Bloomberg News

BofA Sells Fewest Structured Notes Since 2012 (Correct)

March 14, 2014

(Corrects period in headline, first and eighth paragraphs, issuance and distribution in second, fifth and ninth paragraphs in story originally published March 13.)

Bank of America Corp (BAC:US)., last year’s largest issuer of U.S. structured notes, sold the fewest of the securities in more than a year in February as its improving creditworthiness makes it harder to create attractive products.

Sales dropped 75 percent from January to $143.3 million, the lowest since $138.9 million in December 2012, according to data compiled by Bloomberg.

A New York state judge largely approved the bank’s $8.5 billion settlement with mortgage bond investors on Jan. 31, after which prices of five-year credit-default swaps on the bank’s debt dropped 22.5 basis points to 67.3 during the month. The drop in perceived risk means Bank of America can borrow more cheaply, leading to lower coupons on structured notes, which bundle an issuer’s debt with derivatives.

“They might just look less competitive compared to other banks out there,” Joe Halpern, chief executive officer of Exceed Investments LLC, which structures exchange-traded funds, said in a telephone interview.

While Bank of America’s issuance tumbled, total February sales in the U.S. were down a smaller 9 percent to $3.88 billion, Bloomberg data show.

Matt Card, a spokesman for the Charlotte, North Carolina-based bank, declined to comment.

Bank of America’s settlement is part of its push to resolve liabilities tied to faulty mortgages, mostly inherited with its 2008 purchase of Countrywide Financial Corp., that have cost it at least $50 billion since the financial crisis.

Underwriting Streak

The bank in February also extended its streak as the biggest structured note underwriter in the U.S. to 14 months.

Bank of America distributed $966.4 million of notes issued by seven banks including itself last month, with Credit Suisse Group AG (CSGN) selling $387.8 million of those securities, or 40 percent, Bloomberg data show. Drew Benson, a spokesman for Credit Suisse in New York, declined to comment.

Last year, Bank of America issued $6.33 billion of U.S. structured notes, up 18 percent from the year before, Bloomberg data show. During that time, the bank distributed $10.7 billion of the securities, or 16 percent more than in 2012.

Derivatives are contracts with values derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net

To contact the editors responsible for this story: Richard Bedard at rbedard2@bloomberg.net; Shannon D. Harrington at sharrington6@bloomberg.net Mitchell Martin


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Companies Mentioned

  • BAC
    (Bank of America Corp)
    • $17.98 USD
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