single stocks slumps considerably due to some negative news or poor financial results, the lender just need to hold the stock, which has lost almost 90% of the value. The lender cannot make a claim against other properties in case of huge loss from non-recourse single stock margin loans.
The bank has offered margin loans to the former chairman Steinhoff International Holdings NV, Mr. Christo Wiese. BOA suffered a heavy loss amounting to almost $292 million in Q4 2017 due to the accounting fumble in Steinhoff International Holdings NV. South Africa based Steinhoff International Holdings NV is engaged in the retail business of household goods and furniture.
A consortium of BOA and other firms including Goldman Sachs Group Inc (NYSE:GS), Citigroup Inc (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM) and others have offered a collective margin loan of over €1 billion in September 2016 against the collateral of Steinhoff shares of 628 million.
After the discovery of accounting irregularities in Steinhoff on December 5, 2017, the shares tanked and now worth just a fraction of the original value. Having no other way than to liquidate the shares, the consortium wrote off the debts and margin loans and recorded huge losses in earnings of Q4, 2017.
BOA Appoints Matt McCormack as the President of Sacramento Market
Bank of America Corp has roped in Matt McCormack to head the Sacramento Market. His responsibilities include managing over 60 branches of the BOA. He will also be responsible for the operation of Merrill Lynch centers in Roseville, Redding, Folsom, Chico and Sacramento. He has been a mentor for 19 years at Merrill Lynch. He was graduated from the Florida University.
As on June, BOA has local deposits worth $8.41 billion in the Sacramento region.