“Bank of America is shrinking because they need to make sure they’re using their capital in the most profitable ways,’’ said Jefferson Harralson, an analyst at KBW Inc. with a “market-perform’’ recommendation on the bank. “During the Ken Lewis era, you could run the bank with much lower capital; the changes in capital requirements are pushing them to keep the most profitable customers and shed the rest.’’
The sale involves operations included in the $35 billion takeover of MBNA Corp. in 2006. Moynihan’s divestitures include First Republic Bank, acquired in the 2009 Merrill Lynch & Co acquisition, and stakes in asset manager BlackRock Inc. and Brazilian bank Itau Unibanco Holding SA.
TD said it is paying a “modest premium’’ of about $101.6 million for the portfolio, including $7.6 billion in cash and assuming $1.12 billion in liabilities.
Moynihan has had to write down the credit card division by $20.3 billion in reports filed with financial regulators because of increased defaults and US regulation limiting fees. Credit cards in the United States remain a “fundamental core product,’’ Moynihan said yesterday in a statement.
Moynihan has also written off the entire value of Countrywide Financial Corp., the home lender acquired by Lewis in 2008 for about $2.5 billion. Bank of America has scaled back home lending and is selling mortgage-servicing rights acquired in the Countrywide deal.
Bank of America climbed 57 cents, or 7.9 percent, to $7.76 in New York Stock Exchange composite trading at 4:15 p.m. The shares dropped by almost half this year through Friday on concern the bank would have to sell shares as costs from defective Countrywide mortgages drained capital. TD rose 96 cents, or 1.3 percent, to C$76.88 in Toronto.
