Wednesday, June 11, 2008

She said, he said

It shows you how rough things are in the banking sector when even good news hurts your stock price. Meredith Whitney, analyst at Oppenheimer, wrote this morning that Bank of America would not cut its dividend in the near future. The bank then denied making that claim and, in effect, reserved the right cut its dividend (BAC has a dividend yield over 8%). BofA might now be joining the list of banks grumbling about Ms. Whitney's calls. Well, she got it right on Citi and being bold and being right earns you credibility.

But this is not about an analyst's opinion. This is about Bank of America's failure to communicate effectively to the market on a number of important business issues. It's about not giving sufficient guidance on how its retail bank is going to perform as the health of the consumer fails (the retail bank delivers about 50% of BofA's profits). It's about Bank of America making deep cuts in its investment banking business and selling its prime brokerage. It's about Bank of America's inability to convince anyone that buying Countrywide was a good idea, much less that Countrywide has long-term strategic value, despite its short-term liability. It's about BofA's credibility and that's why BAC was down 1.4% today.

Post script: A Reuters story from a long interview with BofA CEO Ken Lewis is here.

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