Read (290)
September 28, 2012 / Saabira Chaudhuri / WSJ
Bank
of America Corp. (BAC) said it will pay $2.43 billion to settle a 2009
class action lawsuit brought in 2009 on behalf of investors who held
Bank of America securities at the time the company announced plans to
acquire Merrill Lynch.
The
bank also revealed it will take $3.5 billion in charges in the third
quarter related to legal expenses, certain adjustments and income tax
expenses.
Bank
of America said in a statement it "denies the allegations and is
entering into this settlement to eliminate the uncertainties, burden and
expense of further protracted litigation."
"Resolving
this litigation removes uncertainty and risk and is in the best
interests of our shareholders," said Chief Executive Brian Moynihan. "As
we work to put these long-standing issues behind us, our primary focus
is on the future and serving our customers and clients."
The
amount to be paid under the proposed settlement will be covered by a
combination of Bank of America's existing litigation reserves and
litigation expense to be recorded in the third quarter. The company
estimates total litigation expense will be about $1.6 billion for the
third quarter.
In
addition to the litigation expense, Bank of America said it expects its
third-quarter results to be negatively impacted by $1.9 billion,
pretax, in negative fair value option adjustments and debit valuation
adjustments related to an improvement in the company's credit spreads,
and a previously reported charge of about $800 million to income tax
expense for changes in the U.K. corporate tax rate and the related
effect on the deferred tax asset valuation.
Litigation
expense, improvements in the company's credit spreads and the U.K. tax
charge are expected to hurt reported third-quarter per-share earnings by
about 28 cents.
Under
terms of the proposed settlement, Bank of America will also institute
or continue certain corporate governance policies until Jan. 1, 2015,
including those relating to majority voting in director elections,
annual disclosure of noncompliance with stock ownership guidelines,
policies for a board committee regarding future acquisitions, the
independence of the board's compensation committee and its compensation
consultants, and conducting an annual "say-on-pay" vote by shareholders.
Shares edged down 0.7% to $8.91 in recent premarket trading. The stock is up 61% so far this year.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
Tags: Bank of America Corp, America securities, Merrill Lynch, BAC, Chief Executive, Brian Moynihan, Litigation expense, third-quarter,
No comments:
Post a Comment